DeLeon Realty’s Most Significant Innovation Yet

by: Michael Repka, ESQ | CEO & General Counsel

We formed DeLeon Realty with the belief that there was a better way to sell real estate and, in doing so, a better way to build a real estate company. We have raised the client experience through offering significantly elevated marketing for our listings; employing exceptionally well-educated and well-trained agents; fostering specialization and collaboration; better aligning incentives by eliminating the commission-based, independent-contractor model that is used at Alain Pinel, Coldwell Banker, Intero, Keller Williams, and most other traditional brokerages; and constantly striving to innovate and improve.

We are proud to announce our most stunning innovation yet: going forward, DeLeon Realty will not take commission from both sides of the same transaction. If any DeLeon Realty agent represents a buyer on any DeLeon Realty listing, then we will waive 100 percent of the buyer-side commission. This policy does not merely apply to agents representing buyers on their own listings, which we still prohibit. Rather, it is companywide and applies to any offer submitted by any DeLeon Realty agent on any DeLeon Realty listing.*

Most attorneys would cringe at the idea of representing both the plaintiff and the defendant in the same case, nor would they prosecute AND defend someone accused of a crime. Yet the real estate industry argues that it is acceptable for the same individual agent to make money from both the buyer and the seller on the same transaction. Surprisingly, many clients seem to accept this conflict of interest, likely due to a belief that everything is going to go smoothly with their transactions.

It is my opinion that this should be illegal and/or banned by all brokerages. Even when an agent agrees not to represent buyers on their own listings, most brokerages do not prohibit the listing agent from having another agent in their office write up the offer in the straw-agent’s name and pay the listing agent a very hefty (and generally non-disclosed) referral fee. In many ways, these non-disclosed referral fees are even worse than listing agents writing offers in their own names, because the listing agent is still getting paid more if one particular offer is accepted, yet the seller does not recognize the need for extra vigilance.

Unlike the other large brokerages in the area, DeLeon Realty has separated the buyer side of the company from the listing side in order to prevent conflicts of interest. Thus, the listing agent is paid the same irrespective of which offer the seller accepts. We felt that this was far better than the conventional system employed at almost all other brokerages whereby the listing agent could receive compensation from both sides of the same transaction. However, it was not perfect because DeLeon Realty still benefited from having DeLeon agents—albeit different people—on both sides of the transaction. We have fixed that!

Now, all new DeLeon Realty listing agreements will include a clause that says: “In the event that the Property is sold to buyers that are represented by DeLeon Realty as the cooperating broker (buyer’s agent), then the commission shall be reduced to 3%. In other words, there will be no compensation (0% commission) going to DeLeon Realty as the cooperating broker (buyer’s agent).”

It is important to note that the individual DeLeon Realty agent with whom the clients are working will not be advising

the other side, and we expect that clients will be comforted by the knowledge that the listing agent’s compensation is not being received from both sides.

Unrepresented Buyers

Many buyers search for homes on their own or come across one of our listings from our TV commercials, radio promotions, our company website, the DeLeon Insight newsletter, newspaper or magazine ads, direct mail, or open houses. Once they find the desired property, they often look for an agent who can write it up. This creates a windfall for the lucky agent, but it contributes to the very high transaction costs sellers face when they sell. Therefore, we encourage these unrepresented clients to contact us directly because it will result in a full 2.5-percent reduction in the commission rate we charge the seller, thus making the buyer’s offer even more compelling.

Our aggressive marketing expands the buyer pool and increases the likelihood that we will attract unrepresented buyers. For example, our direct mail, TV commercials, and marketing to the Chinese community reach a far larger geographic area than the more common MLS-based marketing, which may result in attracting offers from a number of buyers who are not actively looking. Thus, these buyers are less likely to already be working with an agent, motivating a large number of potential buyers to approach DeLeon agents.

At DeLeon Realty, we respect relationships that potential buyers have with their agents. Therefore, this offer does not apply if another agent initially showed the buyer the house, or if the buyer signed an exclusive buyer representation agreement (a.k.a. a “Buyer-Broker Agreement”).

While we hope that all brokerages follow our lead, it is unlikely that they will do so. In addition to the sizable financial impact associated with the lower commission, most brokerages are handicapped by the independent-contractor, commission-based structure. Fortunately, it is likely that some agents will adopt this more client-friendly approach on an individual basis, which will be a step in the right direction. However, the benefit will be very limited because the policy will not apply companywide, and it could be undermined completely if the listing agent is still permitted to accept referral fees from other agents on their listings.

Another significant advantage that sellers will gain from listing with DeLeon Realty stems from the fact that all of our buyer agents are on salary, not commission. Therefore, the DeLeon buyer agents will still be incentivized to sell our listings, whereas commission-based agents would not.

There are a lot of good people that sell real estate. However, we believe the entire industry has to take steps to eliminate conflicts of interest and reduce temptation. It is certainly reasonable for sellers to wonder if all of these good agents can resist the temptation to put their thumbs on the scale, especially when advising clients in situations where they are getting paid more, generally double, if one offer wins over another. We believe that our new policy is a major step in the right direction and will benefit both sellers and buyers represented by DeLeon Realty.

*This offer applies to any buyer represented by any DeLeon Realty agent, provided they enter a binding contract to purchase a home listed by DeLeon Realty after May 1, 2017. It does not apply if the buyer first saw or learned of the property through a non-DeLeon agent, or if the buyer has entered into an exclusive representation agreement (e.g., a “Buyer Broker Agreement”) with any non-DeLeon agent. DeLeon Realty reserves the right to alter or withdraw this offer at any time and without advanced notice. This offer does not apply retroactively and does not apply to any closed transaction or any transaction currently in contract. This advertisement is not a solicitation of any homes already listed with another brokerage. Michael Repka, Managing Broker CalBRE #01854880.