I called it in 2007 when I said that those $60-90 “processing fees” were illegal “kickbacks” that Realtors and Brokers got for pushing Home Warranty companies. (see 2007 post).

My exact words in 2007 in case you missed it: “I wouldn’t be surprised if soon there is a class action lawsuit that will come after these firms and the Realtors that are colluding to the detriment of their client.”

Well it finally happened. Of course the defendant doesn’t agree with or accept any responsibility. Here is the website announcing the class action settlement. It is against AHS, the #1 home warranty company. The period is from May 2007 to Dec 2010. AHS was selling home warranties for $400 and giving the recommending broker $60 to $90 in “admin fees.”

Why does this matter? Kickbacks are illegal under RESPA (google it).

And in case you missed it, our “Excellence Comes Standard” ™ client bill of rights #4 has always been, “No Home Warranty Kickbacks.” I know many might say “Duh, of course my agent should not be getting bribed,” but your Duh is not reality and yes agents get excited over $60. And yes it is only $60, but I think it signals a deeper problem of disclosure and fiduciary duty.

“Are you working on my behalf of not!” $60 here and… $10,000 there when your agent throws you under the bus, without authorization, and tells the other agent you are willing to pay more. And don’t think I don’t see this a fair amount. (ie sucky agents)

(Focus Frank, focus) The settlement calls for about a $45 to $60 refund.

Here is the tricky part. The settlement says those that qualify are “settlement class member’s purchase of the home service contract.” [sic] And supposedly people are getting letters from AHS telling them that they may qualify. But where are those letters likely to go to? To the home being warrantied! Who most likely bought the warranty? The seller! Ha. The seller’s contact information is usually nowhere on the application to purchase the warranty. So how do THEY get paid. I know, kinda boring and academic, but interesting to me.

What now? What is the latest trick or workaround?

Now the warranty firms (some stopped the practice) actually have the agent “do something” so it won’t be considered an illegal kickback. Not sure exactly what is done (if you know, add it to the comments). Probably it will entail having the agent walk around the house and check off boxes.

What a mess.

Should have just followed my advice in 2007.

Frank Borges LLosa J.D.

Broker FranklyRealty.com

Owner FranklyMLS.com

P.S. Hartly is almost one. (pic by AbbyKellyPhoto)

I hate admin fees. Never charged them, never will. (kinda like Sprite)

Just a couple of corrections to my quotes in their post (which they are working on).

1) I initially estimated that admin fees were charged on 40% of deals. I guess I was being conservative. That is actually more like 70% based on 20 recent HUD1s that I pulled (not charged by us, but by the other broker). Also to clarify their post, I don’t know if these fees were agreed to in the initial consultation, or were just sprung up at closing.

(even if they were brought up initially, they are still bogus if the client doesn’t know better, ie they don’t subscribe via email in the upper right corner of my blog. )

2) They quoted me as saying that “many agents” are allowed to keep the admin fees charged by brokers. I actually only know of 1 (maybe 2) agents/brokers that do that. If that was prevailant, it would be EVEN WORSE and I’d go and become a lawyer for the class action on that one! (oh yeah, I got into a law school. I start in the fall.)

But the point wasn’t missed in their post. Agents aren’t completely innocent in their “Sorry that is company policy to charge this.” excuse.

Agents that are with firms that charge bogus admin fees are part of the blame.

Why? Isn’t the broker solely to blame for charging this?

No. They are charging that fee, in part, because they can’t make enough from the agents. Why? Because the agents are demanding better splits. (and they have big offices)

Exaggerated Example/Scenario:

Agent A is with 123 Realty that offers a 60/40% split (firm get 40%). And this 123 Realty charges no admin fees to clients.

Agent A gets courted to move over to 789 Realty. They offer 70/30% split plus a $300 per deal admin fee (that either the agent or the client has to pay).

So when Agent A moves over to 789 Realty and then says to their client, “Opps sorry, this firm charges $300 more per deal, nothing I can do about it. What? You want me to eat it? Heck no, that isn’t ‘fair’.”

