Tweetstorming the Industry Relations Podcast with Jack Ryan of REX

[Note: These are the personal opinions of Sam DeBord and do not represent the position of RESO, the National Association of REALTORS, or any other organization associated with the writer.]

R.O.B and Greg Robertson recently interviewed Jack Ryan of REX on their Industry Relations podcast. The story of REX isn’t a new one. It’s a brokerage that wants to shrink commission costs by reducing or cutting out buyers’ agents’ compensation. It doesn’t want to participate in the MLS.

REX also wants to enjoy the benefits of the organized processes and technology that MLSs have built for showing efficiency, but the company doesn’t want to shoulder the costs of participating in the MLS. It sees that requirement as unfair.

During the podcast, the hosts interjected to question some assertions Jack made. But it felt like the snowball he was rolling downhill was growing faster than the fact-checking could keep up with. And whoever was at the receiving end of this snow job would likely be confused or misled by what they’d heard.

To be clear, this post will not argue against the recent DOJ-NAR agreement, though the topics are related. This is simply accountability for unsound arguments that Jack continues to make which, left to grow in a void, become unquestioned conclusions.

Rob and I agreed that reproducing the Tweetstorm I published subsequent to the interview here on the blog would help frame the discussion. The quotes are my summarizations of what was said on the podcast and I believe they are accurate. Apologies for the informality, but it’s Twitter. Brevity and a little bit of humor help:

  1. Choices are good, whether on price, service, or product. In Seattle, we’ve had every compensation model under the sun for decades (MLS4Owners, Redfin, Faira, MySecretAgent, FSBO markets). You’re all welcome to the competition.
  2. We have to document the misrepresentation of facts. Because a mountain of half-truths becomes a monument to false premises. And people with friends in high places make decisions based on those premises.
  3. There is an interminable parade of people with big ideas coming to real estate that lack the experience in the industry to “know what they don’t know.” I was one of them, even 10 yrs into the business. So let’s chalk these misrepresentations up to simply, “Didn’t get it yet.”
  4. Begin rough quoting of the podcast:
    “At Goldman Sachs, trading prices were going down, why not for transactions in real estate?”
    This is a well-worn opening storyline. Insert another industry and ignore the flimsy false equivalence. We’ll return to this.
  5. “We’re a full-service brokerage firm, we find homes for buyers and sellers, do real-time bidding, make predictions, better algorithmic trading.”
    Great–bring us better intelligence and tech.
  6. “You can’t change the outcome, cost structure, and service level if you use the exact same process (MLS)–you have to use a totally different process.”
    Binary questions oversimplifying concepts will repeat.
  7. “One of the MLSs on the West Coast wanted to do Coming Soon and they (NAR) said no you can’t.”
    This is simply not true. NAR policies allow for Coming Soon if any market wants to adopt it. The monument is beginning to be built…
  8. Access to the lockbox is where things start getting fast and loose:
    “Why are we not allowed access to/why are we not allowed to show the home? You can’t get access, even though you’re a registered agent in California.”
    Greg called this out. And what is a registered agent?
  9. In the vast majority of cases, the listing agent will:
    -Have an open house
    -Ask the seller to open the door for a keyless agent
    -Schedule a time to open the door for the keyless agent who can’t afford the $100/mo to make the showing process reasonable for their clients.
  10. This is a huge point. The boogeyman evil listing agent who doesn’t want the home to sell and wants to restrict showings is the scarecrow that many other conclusions rest upon. It’s simply false in most cases.
  11. “The industry is out of touch with the internet age. As these commissions come down, and they will, and it’s not us it’s the internet…if you’re a middleman, the internet is putting your job in some pressure. It’s not just us it’s the internet and AI is doing it.”
  12. The agent-as-middleman concept continues to be a weak analysis. Consumers can see all of the inventory and access it directly if they want to. Yet they hire agents for additional professional services: consultation, process management, contract negotiation, etc.
  13. “As you bring the price of the transactions down, the transactions go up (stock vs home). Fees go way down, transactions go way up. The value of the underlying asset goes up.”
    Greg couldn’t let this one slide again.
  14. Some sales could increase. But there’s no reasonable person who believes we all want to move significantly more often. The physical and emotional human friction of a home sale and move negates all comparisons to stock, cars, travel, etc. Even if we love a home, we HATE moving.
  15. The flimsiness really set in here:
    “Our people are W2 employees so they can use technology to make better decisions. Those independent contractors only use human intuition to remind themselves, ‘I’m just going to call Rob today’.”
  16. It’s insulting when independent contractor agents are broadly painted as feckless and unsophisticated. The best agents I know are high tech, doggedly responsive, supremely organized, automated and almost all are ICs.
  17. Yes, there are a lot of low producers, but the high producers are involved in the vast majority of sales. Of course, though, binary is easier, so IC=bad, employee=good.
  18. Get ready:
    “Our agent might get a push notification and say to a client: ‘Maybe we should increase the price of your home because our AI says other homes nearby have sold for more. Maybe we underpriced it.”
  19. My client, whose home I haven’t been able to get sold yet, should RAISE their price. Exploding head Boom. AI. Don’t @ me.
  20. “Why does a seller, when hiring a listing agent, have to hire a buyer’s agent? Can a plaintiff’s attorney pay a defendant’s attorney?”

