Can we talk? Full disclosure. What does it mean to you?

Tim K.jpg

I enjoy discussions here because it’s where consumers are. It is like a laboratory of information. One area that is of interest to me, in a large way, is what makes people do what they do. I’m speaking of three groups primarily: consumers and the two primary players in our business, the loan officers and agents.

2007 has been quite a year in the real estate world. Blogging and transparency has been one of the hottest focal points in the business. Because of the obvious turmoil in the real estate industry as a whole, being that the market is in correction mode and the mortgage/credit markets are stressed due to “writing down” Billions (code for losses) and continues to unfold, many industry-wide issues are at the forefront.

In lending, the recent issue of licensing (both locally and nationally) and the hot potato YSP (yield spread premium or equivalent terminology) topic has been debated heavily. Locally, loan originators have to take a competency exam and go through a background check. Agents have their exam and clock-hour classes to obtain and maintain licensing as well. But, should it stop there? Ok, fine, you say. Where are you going with this? What I’m suggesting is this: is the licensing at it’s face value all you would be satisfied with to work with a real estate professional or allied pro’s such as loan officers, title, escrow, etc…?

“Why not ask them to disclose whether they have had a bankruptcy, or foreclosure or heaven forbid, ask them to disclose their own FICO score? Do you really want people who have a history of making poor financial decisions assisting you with advice on buying, selling or refinancing? Or, is it more complicated than that and therefore is not fair?” – me, S-Crow

For example, over the course of the past four years, our small business has bumped into an opportunity or two or three to expand the business. In all the cases, we were approached by mortgage brokers or agents or both. In each circumstance we passed. Why? A bit of due dilligence revealing situations we were uncomfortable with led us to our decisions. Plus, what was the rush? Get rich, lol?!! (eyes rolling.)

I think the thing that caused the most pause for our counterparts was a question I posed to those who wanted to enter in a business capacity with our small business: “If you want to enter into a business relationship with us then reveal your entire financial lives, personal and professional and we’ll do the same.” As you can imagine, that type of transparency is what I’m after if people want to do business with me in opening other offices in a partnership. And, as you can imagine, it is quite the turn off. Someday, we’ll bump into like minded business people. So far, that hasn’t happened as people don’t want us to see the “naked” financials. You see, in escrow, you deal with money all day long, not quite like a bank, but loosely in the same framework. Therefore, you don’t want people who are in financial hardship running an escrow company or having access to trust accounts. Not a good recipe.

Escrow is highly complicated with lots of moving parts. There is a reason escrow firms follow banking hours, so to speak. There is a reason mortgage funders and escrow staff look at the clock all day long as we have to meet very tight deadlines. Because escrow is a regulated business and actually has audits from the Dept. of Financial Institutions that we have to pay for (thank you not very much), it is an arena where many of our colleagues who wish to open an escrow company find themselves wondering why they even tried. Some days we ask ourselves the same thing, but for other reasons I’ll keep to myself. :)

Anyway, back to my point(s). A few things to consider:

  • Wouldn’t you as a consumer (existing homeowners in midst of refinancing, first time buyers, etc..) having to divulge most of your financial lives to the loan officer or agent want to know that you are being represented by those parties in a fiduciary capacity? In other words, wouldn’t it be a good thing to know that they are working in your best interests?
  • This is the crux of the consumer driven push resulting in an issue Congress is meeting about. It is to get lenders & brokers to work on consumers behalf and address the hot potato issue of compensation in the form of YSP (yield spread premiums). One of the questions being asked is when or how is it appropriate to use YSP’s? For those that don’t know, YSP is a compensation mechanism that the lender/investor pays to the broker for originating the loan or loan program at a specified interest rate, or with terms such as pre-payment penalties. Generally, to trigger this additional compensation in the form of a yield spread premium (YSP), the borrower is sold an interest rate higher than would be if there were no YSP. Again, this is a general definition.

I ask tough questions of those wanting to do business with me in a partnership and sometimes the answers received either by my own investigation or their disclosure reveals information that helps me make an informed decision.

So, all that mumbling to say this: will you interview the professionals that are assisting you in your real estate endeavors? Do you have it in you to ask the tough questions? Can you imagine the fallout if, say, a 700 FICO score, was the low end benchmark to qualify for licensing as an agent, loan officer or other professionals involved in your transaction? Now that would have some teeth!

How’s that for a softball pitch to our industry!

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About S-Crow

"S-Crow" (Tim Kane) is co-owner (with spouse Lynlee, LPO-Designated escrow Officer) of Legacy Escrow Service, Inc., an authentic independent escrow firm closing residential purchase/sale and refinance transactions.

56 comments:

  1. 1
    Sean says:

    I recently had a loan officer send me several harassing emails after I decided to go with a different lender. I’m talking a month after the deal was closed I was continuing to get emails lambasting me, making several extremely offensive comments about highly personal information I had disclosed to him under the banner of trust.

    I really wish I had some kind of recourse, but ultimately I don’t. It would be nice to have HIS damn personal information so we’d be on an even playing field. How do I know the guy won’t post my SSN on some Russian website begging them to rape my credit?

  2. 2
    laxtosnoco says:

    S-crow said: “Wouldn’t you as a consumer…want to know that you are being represented by those parties in a fiduciary capacity?”

    I’m not sure that simply adding a fiduciary responsibility does the trick. In CA, mortgage brokers typically have to become licensed as real estate brokers, which theoretically imposes a fiduciary responsibility on them.

    In reality, the brokers still collect YSP as they like, and don’t operate any differently than unlicensed loan officers not working in a ‘fiduciary’ capacity.