Meanwhile on a $10,000 commission, the new company “gives” the agent $1,000 more.While charging $300 to their client.

Another thing that sucks about admin fees is I will see the SAME company charge them one day, and not charge them the next day with a different agent (at least not on the HUD1). So either the agent ate it offline (not HUD1) or they stood up to their broker and said,

“Not only am I not paying this, but I’m not passing it on to my client. Mr(s). Broker, if you don’t do this, I’ll switch over to FranklyRealty.com (if they will take me, no newbies sorry).”

But sometimes brokerages ARE to blame.

Some brokers will start agents off with a 45/55% split (55% for the firm). But of course the $5,500 out of that $10,000 doesn’t cover “admin.” What? Is that $5,500 profit and the $300 is to cover xerox copies (admin)?

Anyhow, thanks MSNBC for blowing the cover off this garbage fee. I hope to help you expose more Realtor tricks.

Tips for Realtors: Tell your broker no. But if you are on a 100% split paying $200 per month, you better believe they are going to charge “admin fees.” Or push you hard toward their Affiliated Business.

Tips for Buyers: Hell no. Buyer Agents advertise their services as “free.” Not “Free*” with a $300 fee.

(I never say I’m “free.” Yes technically the seller pays, but the buyer is the one writing a check at closing, and a part is coming to me. I realize that. Thank you. I hope I helped, and you found it worth it.)

Tips for Sellers: Well this is tougher. At least they aren’t saying their services are “free.” They are saying their fees are XYZ% plus $300. You always have the right to go negotiate the commission split AND/OR the admin fee. But remember, that doesn’t mean the listing agent has to say “yes.” With your right to ask for less, is the agent’s right to say NO. (nothing wrong with discounting or rebating. I write about it here… “I used to do it… but then I got good decent.”)

Tips for Brokers: Just because everyone else is doing it, that doesn’t make it right. Also go cut some overhead. The world is virtual. Get out of the 0.5 real estate world and join the Web 2.0 world.

- Written by Frank Borges LL0SA- Broker FranklyRealty.com
(please report typos)

First JetBlue left customers on the runway for 10 hours. After this disaster they came out with a JetBlue Bill of Rights.

Then a class action lawsuit was brought against C0ldwell Banker (Article) for violating RESPA laws for steering clients to profit-sharing “partners.”

Before there is a further disastrous out lash from consumers against Realtors, we must adopt a new standard. All shadiness needs to be removed from the industry and excellence should come standard.

FranklyRealty.com will start in Virginia, DC, MD and I envision shortly other firms will subscribe to the “Frankly Client Bill of Rights” throughout the country. This is not trademarked, go ahead copy me. You’d be an idiot not to.

Who will join us? Who runs a real estate firm that is willing to follow our lead and offer a new elite level of service and disclosure?

While I’m honored to be the first to come out with this, I’m also embarrassed at the same time that this isn’t already the default. Consumers might read this and say “d’uh, seems obvious,” I agree! But why is it that not one real estate firm in America subscribe to this? YET!

Introducing the Frankly Client Bill of Rights:

#1 No ABA’s, Affiliated Business Arrangements

We make our money on the commission, we don’t need to make a few hundred bucks steering you. No “One Stop Shopping” filled with partners filling our pockets. (blog on ABAs)

#2 No Admin Fees

These $200-$400 junk fees were invented by large real estate firms for both the buy and sell side. No more having clients sign confusing disclosures unknowingly. We don’t charge them, never have. (blog on Admin Fees)

#3 No Dual Agency

Dual Agency is ILLEGAL in some states. I wonder why? Dual Agency is when there is only one Realtor between a buyer and seller. A Dual Agency Realtor can not help both sides. So legally they are not allowed to represent EITHER SIDE, and instead “represent the contract” only. That makes the agent a mere worthless paper pusher. We don’t do that. We will only represent our client, the buyer OR seller. In the case where a buyer comes without an agent, they will be an “unrepresented buyer” (like a FSBO) and will sign a disclosure saying who we work for. (new blog soon)

