Over on the Book of Faces, in the Inman Coast to Coast group, there’s quite a discussion that erupted from something that Redfin does. You might not be able to view it, although this is a public group, so go ahead and join it if you can’t.
Let me not bury the lede: I don’t think Redfin has done anything wrong. It’s certainly not tortious interference. And it’s not unethical, since Article 16 of NAR’s Code of Ethics is not a barrier to competition; if it were, there’s a very good chance that it would be unlawful. Not only that, I wish more brokerages and agents would do exactly the same thing that Redfin has done here.
The Kerfuffle Starts With a Screenshot
It all stemmed from Gary Rogers, a broker (I believe) with Re/Max on the Charles in Waltham, MA, who posted this image:
His comment with the image was:
I signed in [to Redfin] to see a house. It asked if I was working with an agent, yes or no. I said yes and this box popped up. “Are you open to switching agents?” And gives reasons like I could “Tour the Home faster” Dirty. Very dirty and not true. Trying to talk someone away from an agent. and trying to woo them away. Nice work Redfin. I just lost a lot of respect for you.
That triggered an avalanche of outrage, with a number of people claiming that this was (a) illegal, (b) a violation of the Code of Ethics, specifically Article 16, and (c) sleazy.
I asked Gary whether what bothered him about this was the truth or falsity of the claim, such as “tour the home faster.” He responded with a non-answer, but ultimately said:
That was a secondary irritation that they are hinting strongly that a buyer could tour a property faster with a Redfin agent than other agents.
I thought this worth writing about, because…
What If It’s True?
I’ve written a series of posts about Redfin, both before and after they went public. My last post about Redfin, I think, is relevant here. I went into some depth about what the 2017 earnings call revealed about Redfin’s strategy.
Basically, Redfin needs to up the “close rate” or the “win rate” in this insane seller’s market we have now. One of the things they’ve done is to reduce the number of customers that a Redfin agent works with, as they found that fewer clients = more closings. All of the technology they have is then built around that core goal of increasing the close rate, including speed.
The comments in the Facebook thread suggest that Redfin is telling baldfaced lies to steal clients away. As Gary Rogers put it:
Telling a consumer they can get into a property quicker is disingenuous. I promise you they could not have gotten anyone in quicker than me.
Except… here’s Glenn Kelman during the 2017 earnings call:
For home buyers the simplest benefit we can tout in our ads and on our site is speed by instantly scheduling home tours and we are faster. We updated our scheduling software so that we can automatically find a time for an agent to meet a customer on 83% of our December home tours up from 68% in September. Confirming a tour request without any phone call between coordinators, agents and customers lets us capture more with the customers with less work.
The next step for us is rapidly confirming the availability of the listings the customer wants to tour. Typically, the buyer’s agent calls the seller’s agent to see if the owner can get the house ready for a showing. But starting in the third quarter Redfin began using a combination of software and call center employees to do this more quickly and efficiently.
By the last week of December, we confirmed 90% of home tours without requiring a Redfin buyer’s agent to do anything except show up. A major 2018 focus will be confirming listing availability for nearly all tours.
Think about what’s he’s saying here. Redfin has invested $42 million into technology last year. A big chunk of that went to things like this instant home tour confirmation technology that doesn’t require a bunch of phone calls back and forth.
In previous earnings calls, Glenn talked about spending millions of dollars on improving responsiveness to inquiries by seconds. When other brokers are having trouble getting their agents to respond within days, Redfin is focusing on shaving 10 seconds from their response times.
None of that is disingenuous; that’s real. Redfin wasn’t making shit up; they really think they can do it faster, better, cheaper than others can.
Now, Gary did say that he was the listing agent on the property where the box popped up, so there was no way Redfin was getting in to do a home tour faster than he was. OK, there is that. Redfin will definitely not be faster in scheduling a home tour than a listing agent who wants to double-end the deal. But I’ll bet dollars to donuts that Redfin will be faster than any other buyer’s agent in Gary’s marketplace.
My point is that when Redfin claims that they can get a buyer in to see a home faster, there’s a very good chance that Redfin isn’t lying or making shit up. They really can, because they have spent the time, money, and effort to be able to do that.