    Face with rolling eyes(Yes, the emojis are coming.)

  21. A seller doesn’t have to, they have the option of making the offer. Even if they do, they may not pay it if a buyer comes directly to the listing agent. Buyers and sellers are negotiating toward a mutual agreement, they are not parties in conflict like the attorney example.
  22. “If they would give away the rule-making authority of course we’d join (the MLS). Let’s say we had an idea like the realtors in CA like we wanted to do coming soon and the nar and the mls shut it down.”
    Face with symbols over mouth
  23. That didn’t happen. Also, this tells of a lack of understanding of the broker cooperative. It literally exists to provide the rules under which cooperation can proceed with certainty and efficiency.
  24. “(Purchasing real estate) It’s a hard process because it’s been designed to be hard for the last 50 years.”
    All brokers, agents, and MLSs who’ve been working on the design to make the process harder, please raise your hands.
  25. “Once the rules come off there’ll be no stopping the free flow of information that’ll occur.”
    The MLS has been the single biggest driver of consumer-accessible data on residential real estate. It’s already free-flowing. Ask the big portals who all access it.
  26. Greg: Hug your kids.
    Me: Hug your policymakers and let them know that not everything the fast-talking man tells you is so.
  27. “If you’re an efficient real estate agent, you’ll have plenty of transactions at whatever rate you’d like to charge as long as your service supports it.“
    “For someone like you, Greg, I don’t think the price of the transaction will change that much.”
    Where’d the revolution go?
  28. “Shampoo has so many choices. Wait until real estate gets that. MLSs will make tons of money if they just let us do what we want to do and be a system of information.”
    New entrant tell: “The MLS should just be a database.”

Let’s hope that the misinformation that was conveyed during the podcast was just a lot of misunderstandings that can be corrected. But this story has been told many times to many people of significant stature. And the alleged anticompetitive activities attributed to agents and MLSs–unsubstantiated and even verifiably false in many cases–paint a picture of a “cartel” which is inaccurate.

The DOJ has spoken on issues of transparency and the industry will comply. Things will be fine. Competition will reign.

So why spend energy fighting the continued promotion of storylines like Jack’s? Because accepting the precedent that the industry’s business practices should be guided by fast talkers with paper-thin arguments is a recipe for disaster. This isn’t a corporate rivalry over mobile phones or video games. It’s about the integrity of the nation’s organized marketplace for housing opportunities.

No one is totally immune to the seduction of fast-and-facile arguments like those presented by REX. So it is incumbent on real estate leaders to be intellectually disciplined, to separate the facts from the fiction, and to profess the inaccuracies loudly or accept the consequences quietly.

-swd

PS: This is one of the stranger posts I’ve written. But it’s a Notorious post: question, inform, and provide some levity. Then post music. Be well, friends.

“Scheming on a thing that’s a mirage…”✌

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Sam DeBord

Sam DeBord

Sam DeBord is CEO of the Real Estate Standards Organization (RESO). He has served in a wide range of industry leadership positions, including as President’s Liaison for MLS and Data Management with the National Association of REALTORS®. He has 20 years of experience in real estate brokerage, lending, and technology consulting.

9 thoughts on “Tweetstorming the Industry Relations Podcast with Jack Ryan of REX”

  1. “26. Once the rules come off there’ll be no stopping the free flow of information that’ll occur.”

    Because with no rules and minimal cooperation in the commercial real estate market they have a wonderful, free flowing mass of information to the consumer? The model this guy is proposing already exists, its called commercial real estate.

    As a professor teaching Real Estate Practice, as an assignment I had my students search for their “Dream Home”. The process for them was fun, and they came back with a sense of enthusiasm and some great properties. Most were able to complete the task in a half hour or less. Then I had them search for either a 2,000 to 5,000 sf office or retail building. The descriptions of the process they went through and complaining was truly entertaining. Most spent 2 plus hours hunting. One drove around in his car calling on signs. Most found properties in cities and areas that they knew nothing about. A few just gave up out of sheer frustration. We discussed at length the benefits of a MLS and why that cooperation model had such a significant impact on their ability to access good, quality information. For anyone that argues that property information would be readily available without the MLS, have them do this little experiment and see if they still hold same opinion.

  2. Rob, the one aspect I enjoy about your writing is the neutral tone you take. And you tell it like it is. I knew right away this was not your article. Some have blinders on and are drinking too much Kool-aid. Even if the the author is correct about some aspects of contradicting Jack Ryan, the tenacity of attacks from executives with skin in the game is very telling. Just like all the execs coming out of the wood work saying “commissions are negotiable”, which is a bunch of BS. Negotiable by the firm setting the policy but not by 1099s. Sam was one of who made this comment “commissions are negotiable”. Sam lost all credibility in my opinion after making that statement. I wonder if companies like Black Knight and Corelogic can pull all the buyer agent compensation data in any given town (or most towns)? The answer is yes. Good luck to Sam trying defending antitrust issues with big data. I’m not a lawyer but it doesn’t mean I can’t ask the questions to people who are.