#4 No TELLING you what to pay

We won’t tell you what to pay for a place. Ever! We won’t even answer the “What if you were me” question, since… We aren’t you! It is your money, and your risk tolerance. Instead of telling you a price, we will go over a ton of data to consider and conclude with our “VEGAS ODDS SYSTEM” on what the other side MIGHT do and separate it into three categories: Accept, Counter or Walk. Ultimately you decide how aggressive you want to be. (No “selling” blog)

#5 No Home Warranty Insurance Kickbacks

Even though it is illegal to receive a commission for selling insurance (unless you are a licensed insurance dealer), the Home Warranty companies have figured out a way to give agents and firms an “admin fee” of $60 to sell their goods. Why bother? We won’t accept that commission as we feel that is illegal. Instead we will pass that “admin fee” to the buyer/seller. This might seem like a small amount, but the principle is what matters. Again we make our money on the commission, we don’t need to upsell you to make another $60.

#6 No Buyer Agent Bonuses/Bribes

We outline our compensation up front in our Exclusive Buyer Agency Agreement (Don’t Sign Them Yet blog). If there is a bonus to the buyer agent, the buyer gets that in a form of a rebate on the HUD1. We can’t be bribed to push you into a particular listing. (blog on 10% agent bribes)

#7 30 Photos & Custom Domain Name Website Per Listing

It boggles my mind when a $900,000 listing posts 3 photos taken with a camera phone (see Sucky Agents) and then wonders why it didn’t sell for 200 days. And this is from a “Top 3″ large company, not a “discounter.” They even allow agents to check a default button to allow the MLS to dispatch a high school photographer to take a free exterior shot. I call this the free drive-by shooting option.

Simple new requirement: Each listing must have at least 20 photos taken with a 22mm wide angle camera (like the v570) or from a professional photographer.

Each listing will also have their own domain name. No need to point prospects to “HugeRealEstateCompany.com” just to get lost looking at another 10,000 homes. Instead prospects can go directly to the photos of the listing with their own domain like: 2001OdysseyUNIT X.com

#8 Professional Staging

We won’t list a house unless we can make it look better than a model home. Why? It works. It gets you more money and the house sells faster. (See Bidding War blog). Just yesterday we got 3 offers in 3 days for $20k over what other Realtors said would be the seller’s top price (referrals available).

#9 You’re High Tech, We’re High Tech

How about 100% paperless transactions from start to close? No unnecessary “meeting to sign” papers or trips to Kinkos. We also use instant messaging, cell text messaging and of course email… from our phone. Prefer paper? We can do that too.

Thank you for following Blog.FranklyRealty.com as we recalibrate the real estate industry! Sign up via for updates or email this to a friend.

Are you a buyer or seller? Print this out, have your Realtor sign the Frankly Client Bill of Rights? (Tell me how it goes)

Are you a Realtor with another firm that can’t promise the above? Then switch or start your own, maybe I’ll even help you!

Thanks for all the comments, keep em coming. And if you like this blog, please pass it on! Oh and tell me if you find typos, I don’t like looking dumb.

Written by Frank Borges LLosa- The Real Estate Gadfly

Virginia Broker/ Owner FranklyRealty.com

Blog.FranklyRealty.com Featured in BusinessWeek, CNBC, WSJ etc.

p.s. #10 As with JetBlue, we also promise not to leave you on the runway for 10 hours.

Update 3/2011: Admin fees are now being called “Additional Commissions” after a few lost class action suits against “admin fees.”

Somebody must be reading this (actually 60 people a day) since this GREAT question came in.

Q. My listing agent is taking commission plus a $395 administrative fee. What is the administrative fee all about?

Great question! Why didn’t I think of that?
First of all I don’t know what you mean by “taking.” If you are telling me that you signed a listing agreement for a certain percentage and the $395 was NOT mentioned in there, and suddenly you are expected to pay it at the closing, I think your exact words should be “over my dead body.”

Shameless plug: FranklyRealty.com has never charged an Administrative fee. I just never understood what it was. It is a junk fee, but allowed if you agree to it.