I think it’s extremely relevant that Redfin might be telling the truth, but maybe not. Maybe truth doesn’t matter as to whether what Redfin did here is either (a) illegal, or (b) an ethics violation. Let’s examine those in turn.
I wrote a post a while back titled “Competition Is Not Tortious Interference” that dealt squarely with this topic. Here’s the key grafs:
Within the real estate industry, there is this widespread sense that doing anything that might result in a buyer or seller terminating an existing agreement — buyer representation agreement or a listing agreement — is tortious interference. This is simply not true.
Tortious interference requires a tort — some sort of wrongful act. And the case law that created the concept of tortious interference have some really weird things in it (as the tort is an ancient common law deal) like someone shooting a shotgun over a neighbor’s pond to scare away ducks.
Competition, even aggressive, vigorous competition that most people might find distasteful, is not a tort. And as a matter of public policy — that of encouraging competition — it’s pretty difficult to prove a tortious interference claim against a competitor.
You want legal citations to go with that conclusion? Certainly.
This comes from an article written by lawyers for lawyers titled “Navigating the Nuances of Tortious Interference Claims.” Here’s the key passage:
To establish any tortious interference claim, a plaintiff must establish that “the defendant’s conduct was independently tortious or wrongful.” Wal-Mart Stores, Inc. v. Sturges, 52 S.W.3d 711, 726 (Tex. 2001). What distinguishes legitimate competitive economic activity—something that is protected in our free- market system—from actionable interference? The act must be tortious, meaning that the plaintiff “must plead and prove at least some improper motive or improper means.” Golembeski v. Metichewan Grange No. 190, 20 Conn. App. 699, 702, 569 A.2d 1157 (Conn. App. Ct. 1990).
Tortious conduct generally requires proof that “the defendant was guilty of fraud, misrepresentation, intimidation or molestation or that the defendant acted maliciously.” Blake v. Levy, 191 Conn. 257, 261, 464 A.2d 52 (Conn. 1983). Courts generally have required a plaintiff to show that the defendant wrongfully interfered for the sole purpose of harming the plaintiff or that it committed independent torts or predatory acts. See, e.g., EDP Hosp. Computer Sys. Inc. v. Bronx-Lebanon Hosp. Ctr., 212 A.D.2d 570, 571, 622 N.Y.S.2d 557 (N.Y. App. Div. 1995).
So the fact that Redfin did not lie about its ability to get into homes faster than competitors is extremely relevant to whether what they did is illegal tortious interference or not.
No fraud, no misrepresentation. This being a pop-up on a website, certainly no intimidation or molestation. There’s zero evidence that Redfin did this only on Gary’s listings for the sole purpose of harming a competitor — Redfin genuinely wants to get the buyer to switch agents.
That sounds like… competition, doesn’t it?
You can sue Redfin if you’d like, but I’m going to go out on a limb and say that they’ll get the case dismissed with ease and then come back on you for filing a malicious and frivolous lawsuit or something. It won’t be fun. I do not advise it.
Maybe It’s Still an Ethics Violation
Well, maybe what Redfin did isn’t illegal, but it could be a violation of NAR’s Code of Ethics! Quite a few people specifically mentioned Article 16 and were quite convinced of it.
So let’s talk about Article 16. It reads:
REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients.
Well now! It certainly sounds like Redfin is engaging in skullduggery and unethical behavior! Gig ’em!
