Misaligned Incentives and Systemic Flaws of the Real Estate Industry

By Michael Repka, Esq.

Many people take issue with the real estate industry and the way transactions have been handled traditionally. Many clients justifiably believe that there are far too many conflicts of interest, too little oversight, inadequate training, and a general herd mentality that is often not in the best interest of the clients.

Everything from the standard listing agreements, the purchase contracts, common commission structures, training, and access to information seemed biased in favor of the real estate agents. To make matters worse, few clients consult an attorney before signing “standard” listing agreements, which are written by the real estate industry and heavily biased towards the real estate agent’s interests. Nevertheless, many clients felt that engaging a real estate agent was a necessary evil if they wanted to buy or sell a property.

Fortunately, all of that is starting to change. A relatively recent major step in the right direction was the 2008 case US vs. National Association of Realtors® (Civ. Action No. 05 C 5140), which ended with a final judgment that prohibited Realtors ® and/or the Multiple Listing Services (the “MLS”) from restricting Virtual Office Websites or otherwise monopolizing information about homes for sale. This case, and several similar cases that came before it, shifted access to information from Realtors® to the public.

Setting aside any attempts at false modesty, the DeLeon Team has done a lot to improve the quality of the industry; however, we are not alone. Several innovative new companies and business models have emerged that will challenge the status quo associated with traditional brokerages affiliated with thousands of independent contractor agents operating in silos, such as Coldwell Banker, Sotheby’s, Compass, and Keller Williams.

DeLeon Realty has attracted a lot of attention by shifting much of the risk away from sellers, to us as Realtors®. We invest far more time and money in the preparation and marketing of our homes than any other real estate agent or team of which I know. We also provide free access to attorneys, handymen, licensed contractors, interior designers, and the most robust marketing team in the industry.

While I am unaware of any other individual Realtor® or real estate team that matches us in terms of scope or the quality of service, other agents have certainly improved their business practices and marketing. Over the past 5 years we have noticed a growing chasm between the quality of the area’s top agents and the masses of agents.

Clients are also starting to demand more, as they should. Many sellers expect a listing agent to pay for the complete staging of their home, newspaper ads, and sometimes, the property and pest inspections. Naturally, the DeLeon Team pays for all of this, and much more.

As a result, the agents who are willing to provide enhanced services are thriving, whereas agents who want to sit on their hands and do very little are losing tremendous amounts of market share to the DeLeon Team and other top agents.

Some Weak Agents Resent Us

As one might imagine, some of our competitors are very frustrated with all of the services and marketing that we provide for our listings. Understandably, they liked the “good-ol’-days” where all of the information was private, and agents could spend a mere fraction of what we spend on preparing a home for the market. Plus, in those days gone by, many sellers felt an added urgency to sell because the sellers themselves were paying monthly fees to keep the home staged.

Additionally, the DeLeon team is very straightforward in sharing the scope of our marketing program. As a result, clients ask other agents to provide access to the highest echelon of stagers, television commercials, professionally produced videos, 12 to 32-page brochures for each listing, and a myriad of other things.

Perhaps even more unsettling to other Realtors® and brokerages, especially those that regularly engage in representing both the buyer and seller in the same transaction, is the fact that we refuse to take commission from both sides of any transaction. Many agents love getting commission from both sides of the transaction, and they rationalize how it is perfectly okay to do so. To my knowledge, all of
the other top brokerages take commission from both sides of transactions.

Recently, we were hosting a client appreciation party and many of the clients were raving about their experience with our listing team; however, I was disappointed to hear how a few struggling agents badmouthed us in a variety of different ways. I heard everything from agents saying that Ken DeLeon is on his deathbed, to us requiring sellers to pay us back for all of the marketing we do. While it is frustrating and annoying that real estate agents feel the need to lie about us in order to compete, I also realize that it’s a bit flattering.

I encourage all potential sellers to invite me in to interview for listings. I will provide a detailed breakdown of all of the marketing that we’re going to do and the services that we provide for no extra charge. If nothing else, this will give the seller a tremendous amount of leverage with other agents. It will also give me an opportunity to explain exactly what has made the DeLeon Team the number one (#1) real estate team in the entire United States. In fact, 2018 was the second time in our seven year history that we were able to accomplish this very significant honor.