What is an administrative fee?

It is a fee that is supposed to cover “the cost of paper and tools, etc.” Um, but don’t they also get a BIG chunk of the commission too? Yes, so it is a fluff fee to increase revenue. A fee that is easy to slip past the client that might not know better, so why not charge it?

• Thank God you have this Blog to get the inside scoop.
  Shameless plug #2 If you are smart, you’ll sign up for future blogs to be emailed to you (at the bottom). I apologize for all these plugs on this particular blog, and I know blogs aren’t supposed to be self promotional, but when 70% of the competition does shady stuff like this, I just can’t contain myself.)

How do they get away with this fee 70% of the time?

While everyone knows there is competition for which agent you pick, there is another round of competition that you might not know about. It is the competition amongst brokerage firms to get the top producing agents to work for them. Different firms have different split structures. Some start with 50% going to the firm and 50% going to the agent (and they need an admin on top of that, give me a break!). And this 50/50 split is for deals that the agent finds on their own! It drops even more if the firm gave them the deals. And it cuts in HALF for the first couple of deals since a mentor gets a portion. Yes, a new agent can get as low as 20% of the commission, I saw it in real life. A friend/new Realtor walked out with a $2,100 check on a $10,000 commission that she brought to the firm. And you all thought we had it easy!!

So one way firms lure agents in is with more competitive splits. Some firms recruit newbies at 50% splits, and some take experienced agents and only charge 5%, plus “desk fees.” But wait. They have to make money somehow.

So many firms started with “admin” fees to subsidize the brokers (because the agents wanted higher splits) and now they also do it with ABA’s (see Blog: “Affiliated Business” or Illegal Kickbacks?) So one could say that the brokerages didn’t need to charge that if the agent split was lower and more profitable. So while the agent pitches it as “oh the broker charges that, I can’t do anything about it,” they in the meantime are charged less by the broker. So indirectly that admin fee goes to the agent, in the form of lower fees to them. Have I confused you yet?

Here is how the conversation probably started:
• Agent: Dear Broker, I need a better split.
• Broker: But I’m not making enough money at this rate.
• Agent: Do better or I will leave.
• Broker: Hold on, I’ll give you a better split but you will have to pass on a $395 fee to your clients that would go directly to us.
• Agent: Deal! Where do I sign?
• Agent to Client: Oh, that Admin fee is for the broker to cover costs of doing business.
• Client: Um, ok.
• Client’s friend: You should have read Blog.FranklyRealty.com

How common is the Admin Fee and where should I look for it?

I spoke to 2 closing companies. Both agreed that the range was from $195 to $395 and they were on 70% of closings, and they were on both the listing side AND the buying side. I had never seen them on the buying agent side, news to me. Heck, maybe I should start charging this!

What can you do?

• Net everything out. If your listing agent is charging x% plus $395, add it up. And question it to see their recorded pitch.
• If you never signed anything allowing that fee, make the agent eat it. This is like a lender giving you a good faith estimate and suddenly adding an admin fee.
• It is up to you if you wish to ask for the fee to be waived if it WAS disclosed. I go back and forth on the ethics behind this since you DID agree to it. But maybe you were tricked into it? One closing company told me that 10% of agents eat this fee since some are embarrassed by the fee and sometimes because a customer won’t pay it.
• Pick a firm that doesn’t nickel and dime you. If they are pulling this fast one on you, what else are they pulling?

Again, they might say, “it is for the cost of paper and tools, etc.” Your response is, “Out of this $10,000 commission, don’t they already get a large portion? I won’t pay that fee.”

Good luck and let me know how it goes!

- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily.

Videos at YouTube.FranklyRealty.com

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Now I have reported to MRIS another violation.
Lets see what they do about it.

New Construction Fudging the Reporting of Seller Subsidy… how conveeee….enient.