Except… Article 16 has both Standards of Practice and Case Interpretations. Here are Standards of Practice 16-1 and 16-2:
Standard of Practice 16-1
Article 16 is not intended to prohibit aggressive or innovative business practices which are otherwise ethical and does not prohibit disagreements with other REALTORS® involving commission, fees, compensation or other forms of payment or expenses. (Adopted 1/93, Amended 1/95)
Standard of Practice 16-2
Article 16 does not preclude REALTORS® from making general announcements to prospects describing their services and the terms of their availability even though some recipients may have entered into agency agreements or other exclusive relationships with another REALTOR®. A general telephone canvass, general mailing or distribution addressed to all prospects in a given geographical area or in a given profession, business, club, or organization, or other classification or group is deemed “general” for purposes of this standard. (Amended 1/04)
Article 16 is intended to recognize as unethical two basic types of solicitations:
First, telephone or personal solicitations of property owners who have been identified by a real estate sign, multiple listing compilation, or other information service as having exclusively listed their property with another REALTOR® ; and
Second, mail or other forms of written solicitations of prospects whose properties are exclusively listed with another REALTOR® when such solicitations are not part of a general mailing but are directed specifically to property owners identified through compilations of current listings, “for sale” or “for rent” signs, or other sources of information required by Article 3 and Multiple Listing Service rules to be made available to other REALTORS® under offers of subagency or cooperation. (Amended 1/04)
A little further down, we find Standard of Practice 16-6:
Standard of Practice 16-6
When REALTORS® are contacted by the client of another REALTOR® regarding the creation of an exclusive relationship to provide the same type of service, and REALTORS® have not directly or indirectly initiated such discussions, they may discuss the terms upon which they might enter into a future agreement or, alternatively, may enter into an agreement which becomes effective upon expiration of any existing exclusive agreement. (Amended 1/98)
An even more interesting finding comes from Case Interpretations related to Article 16. Specially, Case #16-3. In that case, a REALTOR sent a mass email solicitation to all of the homeowners in an area. He was brought up on ethics charges. Here comes the interesting part:
The Hearing Panel’s decision noted that REALTOR® A, in designing his advertising campaign, did not direct his brochures to property owners whose identity had come to REALTOR® A’s attention through information disclosed by other REALTORS® consistent with their ethical obligation to cooperate with other brokers under Article 3 of the Code of Ethics; e.g., through a “for sale” sign or through information disseminated through a Multiple Listing Service. Rather, REALTOR® A’s advertising campaign was directed in an indiscriminate manner to all property owners in a given geographical area. Furthermore, the medium REALTOR® A chose for his advertising campaign was a written brochure, which property owners could examine or discard as they saw fit. The panel determined that this form of communication does not harass a property owner, as would telephone calls or direct personal contacts. The Hearing Panel, therefore, held that REALTOR® A’s advertising campaign did not violate Article 16 of the Code of Ethics.
Take all of that together, and what we have is that Article 16 prohibits the kinds of direct and personal marketing where (a) the REALTOR identified the buyer/seller through “information disclosed by other REALTORS”, and (b) could be harassment of the client.
I think this is exactly correct. Article 16 isn’t about prohibiting competition amongst REALTORS. It’s ultimately about harassing the client. REALTORS put the client’s interests first, and the concern here was that a homeowner who lists his house with a REALTOR is suddenly barraged by telephone calls from dozens of real estate agents. (Sort of like how a FSBO is suddenly getting dozens of phone calls from REALTORS….)
If it were about prohibiting competition… then it would be illegal. We saw this when the FTC took action against NARPM (National Association of Residential Property Managers) back in 2014. You can read the complaint here, if you wish.
So unless Redfin found out about the buyer through the MLS, or harassed the website visitor, there’s nothing unethical about what they did here. The buyer comes to their website voluntarily. She then requests a showing, voluntarily. An automated pop-up box asks if she has an agent. Buyer answers Yes. Another pop-up asks if she would be willing to switch, because <touts benefits like any sales pitch would.>
Compete, For Cryin’ Out Loud
So what Redfin did is neither illegal nor unethical. What’s the big deal? Why are people losing their ever-lovin’ minds?
Well, not everyone. Kendyl Young, a broker from LA area and a friend, wrote this on that thread:
Let’s stop talking about old school protectionist ideas and let’s start talking about what the consumer is thinking, what the consumer is feeling. If you’ve proven your value to the consumer no “message” is going to change that.
And FWIW, I don’t think it is right or “nice” and they should stop. But, what the hell- why are we more worried about making them stop than beating them at the value game?
She’s exactly right… except for the “it ain’t right” part.
Certainly, you can say that what Redfin did here isn’t “nice” — I can’t argue against that. But you know…
It ain’t real estate friends, it’s the real estate business.
