Home Buyers; Do You Know What You’re Worth?

Home buyers for sale!  Buy one get one free!

Ok, it’s not quite like that but, if you are a home buyer, odds are you have been bought and sold whether you know it or not!  Does this sound surprising to you?  I’m guessing it probably does as I don’t think most home buyers realize that, just like the homes they are shopping for, there is a market for home buyers (and sellers, of course)  as well. I’m talking about “real estate leads”.

How home buyers are bought and sold…

Before I go further, or, especially if you are a real estate agent reading this, before you start hating on me thinking I’m bashing the idea of leads, I should explain that I have no issue with “leads”.   Most every real estate agent I know is always looking for leads or that next opportunity to do business with someone.  That is normal.  In fact, especially for new, or newer real estate agents, that have not yet established a large referral base, leads are critical to their survival in this business.  To go one step further and in the interest of full disclosure, my company, MORE, REALTORS®, is known to be one of the best companies in the St Louis area for generating leads or opportunities for our agents.

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St Louis Favorite Real Estate Search Site - Best Site to Search for St Louis Homes For Sale

Google search for “St Louis Favorite Real Estate Search Site” performed on 9-15-2017

So, back to how buyers are bought and sold and where my rub comes in.  You’ve probably heard of Zillow® and even though St Louis’ favorite real estate search site is our local site,  St Louis Real Estate Search (don’t take my word for it, Google it), many, many potential home buyers go to sites like Zillow®, as well as many other large national sites, to search for homes for sale.  What a lot of people don’t realize, or never give a thought to is those types of websites are not operated by real estate companies but instead are operated by companies which depend on, among other things, the sale of buyer leads to produce revenue.

I’m not bashing Zillow® here, or anyone else, just simply pointing out the difference between a website such as that one and a local one, such as StLouisRealEstateSearch.com that is operated by local real estate professionals.  

How does Zillow® sell the buyers that use their site?  Although there may be other ways, what seems to be the most popular way is their Premier Agent® agent program whereby agents pay to be featured next to listings for a particular zip code or many zip codes.  What’s wrong with this?  Nothing, from the standpoint of Zillow® or the agent buying the leads.  From the consumer standpoint though, I’m a strong advocate for informed consumers and, as such, think home buyers should realize that when an agent calls in response  to their inquiry on Zillow® that the only real “vetting” for the agent that got the lead was, for the most part, they are paying for leads in that zip code.  I have to say again, I’m not criticizing those agents or saying they are bad, in fact, many of them are very good.  However, I’m suggesting that you, as a home buyer, be informed and understand how and why they are the one calling you.

So how is this different from the way our company handles leads, or other local real estate companies?  Well, while I can’t speak for all companies, I can share how we do it at MORE…For starters, as I mentioned before, our site, StLouisRealEstateSearch.com, is owned and operated by a St Louis real estate company, MORE, REALTORS.  At MORE, only agents of good character, that conduct themselves in an honest and ethical manner and are true professionals in every sense are invited to join our firm.  Next, we don’t sell our home buyer leads to any agent that pays the price.  Instead, when a home buyer makes an inquiry on StLouisRealEstateSearch.com, we match them up with one of our agents that is knowledgeable and experienced in the area, property type, etc that the home buyer is interested in and have that agent follow up.  This way we can ensure that a home buyer on our site is going to get the information they want from a local, real estate professional who obtained the lead by being qualified to properly serve the needs of the home buyer.

A final word, and where I do have a problem with Zillow® leads…

I would be remiss if I ended this article without sharing the fact that it has become very common for mortgage lenders, to pay for Zillow® leads for an agent.  The issue here is, the loan officer paying for the leads, naturally, expects the agent to refer any buyers that come off the leads back to them for their mortgage.  While on the surface this may not seem like a problem, real estate transactions are governed, in part, by the Real Estate Settlement Procedures Act (RESPA) which prohibits kickbacks.  In other words, a loan officer can’t pay for leads for an agent and expect the agent to refer the lead back to them for their loan without being in possible violation of RESPA.  You can reach more about this in an article I did previously about Zillow coming under fire by the CFPB over this issue here.

I don’t believe the loan officers paying for Zillow® leads for agents are bad.  Many of them are very good.  I just think it is good for consumers to know how it works, so if you make an inquiry on Zillow, just realize how and why the agent that called you got your info.  Then, later, if that agent makes a lender recommendation to you, realize that the lender he or she recommended may have been selected by them based upon that lender “paying for you” rather than simply based upon merit or qualifications of the loan officer.    Granted, the lender chosen by the agent to have pay for their leads may very well be the lender that the agent likes doing business with because of their skill and qualifications, but under RESPA the type of arrangement I described appears to be problematic.

My advice…

To home buyers:

  • Use a great real estate search site, such as StLouisRealEstateSearch.com, that is backed by local, real estate professionals ready, and qualified, to properly serve you.
  • Whether an agent contacts you from our site, Zillow®, or any other site, do your homework on the agent and have the agent share their qualifications and experience with you before deciding whether or not to have that agent represent you.
  • When you get a lender recommendation from your agent ask if the agent has any sort of financial relationship with that lender for starters, then check out the lender just like you did the agent.  By the way, if there is any sort of financial or business relationship between the agent and lender, that should be disclosed to you without asking.

To real estate agents:

  • Before you allow a lender, title company or another party to your real estate transactions to pay for leads for you, or provide services or gifts in exchange for business, get up to speed on RESPA.
  • Seek out a company like MORE, REALTORS, which produces enough leads, as well as has the tools, resources and coaching for agents to produce their own leads, thereby eliminating the need to enter into agreements with lenders that may put them at risk.

To loan officers:

  • Don’t buy into the “everyone’s doing it so it must be ok” mentality.  Pay close attention to the news coming out from Inman and other credible sources about the Zillow investigation by the CFPB as well as reports by the CFPB of fines being levied against loan officers and agents.
  • If your company is participating in buying leads for your agents, and particularly if they are telling you it’s ok to do, have them write the check to Zillow® instead of having you do it and then reimbursing you as part of your “expense reimbursement”.
  • Find ways to support agents and build your agent network that will not conflict with RESPA.  Contact me and I’ll share some ideas.
(Zillow® and Premier Agent® are registered trademarks of Zillow® – REALTOR® is a registered trademark of the National Association of REALTORS®)
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