Before I get started on tricks that the builders are using to unload inventory, did you know that it doesn’t cost you anything to have a Realtor represent you? The cost is the same to the buyer, oftentimes the on-site sales agent gets the double commission. Sometimes a “free” buyer agent can save you even more, even if you think you already squeezed $100k out of them, who cares, if your buyer agent knows they recently dropped a place $200k around the corner. Price drops are relative, and a good Realtor can help protect you. See I Need A Buyer’s Agent! But For My Car.

So back to builder fudging. On the MLS, when a listing closes a Realtor must enter in the closed price. This can easily be verified by the tax records once it comes out. A Realtor is also required to post the seller subsidy amount. The “seller subsidy” is the “cash back to buyer” or “cash toward closing costs” and it is a marketing scheme to make a listing look more favorable, even though I tell my buyers to ignore them and just to net everything out. A $515k place with $15k back should be viewed as a $500k. Don’t let that marketing confuse you.

• Damn side note: I once had a listing for $325,000 and an agent said “but the developer is offering an amazing $15,000 in incentives, will you match that?” The builder’s price was $350,000. I said “Sure. I’ll double it! I’ll give you $30,000 back with a price of $355,000, Deal?” So make sure you NET everything out!

Anyhow, the builders are in a bad situation right now. Especially Arlington County condos in Virignia. They have already sold a ton of units at a great price, but they need to sell the rest of their inventory without pissing off the current owners and people under contract.

So how do they do this?
Well one way is through fudging the “seller subsidy”. If a place is $600,000 and they want to drop the price to $580,000, they will instead give $20,000 worth of “seller subsidies” or “cash back.” Effectively the sale is $580,000, but it gets recorded in the tax records as $600,000 (which is fine). The part that is not fine is they are leaving off the subsidy information on the MLS. Insert Dr. Evil’s voice: How convenient!

How do I know they are fudging the MLS?

• The graph to the left shows one builder’s last 40 sales. Not one included a seller subsidy. Meanwhile I have been in their sales office. As with EVERY builder, they give huge seller subsidies. Yet not one is posted here, as required by the MLS.
• The box on the right side of the graph are 50 Arlington Condos sold in 2006. About 40% have seller subsidies.

Why does seller subsidy disclosure matter?
If you are considering buying a $500k condo in Arlington, you will look at the past sales as one of a dozen metrics to value a home (I wish I could show all my tricks on pricing and offering on homes, but the competition might be reading this, email me if you want a sample). If the builder just sold a nearly exact unit for $500,000 and recorded no subsidy, you might actually consider buying the unit near $500k. However, if you knew that there was $20,000 cash back, and the net price was actually $480,000, that is basically a Honda Civic value of information ($20k).

So in conclusion, make sure your buyer agent knows the market well and knows about tricks like those and other listing agent tricks that could cost you $20,000.

For all those super smart people that think like my Mom (read Mom Blog on not trusting Realtors) did “I don’t need no stinking buyer agent,” this stuff happens all the time. (shameless plug here: sign up to get emails of new blogs, the sign up box is at the bottom)

And you all think all we do is push paper and get you to buy quickly?

- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily, use the form on the right of the page.

Videos at YouTube.FranklyRealty.com

*Thank you to MRIS continued: I would like to thank MRIS for warning agents about MLS fudging.(the local MLS system) for posting a bulletin board on Matrix (the back end Realtor system) warning listing agents that Data MLS fudging is illegal and will not be tolerated. I believe my MLS Data fudging Blog (Part 1 and Part 2) and the resulting Business Week article probably lit a fire under them. While I wanted to copy and paste that notice, it wa
s gone after 24 hours. Oh well. Update: I found the link to the notice.