Nice or not, what Redfin did and is doing is right in line with their business model and strategy. Note that Redfin’s strategy right now is to reduce the number of clients that its agents work with, in order to maximize personal attention and therefore the close rate.
So it’s important for Redfin to know whether the person requesting to see the house is or is not represented, and if they do have an agent, whether the person is or is not open to switching. If they’re not open to switching, no big deal, but that means they don’t waste a Redfin agent’s time. If they are open to switching, then sure, revenue opportunity.
The big “no-no” here appears to be asking whether the buyer is open to switching or not.
I don’t know what to say here, other than the fact that some agents are acting like crazy jealous boyfriends. If she loves you, who cares that some dude propositioned her — as long as he isn’t harassing her. If she doesn’t love you… then like Sir Mix-a-lot said, “If you don’t have game, then let her leave your world.”
Get over it. You don’t own the client. And honestly, if you’re relying on “WE HAVE A CONTRACT!” to hold on to a client who wants to leave yo’ ass… you’re part of the problem. Every good REALTOR I know lets the client out of any contract, the minute the client wants out. Just think how the consumer thinks of the REALTOR profession when you start threatening legal action and such.
It’s like… your wife comes to you and says, “I want a divorce.” And you’re all, “NOPE! We have a contract! We swore an oath before God and all these witnesses. You can’t leave!” That’s not going to make her go, “You know, I thought this marriage was over, but now that you mentioned CONTRACT, never mind then. Maybe I still am in love with you.” It’s the opposite. She’s going to think you’re crazy and a creep.
Don’t be that person. If the client wants to go, set them free. Free, free, set them free.
Like Kendyl said, if you have value, your buyer isn’t leaving you over some website message. If you don’t have value, then your buyer should leave you. Ultimately, you’ll be happier too, since a client who doesn’t see your value isn’t going to be a good client for you either.
Why Aren’t Others Doing This?
So ultimately, the question I have is… why aren’t other brokers and REALTORS doing the exact same thing Redfin is?
GO COMPETE! Competition doesn’t mean tortious interference. It doesn’t even mean an ethics violation. It just means competition, which is good for everybody.
Just because someone says she has an agent doesn’t mean you can’t talk to her — you just can’t harass her.
I have long held that great REALTORS have a moral duty to take clients away from crappy ones. As a consumer, working with a great REALTOR who puts your needs first makes the transaction stress-free, almost pleasurable. Working with a crappy REALTOR who can’t be bothered to return phone calls is a nightmare.
If you’re better than others, and you truly believe it, then go compete for their clients within the rules. So what if it isn’t “nice”? It ends up being better for you, better for the industry, and most importantly, better for the consumer.
If you’re not better than others, and losing clients, then that ought to light a fire in your belly and make you want to compete. Maybe that’s with technology, like Redfin has. Maybe it’s with a personal touch. Maybe it’s some unique value proposition that you can bring. But competition can bring out the best in even those who lose.
PS: I know the obvious song to go with this post is Shawn Mendes’s “Treat You Better” but that’s the most pathetic beta male song since Keith Whitley’s “Don’t Close Your Eyes.” So, a real man doing it right, with dignity even, instead:
28 thoughts on “Redfin, Ethics and Article 16”
Interesting take on the conversation. However, Articles15, 16, and 17 fall under the heading of “Duties to REALTORS®” in the “REALTOR® Code of Ethics and Standards of Practice”. If we don’t like the code we should abolish it or repeal the articles we don’t like. But, we all agree to live by the code.
Furthermore, when a buyer enters into an exclusive buyer agency agreement with a Real Estate Licensee, whether they are a REALTOR® or not, there is usually a compensation clause that says the client will pay a fee, the amount which is negotiated between the buyer and their agent”, payable at settlement regardless of who the buyer buys from. In every business that I am aware of the service provider expects to be paid for services rendered. Now a buyer may have reasons, due to some malfeasance or breach of agreement by the agent, to avoid paying that fee. But, a buyer could be obligated to pay the fee to the contracted agent if he is “unaware” or “forgets” about his contractual obligations. So, you are right, Article 16 does protect the buyer as well.