    If Uber/Lyft or any ride service company for that matter could collectively pull data on “charges to consumers” in a given town (in this case buyer agent comp) I’m sure it would raise some eye brows. The industry is it’s own worst enemy and the more execs which scream and stomp to defend the more I wonder why they are so defensive……

    • Hi Tricia,

      It may not be mentioned in my bio, but I’m a broker. I’ve managed hundreds of real estate agents at Coldwell Banker Danforth. And we allowed our 1099 independent contractors to individually negotiate their commission rates with their clients. Yes, some brokerages have set commission rates that they require in their offices. We did not, and many companies do not. So your broad statements are inaccurate.

      I’d love to hear any other areas where you feel this post is not factual.

  3. Sam, just a thought…maybe you shouldn’t leave your policy and procedures up online. I can see your office charges royalties to 1099s disguised as brand fees too–not shocked. Do you call it a royalty in the ICA or a brand fee? Do you explain to your agents the math is different? Do you follow the FTC business opportunity rule when you hire…do you explain that 70% split is not a 70% split and that brand fee is actually higher because it’s a royalty? I hope you provide the proper disclosures to your agents and disclose your office is really practicing a tiered franchise model when you are charging those 1099s royalties.
    PS: YOU DID make a blanket statement: “commissions are negotiable”. Next time be more specific (you were specific above). But don’t speak on behalf of the industry like you have in the past. You still failed to answer my question about pulling buyer agent compensation in a given town from MLS data. Software like Black Knight and Corelogic, can it pull rates charged to consumers by towns…IDK, I am not a antitrust attorney but I am sure someone would love to know this and it would raise some eye brows. I hope the kool-aid protects you from discovery and depositions.

    “COMMISSION REDUCTIONS: It is CBD’s policy that you will always offer a full market
    SOC on every listing. If you choose to reduce your listing or buyer’s side commission, you
    must do so in writing within either the listing agreement or buyer’s agreement. If you do
    not handle your commission reductions through these agreements, you will be charged the
    6% royalty fee by CB corporate as they choose not to participate in your client gifts that are
    non-contractual”

    Sam, do you tell your agents that the office gets a kickback on home warranties? You can call it what you want but it IS a kickback. Or are you going to tell me your office doesn’t receive anything in return for those warranties?

    “Coldwell Banker Danforth highly encourages the use of Home Warranty Programs on all
    properties.
    The policy of this office regarding the home warranty insurance program is as follows:”

    “ORIENTATION: Each Broker is required to attend an Orientation class within 3 weeks of
    joining our company. Ask a manager for the Orientation schedule. Newly licensed Brokers will
    complete the NWMLS Orientation and Matrix classes prior to attending the CBD Orientation”

    Sam, last I checked mostly W-2s have “required” orientation (at least my in state which follows the ABC test). This doesn’t sound so “independent”. But you are the expert “managing hundreds of agents”…this is starting to feel like Jack Ryan’s W-2 model.

    Lots of sloppy brokers have left their policies and procedures manuals online for the DOJ or anyone else to see; maybe some should stop saying one thing publicly and enforcing something else within their firm’s office. Cheers!

    • That was an excellent gish gallop, and I’m glad you’ve had the chance to review the company’s procedures manual just as anyone is welcome to. Transparency is a wonderful thing, isn’t it? To add clarity, SOC is the Selling Office Commission, a.k.a. the offer of compensation to the buyer’s agent.

      Interestingly, this post didn’t actually say “commissions are negotiable,” which seems to be your main concern. But I can clear that up officially. Commissions are negotiable. Have a great week.

  4. Why is it that so many men at the top have to tell people how important they are? “I manage hundreds of agents”. And so defensive. You spoke as an industry leader for RESO when you said “commissions are negotiable” when clearly you know they are not. Still didn’t answer some of my questions. Transparent? Why does your office encourage home warranties? Do you disclose to agents about those kickbacks? Don’t even say the industry bull crap about why agents should offer them. We both know they are crappy warranties. It’s about “transparency”. How about pulling buyer agent comp by town with software like Black Knight & Corelogic? You are a leader in the RE industry. Start acting like it. I’m just the one asking questions and watching men get defensive and then me how important they are. Should I keep digging? Because I am really good at finding lawsuits in every state.

  5. Sam, just so we are being “transparent”, Black Knight’s, Chip McAoy is also on your RESO board? This seems like a huge conflict of interest? Especially since Black Knight has the ability pull buyer agent compensation by town. Hello antitrust!-if firms are making commission decisions based on this data “No agent B, you can’t reduce your commission because the buyer agent comp in this market is 3%”. But that’s just my opinion, and since you are the important one earning $195K salary from RESO which is determined by your board, you know all.

    I’m pretty good at going through 990 forms too. Like I said the industry is it’s own worst enemy. RESO 990: https://apps.irs.gov/pub/epostcard/cor/454079029_201912_990O_2020081917244261.pdf

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