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Preview Keywords: Housing bubble? Arlington, Alexandria, mls, homes, Real estate, Virginia, Alexandria, 22201, 22314, Fairfax Va, DC Realty, Realtor

A Realtor’s job shouldn’t be to talk people into buying. However too frequently you’ll hear Realtors saying “Now is the time to buy” or “We have reached bottom.” Maybe they believe it, maybe they are brainwashed, or maybe they are lying. Irregardlessly* in reality Realtors don’t know where the market will be in 1 month, 1 year, 5 years or 10, and don’t believe somebody whose pitch is always the same… UP! (*yes that is a made up word to see if you were paying attention)

What many Realtor know is if they can convince you to buy, they might make another sale! More Sales = More $ for the Realtor

One lesson stood out most from my mother…

On a sunny spring day in 1995, my mother was working with her Buyer Agent Realtor, about to put in an offer. The Realtor kept looking over my mother’s shoulder as she was deciding on a price to offer on a house. The Realtor was not the Listing Agent, but her Buyer Agent (supposedly looking after her best interest). The Buyer Agent Realtor kept saying in a “salesy” fashion: “$XYZ would be a great price!”, or “You will make a ton in 2-3 years!” and “You should put $XYZ!”

My mother stopped her and said, “Let me ask you some questions,

1. “You will make money if I buy this house right?”
   The agent replied “Yes”
   
2. “Will you be sharing in my risk if this property goes down?”
   The agent replied “Sorry, No”
   
3. “Will you be making more money, the higher this offer is?”
   The agent replied “Yes”
   
4. “Is the % likelihood of this deal being accepted go up with every $5,000 higher that you recommend we put in here? And thus the more likelihood of you getting paid?” The agent replied “Yes”

   “Then please be quiet and let me think.”
   (she probably wasn’t as nice as that).
   

Warning, blatant subliminal sales pitch approaching: When it comes to price, a Realtor’s job should be to delivery information, not suggestions.
The Realtor might use their experience and compare the bidding process to a trip to Vegas and say “at this price you might have a 25% chance of getting it, at this price an 80%”, but when asked “What should I pay?” a Realtor shouldn’t answer that since they have a bias and it isn’t their money. Only the buyer knows their risk levels, how the monthly payments will feel, and how much they love the place.

Don’t get me wrong, a good Realtor can help you get a lower price (ask for some testimonials) and come up with a strategy to do such, but they should not say “If I were you I would bid $XYZ.” Trust me (never trust anybody that says “Trust me”), the higher the price, the easier the job. Fighting to get that last $5k or $10k is the toughest part*, but important especially if the market goes down more, you’ll be glad you fought for that last $10k.
(*Note that some people would rather just buy at full price and have an easy transaction, we can do those too, whatever is important to the buyer.)

I can’t really list all the insider buyer agent techniques on a public Blog being read by my competition, but one example would be to not stop at finding one great home, but finding 2 or 3 houses and taking a “round robin” approach. Offering a price on one, and if that doesn’t work, bid on the next one, then the next and then back to the first with a slightly higher price and repeat as necessary (are you really supposed to “shampoo and repeat?”) until somebody bites.

And lastly, don’t trust any data from NAR, The National Association of Realtors. Just don’t do it. Ignore it. As Peter Coy wrote in Jan 8th’s BusinessWeek, NAR said on 12-12-05 Prediction: “The national median home price will rise about 6.1% in 2006. Over a full year, it has never declined since good record keeping began in 1968″- NAR. This was followed up by “The Reality: Through October (06), the median price of residential properties was down 3.5% from a year earlier.” (Actually probably more like 5% when you include seller subsidies, see earlier Blog on MRIS data.)

Yes they can make one mistake, but the NAR president repeatedly says we are at or near the bottom.” My earlier Blog exposes a NAR advertisement that says now is the time to “Buy Or Sell”, while only listing reasons to buy. How can one time happen to be perfect for both sides? I’ll tell you, when money is involved and it flows to the recommending party, that is how. Also the data is manipulated (see MRIS data report Blog).

JUST ADDED
Here was the T-Shirt that I was giving my clients at their closing. Even when buying a $3M house. This proves that I warned them about a potential bubble:

The 2004 version was featured in a Article (near end).
- – - – -

Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4006

There are 2 levels of MLS fudging. One is a NVAR (Local Realtor association) violation and the other is borderline ethical. And there are 2 reasons agents fudge the MLS.

• BORDERLINE MLS FUDGING (like sugar-free fudge, is it really fudge?):
  This is what happens when a listing agent wants to re-list a property they are already listing for sale. Maybe the house has sat for a few months or there is a big price change. Instead of a 2 minute change, they will withdraw one listing and spend 30-45 minutes reentering all the data.
  