Full disclosure: I am not a real estate agent and I do not work in the real estate industry. Instead I am a private investor who has invested a small fortune on Redfin. I religiously read R.O.B.’s blog & FB posts. Statements like the one above by Joe, that a real estate agent may invoke a fee to a buyer or seller whom doesn’t want/choose to ultimately use their services enhance my confidence in my large bet on the success of Redfin.
On a side note, thanks R.O.B for your consistent & in depth writing on the real estate industry! You’re a Rockstar, my friend. Ben.
Thank you Ben! 🙂
But um, if you’ve invested a small fortune in Redfin, might I strongly urge you to consider picking up the May issue of The Red Dot (Premium report link above)? This isn’t merely a sales pitch; it’s something you need to be aware of.
I don’t know what business you’re in but I am sure that you would not be very successful if you spent time and money providing services to one of your customers or clients for free. There are plenty of agents who will work without a contract and a consumer is free to choose one of them. You do get what you pay for. You also get what you don’t pay for which is probably worse. Both agent and client know exactly what the terms of the agreement include before execution. The client’s eyes are wide open when they sign the contract.
There has been much discussion over the years that the notion of the seller paying commission to both the listing and selling agent should be abolished. Sellers should pay their agent, buyers should pay their own agents. Buyer agency is an implementation of that notion.
I am pretty sure that Redfin agents are paid a salary by the company and a bonus for homes sold which is an entirely different compensation model than those of us who live on our earnings from services rendered.
Hi Joe –
I’m not sure what you mean by “If we don’t like the code we should abolish it or repeal the articles we don’t like. But, we all agree to live by the code.” My point is that what Redfin did/does is not a violation of Article 16, and therefore not unethical.
Duties to Other REALTORS does not include a duty not to compete; I think Article 16 is pretty clear on that.
I’m urging other brokers and agents not named Redfin to start competing, within the ethical rules laid out in Article 16.
The many SOPs under Article 16 explain what is meant by competing such as initiating a contract that starts when the current one ends, offering services that are not included in the existing contract, etc. It does not include, in fact it specifically excludes interfering with the contactual relationship between a client and his agent.
Oh, and what I mean by abolishing COE articles is whether we like them or not, we have to abide by them or get rid of them. Just like amendments to the US Constitution. We may not like all of them but we must abide by them.
Ah, I see. So your position is that what Redfin did here is a violation of Article 16 then, no matter what 16-1, 16-2, and 16-6 say. OK!
So how do you interpret 16-2 to reach your conclusion?
I am a little late getting back to the party. Thanks for the responses. In reference to Red Dot, it looks & sounds amazing! I am especially intrigued with your upcoming writings on Zillow, Redfin & Realogy. My dilemma is I’m not in real estate, not even close, thus some topics are foreign to me. Any chance I could buy specific months? As, always thanks for your time & phenomenonal insight! Ben
Let me start by saying I have no axe to grind against Redfin. I am sure they are a good company and I know some fine agents who work there. I am not afraid or intimidated by them. I will compete against anyone. I will insist that everyone play by the same rules though.
The key 4 words in 16-1 are “where otherwise ethical”. The rest of the articles and the SOPs under Article 16 describe what ethical means to REALTORS®
16-2 does not prohibit solicitation for business via direct mail, direct email, telemarketing, social media marketing, internet marketing, etc. It does prohibit targeting individual customers already in a contractual agreement with their agents. What Redfin did with this pop-up is violate SOP 16-9 before making the pop-up solicitation.
As for SOP 16-6, a customer who visits my website, searches for homes there, even inquires to me directly for assistance does not excuse me from my obligation under 16-9. If the customer insists on proceeding with me in spite of my admonitions concerning their potential contractual obligations, I *might* be free and clear of Article 16 violations but I wouldn’t count on it. I didn’t always think that but I’ve changed my mind and would now be much more cautious than I would have been before.
Case 16-14 from the Code of Ethics and Arbitration manual case interpretations illustrate my point. Though the specific example is different, the spirit of Article 16 still applies.
https://www.nar.realtor/code-of-ethics-and-arbitration-manual/case-interpretations (NAR login required)
Fascinating discussion. I’m a former client/consumer turned Realtor. Realtors must acknowledge consumer wants and needs have drastically changed with the rise of technology. I’ve had some disheartening experiences with those in the industry refusing to acknowledge this and failing to put the client first by seeking to adhere to the old ways of doing business. it is time for a complete overhaul of the traditional brokerage model, and I’m more than happy to compete with Redfin and any other disrupotr with my own unique client-centric approach that offers a more personal service but at a savings to the consumer.
How about Article 16, Standard of Practice 16-9: Realtors®, prior to entering into a representation agreement, have an affirmative obligation to make reasonable efforts to determine whether the prospect is subject to a current, valid exclusive agreement to provide the same type of real estate service. (Amended 1/04),
then, back to Article 16: Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other Realtors® have with clients. (Amended 1/04).
My disappointment with Redfin began when I saw an ad for a 1% listing fee.
We, as real estate pros, know their is another commission in the deal…the buyer’s agent’s side. While their listing fee may be 1%, I’m not so sure the consumer understands that there is more $ involved.
This just seems to follow their less than full transparency messaging.
To bad, it’s not really necessary.
I am hugely committed to providing value and believe that I do a pretty good job, but anybody who thinks that buyers are committed to you in this current market because of the “value” you provide are hugely naive or just plain out of touch with current consumers. Most buyers will stab their mothers in the back, if they think it will give them an edge in getting a property and who could blame them? I am hugely concerned about that Redfin strategy, but not because I think it’s unethical.
Fact. As long as the best offer this industry has for the consumer is “random real estate”, the 1.2 million plus different ways we serve the consumer today determined primarily by each agent, others that are “ready, aiming and firing” with viable ways to improve the industry will win the business. Thought to digest, but true. Disintermediation and disruption does not occur in businesses that have there collective stuff together. In that case, attacks made on the performance promised by such companies are quickly dismissed by the existence of something of equal capability or better value. Agents who believe that those people in their “spheres” are their customers for life are very wrong. Today all people – even in real estate brokerage – begin as “consumers at large” and end up becoming “customers for now” the day when they search and find something that believe will get the job done most effectively and efficiently for them. And in considering the case being made here, that includes companies like Redfin who are setting new standards and making claims for the improved timing of responding to basic consumer inquiries. It sucks to lose when others win by claiming they can do something better and actually do it – but that my friends, is called business.
I am a former redfin agent and I now work in the commercial side of real estate finance. One of the comments in the fb group had said that “that they are hinting strongly that a buyer could tour a property faster with a Redfin agent than other agents.” and made it seem like this is inaccurate. I am no longer employed by Redfin, so I am not biased and I can promise you that besides the listing agent, redfin will 100% get a consumer faster into a home. Keep in mind that the buy side is still redfin’s bread and butter, so they have had a decade now to absolutely master the buy side process- especially the process of touring homes and they have brought it down to a science. When a customer schedules a tour online through the website or the app, the support agent or tour coordinator vets the client, speaks with the listing agent and checks whether a viewing is possible if the home is owner occupied and if the lead agent is not available at that time, there are plenty of associate agents just waiting for a home tour, so the client will be booked with an associate agent. The associate agents get paid for the home tour, so they will rarely turn down the tour. I think now they have pretty smart software that even reccomemends a particular associate agent based on availability. It is a very seamless process with little back and forth with the several parties, it can also be done all through text. So, neat software plus a smart team based model where you have support agents and tour coordinators all day scheduling tours and associate agents just waiting in their car in different areas for tours separates redfin from other brokers where if you want to see a home at 7 PM, you first have to see if the broker is available. With redfin, you dont have that problem.
How much faster can they get a buyer in than instantly?
I am not sure what do you mean, could you clarify? If a home is vacant, in the mls agent notes, it typically says “vacant-go direct”, and in that case, literally 15 mins after booking a tour and if the tour coordinator/support agent vets the client (verify id), the client can get into a home. That is pretty marvellous. No longer checking to see whether the broker is available at the time the client wants to see the home. If the client wants to see the home at 7 PM, and if your not available because you already had another appointment scheduled at that time or your at your kids softball game, then the client will have to see the home at another time, so redfin has helped remove that barrier and has allowed the client to see the home at their preference/availability and not at the brokers availability. If your a one man operation, you can only be at so many different places at a time. This is where redfin has developed an edge, as they operate on a team based model, you can be almost certain that a licensed redfin agent (or associate agent) will be available to show you a home. And note that associate agents are paid per home tour, so they will move heaven and earth to try to get you into a home.