This low-fat fudge will:

• a) Restart the Days On the Market “M” ticker, DOMM (The other ticker is DOMP which is ALL days for this Property regardless of normal relisting)
• b) Reset the “Original List Price”.

So if a house drops from $600k to $550k after 100 days, and the plan is to drop again, but to $500k, the “borderline fudger” will do a normal delist (expire or withdraw) and relist.

• a) The new DOMM will be 1 (but the DOMP will be remain “101″)
  • b) “Current List Price” will become $500k
  • c) “Original List Price” will be $500k (the $600k is hidden and stays with the old listing)

  80% of Realtors will see the DOMP at 101 and look back at the old listing to get more information before making an offer. I found one agent did this 17 times!

• ILLEGAL MLS FUDGING (very fattening fudge):

This fudge is harder to do. After delisting the property, the agent goes back to relist. The system by default will recognize the property by the address and ask you if you wish to pre-fill the Tax-ID and some other data from the tax records. And agent doing illegal fudging has to go out of their way to press NO and override the system by entering gibberish into a tax ID of 000000 and then another 40 minutes reentering data. (The MRIS claim that they have a system to protect against this, however I have seen it over a few dozen times.)

• This fattening fudge will:
• a) Restart BOTH the DOMM AND the DOMP
• b) Reset the “Original List Price”.
• c) Leave NO indication that this property ever was listed.
• It looks like a 100% brand new listing. This is a NVAR violation.

Maybe only 25% of Realtors will find this fudging. They know that when submitting an offer they should search for expires and withdrawn listings for that address (and variations like St vs Street and N vs North).

What a shame that we can’t trust our fellow Realtors to be honest.

In the graph above, that is not the default of what a Realtor sees after a search. I had to create a special search to put it in that form. It is much harder to find. Also note that in this case the first 4 light fudgings were from one agent and then a new agent took it on and did the Tax ID=0000 to reset everything. This is NOT as bad (still illegal) as one agent relisting multiple times using the 0000 trick.

NEW: Part 2:
Illegal MLS Fudging. 20% Chance You’ll See One

- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6

Videos at YouTube.FranklyRealty.com
Keywords: Housing bubble? Arlington, Alexandria, mls, homes, Real estate, Virginia, DC Realty, Realtor

One blog reader asked me, “How frequently does MLS fudging really occurred. Are we talking once in a blue moon, is it commonplace or even the default?”

Great question!

They wanted a breakdown of the frequency of both the Fat-Free MLS Fudge (technically allowed which is the same agent relisting a property to reset some data like the DOMM not DOMP and Starting Price), and the Full-o-Fat MLS Fudging that is a MRIS violation, which resets the DOMM and DOMP and makes the listing look brand new, with no trace of the old listing.

Quick DOMM vs DOMP recap.

• DOMM= Days on the Market- MLS (days for that MLS listing only)
• DOMP= Days on the Market for the property (regardless of relistings, unless fudged)

Quick Full-o-Fudge MLS recap.

An agent can pull their listing and when given a 1 click option to restart it, bypass the default and put “00000″ in the tax id box. This is an MRIS violation but done so that buyers and many agents won’t see how long it has been on the market, in hopes of getting a higher price.

My estimations:
I can’t get exact figures. There are probably over 10,000 active listings right now in this area. The system only allows us to pull up 500 at a time. While I was able to search for Tax ID 00* (* meaning anything after two zeros), and 999*, XX* and 123* I then had to manually look up EACH result to make sure it wasn’t a new construction or condo conversion (which don’t have Tax ID’s yet and putting in “000″ is and acceptable and legit practice). Some of you might think I have too much time on my hand (maybe since I sometimes talk people OUT of buying), but I don’t have THAT much time.

So I pulled up one county and price range and did a sample analysis. 2400 active homes analyzed.

My search criteria:
Homes and condos in Fairfax County priced from $300,000 to $600,000 built before 2004.
The result was 2400. (Since the max search is 500 I had to do smaller $50k range searches and add them.)