The likelihood that I am unable to meet the customers needs and desires is almost nil. I am my own tour coordinator.
Good for you Joe, you are a superhero, but not every agent is like you, there is a reason why the top 10 or 20 agents do 80 percent or so of the business. Many cannot be at 10 different places at once. Client X schedules a six home tour from 4-6 PM and the appointment was made a week ago, another one of your client, client Y wants to see three homes also in the same time but she calls you a few hours before your appointment with client X, maybe you will figure out a way to handle both appointments (which are at two different parts of your market 70 miles part), oh and also you have an inspection scheduled for one of your active escrows also at 6 PM, then dont forget you need to pick up your kids from softball practice in the same time, you being a superhero will figure out to be present for all the appointments, but most agents cannot and that’s where redfin’s team based model comes into place.
I’m fascinated by this, and the code of ethics in general. The big majority of REALTORS have never actually read the COE, or they might have had a class on it every 2 years, but they don’t retain information.
However, I think your interpretation of Article 16 is a bit of a stretch to say what Redfin did, in this example, complies with the COE. In the example with Redfin, as I understand it after reading this post, the buyer was creating an account on Redfin’s website, and Redfin then asked if they were working with another agent. The buyer answered “yes”. Redfin responded asking the buyer to leave their current agent and hire them instead. Hopefully I understood that correctly, or the rest of this comment is probably irrelevant. In this case, Redfin initiated the conversation about services, NOT the buyer. Right? The buyer did not ask Redfin for any type of real estate service related information. Redfin’s first question is if the buyer is working with an agent. I don’t think Redfin’s 2nd pop up qualifies as a general announcement, because Redfin now has the knowledge there is an exclusive agency relationship with another broker. A general announcement is blindly mailing post cards to every house in a single subdivision. A general announcement is not asking a someone “are you working with an agent? yes? Well let me go ahead and make a general announcement about my service while I have you here.”
Also, I’m curious to see what you think about SOP 16-5, which says verbatim: “REALTORS® shall not solicit buyer agreements from buyers who are subject to exclusive buyer/tenant agreements.” In this Redfin example, I suppose you could argue that if Redfin just asked “are you working with another agent”, then that doesn’t exactly reveal if there is an exclusive agency agreement signed between the buyer and the other broker. BUT, SOP 16-9 says the REALTOR has an affirmative obligation to make reasonable efforts to determine if the buyer has an exclusive agency agreement with another broker. Is Redfin asking “are you working with another agent” enough to consider it a reasonable effort? Maybe. BUT, when the buyer says “yes” to that question, then isn’t that a red flag for Redfin to ask “do you have an exclusive agency agreement with your agent?”
SOP 16-6 doesn’t apply to this Redfin example, unless we don’t have all of the information. 16-6 says if the buyer asks Redfin about entering into an agency agreement FIRST, then Redfin can discuss that, even if the buyer has an executed exclusive agency with another broker. The key is that the buyer was the first one to ask about representation from Redfin (which is very different than asking Redfin for information on a listing). In the example provided, Redfin was the first to ask this question.
As a broker with 300+ agents, I’ve had some experiences with potential COE violations by both my agents and other brokers’ agents. So, I have nothing against Redfin, I’m just looking forward to a response and a great debate on something as fascinating as the COE.
I came from a RE market where 50% of the licensees aren’t Realtors. While that was my “normal”, I realize now how agents in other markets would think of it as the wild Wild West. It was not unusual for a non-Realtor to try to solicit away your clients. Honestly, it was never really an issue. I concentrated on doing my job to my best ability and keeping my clients happy. There will always be interrupters in the industry; some will succeed, some will not…it’s called competition and it’s a good thing!
A couple assumptions are being made about a “relationship.” Working with an agent doesn’t automatically mean the client has signed an exclusive agreement. And if they have signed an exclusive agreement, and you as the agent aren’t representing them well, do you really feel like you have the right to hold them hostage to the agreement?
Assuming there is an exclusive agreement, if the buyer says yes, they’re willing to switch, the first agent didn’t do a good job of explaining what that agreement means and what each party is responsible for.
Assuming there is no agreement but an agent has shown a buyer a few houses, you don’t have a commitment. So while the buyer may be “working with an agent,” it doesn’t mean s/he feels like they have a strong relationship.
If the COE is anti-competitive, we’ve all got some bigger things to think about.
This was really interesting.
I started writing a comment.
Then I kept writing.
Then it got really long.
Then I turned it into a blog post.
It was a good one, Joe. Thanks for doing that.
The big takeaway is that you think Redfin is being rude, but not violating the law or the Code of Ethics. That seems like a fair assessment.
I do think, however, that professional courtesy should never extend to restraining proper competition — defined as non-harassing competition for the client’s business.
All of the commenters suggesting that Article 16 does prohibit what Redfin did here are missing the larger point: if Article 16 restrains competition, then it is likely unlawful. The FTC/DOJ will come after NAR if that were the case. If, on the other hand, all that Article 16 does is (a) prohibit harassment of the consumer, and (b) preserve the incentives for cooperation, then it’s kosher.
Maybe a followup on that point later 🙂
Hadnt realized that my post caught your attention. I did write my responses in a hurry, so certainly would have expressed myself a little clearer if I had thought about it. If what yous ay is true, then why should Redfin even ask if a buyer was working with another agent? While any number of questions could come up about the buyer’s relationship with another agent, the gist of the Redfin questioning was clear to me. If an agent receives a call from a homeowner, who indicates that they have an agent, but want to speak to someone about opinion of value, market, or whatever, the next thing out of the agents mouth is, are you under contract? If the answer is yes, and the agent says, well, would you like to switch agents, then that’s a clear violation. Redfin asked the website visitor, (who didn’t call Redfin but in essence had a question about property, market or whatever, if they were working with an agent, and the answer was “Yes”, the next question maybe should have, are you under contract with that agent? Not, would you dump your agent for us. At least if we are going to stay with the COE.
On the issue I had with implying that Redfin can get a buyer into any property quicker than anyone else. While they may make a request instantly, 24/7, via email, showing service or call to a listing agent, stating that they can make a property available for viewing faster is just dead wrong. Yes, I did say because I was the listing agent, that it would be hard pressed to get someone in faster. I was being a wise guy about that. Given that the majority of listings are occupied and need some notice, and in many times, at least in this market, no showings until the weekend open houses, Redfin’s influence or power to cause a showing to happen faster is incorrect. I am aware that my experience is only in my market and it may be different in others, I would bet that most are similar. I believe that before one tries to sell themselves, they should determine the relationship between the buyer and their agent. There is a difference between healthy competition and interference with an agency relationship. Technically they did ask if the buyer were working with an agent. Then, they ignored it. So then, what is the purpose of asking in the first place? Why not just offer to show the property or ask them what they are looking for? They were better off not asking. Then, the test is how well their buyer agent educated them on committing to an agent, or the level of service that agent is giving to create the loyalty needed to maintain that relationship. If the buyer agent truly has earned the relationship, no amount of enticements would be successful.
I thing I did fail to mention. When we do an open house, and a potential buyer signs inot it, and checks off the box “Am working with an agent”, and indicates who that agent is, it is expected that I would honor that relationship. Inf act, many potential buyers sign in as “Redfin” being there ‘agent’, even though they have yet to speak to anyone there, and certainly haven’t yet formed an agency relationship. Not only is that honored, but it is expected to be honored by Redfin. No attempts at getting them switch by inducements such as, “I’m more experienced, and I’ll give you a larger rebate, or, whatever carrot could be dangled. Agents who do, typically get into a bit of trouble, at least in this market.
All Redfin has to do to be in compliance with the COE is to eliminate the question “Would you be willing to switch…”. Its the ask, not the tell, that crosses the line.
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