Then I searched for tax ID of 00*,XX*, 999* and came up with about 40 results. Again, sometimes not having the Tax ID (which attaches a property to prior MLS listings) can be legit in cases of new construction, condo conversion and a couple other reasons.

So I took those 40 and opened another browser. I searched for that street address and included all Withdrawns, Temp off, and Expired to see if that property was previously listed and whether the Tax ID of 000 was used to reset the data.

I found 21 Full-o-Fat MLS Fudgings and 17 of those were from the same agent (vs a new agent taking on a listing and wanting to reset everything, which is also not allowed but not AS bad in my opinion).

So out of the sample of 2400 homes, I found 21. Which is just under 1%. This doesn’t seem like a lot and I do remember seeing it fairly frequently, so I started looking at that 1% another way.

Lets say an average buyer might go into about 7-10 homes, they probably have the agent look into about 20 homes online. That means there is a 20% (20, 1% chances) chance that you will come across a listing that has been fudged by the Realtor to deceive the public in order to get their listing sold faster.

Fat-Free MLS Fudge frequency?

So then I wanted to see how frequently a listing undergoes Fat-Free MLS Fudging, the act of relisting the property but not removing the Tax ID. This practice is allowed. Heck, one agent did it 17 times.

I couldn’t look at all 2400 homes, so I focused on 90. , the results from a price range search of $499,900 to $500,000 in Fairfax built before 2004.

25 of the 90 were relisted and had a different DOMM vs DOMP (defined above). This 25 is legit, and tells you that there is a ton of turnover of listings to a different agent. Sucks to be those that lose the listing agents losing those deals.

Of the 25 active listings with a DOMM and DOMP discrepancy
• 15 were new listings from one agent taking over for another agent. This is 100% legit.
• 10 were the same agent (Fat-Free Fudge, allowed but questionable)
• 3 (of the 10) were relisted and withdrawn 3 times for a total of 4 MLS #s each
• 1 (of the 10) was Full-o-Fat Fudged

Conclusion:
About 12% of listings get relisted by the same agent
About 3% of the time they relist it multiple times, sometimes 4 times.
About 1% of the listings (in the example of 90 and 2400) are fudged.

So if you look at 20 properties, there is a almost certain chance that a few were using the Fat-Free Fudge technique and probably a 20% chance that you will encounter the illegal fudging technique.

Why does this matter?
When bidding on a property, you should have ALL the available information. If a place appears to have just hit the market 5 days ago, there might be a little rush to winsecure it. If you bought it to then find out that it was really on the market for 300 days, you wouldn’t be happy that you were duped. Also the amount you offer might be lower if it sat for the same price for 200 days.

Recommendations:

• MRIS (our local MLS system), do a better job at catching these manipulations. A simple review of all 00* would be a start. Secondly impose fines and get serious about cracking down on this. (Email me if you want an address to complain to MRIS)
• Buyer Agent Realtors, report these violations to compliance, they can reset the listings.
• Listing Agent Realtors, stop fudging the MLS or risk losing your l
  icense!
• Buyers, don’t be scared, just be aware and make sure your agent double checks into this before putting in an offer. Also ask your agent if their emailed reports use the DOMM or the DOMP (most use the DOMM).

Disclaimer: The data that I collected might not be statistically perfect, but it was the best that I could do. I would be happy to work with a research person to get more exact figures. Also the Fat-Free Fudge, which is allowed, is my opinion not kosher, many agents might debate this or say it is company policy. To each his own. I just wanted to bring up the debate.

Now talk amongst yourselves…

- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6

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As you will see throughout this blog, we will try to give you an insider perspective. Also we pledge to never talk you into buying. But if you are ready to buy, we’ll help and make sure you are protected (as much as possible) from a further downturn with an aggressive price drop.

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- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4006

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Keywords: Housing bubble? Arlington, Alexandria, MLS, Homes, Real estate, Virginia, Alexandria, 22201, 22314, Fairfax Va, DC

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