  3. 3
    S-Crow says:

    Lax,

    I’m not certain that in Washington State a loan officer or mortgage broker who also is licensed as a real estate agent or broker imposes, “in theory” as you mention,a fiduciary duty to their client when acting in both capacities in a transaction. Just because you put on one hat (selling a home) doesn’t mean that putting on the other hat (arranging a loan) triggers a fiduciary duty umbrella just because the agent is acting as a fiduciary in that role solely. That scenario, although not uncommon, is a VERY slippery slope. Most consumers don’t understand, even with a signed buyer agency agreement with the agent, that the very agent arranging the financing is not acting as a finduciary in that capacity.

    There is no magic “fiduciary” light switch. Consumers need to go in with eyes wide open when their agent is also acting as their loan officer. It is a recipe for problems.

    Hope I understood you point.

  4. 4
    NotaBull says:

    In my opinion, part of the problem is that consumers are willing to abdicate all responsibility to brokers. This is especially true when they’re fearful of being priced out forever or don’t give a crap what kind of loan they get because they’re going to sell in a year and makes tons of money!! ;)

    Personally speaking, I don’t want financial advice from a broker. I want them to search their little database, pull out the best loans and present me with a list of options. Each option should show the costs and where the money goes. The problem with the current system is that the broker’s commission can be hidden with this tricky YSP. That’s wrong, and means you actually have to see multiple brokers in order to find the best deal. But isn’t that the point of having a broker in the first place? Do I now need a broker-broker? I presume this person would shop around for the best broker for me, and then add his/her commission to my loan…

    The standard advice for hiring a financial adviser is to ask “how do you get paid?’. If the reply is that they get money from the funds they recommend, then the conventional wisdom is that this is a financial planner you should not use.

    Why is this conventional wisdom for financial advisers and not for brokers, who offer financial advice all the time?

    Why can’t we change the law to say that brokers can only charge a set fee that is paid directly by the consumer? No kick backs, no percentages!!! Does it really cost more to deal with a 500K loan than a 300K loan? No. Why should I pay more? Just tell me how much you want for your broker services and I’ll pay it. If you’re getting me a good deal, you’ll be able to show me how much you’re saving me, and we’ll both be happy.

  5. 5
    S-Crow says:

    Actually, broker compensation (in most circumstances) is disclosed. It just does not appear necessarily under the borrower column.

    It is crucial for consumers to understand that any figure on the settlement statement (HUD-1) form (whereever is shows up) means money is exchanging hands. Escrow is writing checks folks.

  6. 6
    WestSideBilly says:

    Interesting piece, but even with full disclosure, it doesn’t really change the game of buying a house for the buyer. I might trust an RE agent slightly more if he/she had an 800 FICO; it’s obvious they can manage their own money. Same with a broker or escrow. But the ability to manage their own money doesn’t indicate they will truly be looking out for my best interest. The RE agent loses money if I buy at a lower price, the loan originator loses money if I get the best possible rate with not pre-pay penalties, etc. An honest escrow isn’t going to drastically change that.

  7. 7
    Sandy says:

    Okay, two things. 1) Why would you ever work with an agent (or any service provider) that you didn’t feel was looking out for your best interest? Granted, many agents out there might not be, but it’s a simple matter of interviewing people until you find someone you feel comfortable with–and if you want to ask for credit scores, if that makes you feel like someone has their act together, then ask for them. I will tell you that most of the agents I know would pass this “test,” but I also know that there are some dirtbags in the industry who probably would not.

    2) This is really a subset of the first one, but when you hire an agent to help you buy a house, or to help you sell a house, that person is basically your employee. You should take the same care when hiring us that you would when hiring any other service provider.

    (Which then begs the question, how careful are you when hiring other service providers? From what I see, people often hire the first person they meet. Even with referrals, I think people should interview several service providers–agents, loan officers, or any other person you hire to do a job for you. Don’t just hire someone because someone else told you that person did a good job for them. Verify for yourself that you feel comfortable with the person, how they do business, and your expectations of each other.)

    I think the industry would be a lot more transparent if more consumers required us to be. It aint’ asking that much.

  8. 8
    Tenquick says:

    I was in the mortgage business back in 1995-1999 and got out when subprime loans were cut back at that time. I think that the YSP is an integral part of the business, but need to be disclosed to the borrower better. Instead of being a (-) negative number or hidden in brackets on the HUD 1 (closing statement), borrowers should be told in a separate disclosure just how much money the broker is making. If the broker wasn’t upfront and told the borrower what they were getting paid and mention it on the Good Faith Estimate, they should not get paid the money.

    TQ

  9. 9
    plymster says:

    I think the industry would be a lot more transparent if more consumers required us to be.

    Basically, you’re saying that it is the responsibility of the consumer to make sure that their RE agents, and mortgage brokers are acting in their best interests. This in an era where people have been regularly waving inspections, taking out loans that make no fiscal sense, and willfully paying scores of fees for little or no service.

    Let’s face it, most consumers don’t have the financial sophisitcation (or for that matter the time and effort) it takes to do this. This is where regulation comes in.

    For example, I shouldn’t have to interrogate the butcher at the local grocery store, check his/her medical history for infectious diseases, and peruse the Safeway vendor list and investigate each beef supplier to buy a pound of hamburger meat. And this investigative work would be done for a service I use every week, not just once every 5-7 years.

    Sure, you could leave it to the “free” market to root out the bad actors, but how many people will die of food poisoning?

    Likewise how many people will be debtors for life, or have their finances ruined by the bad actors who won’t even get a slap on the wrist.

    Of course, in an age where the SEC and the Fed have been sitting on their laurels with all the level 3 assets, hedge fund schemes, and blatant insider trading and market manipulation, mere regulation is not enough. It must be executed by a competent, uncorrupted agent/agency.

  10. 10
    Lake Hills Renter says:

    At the risk of raising agent ire, I’ll throw this snowball out there — it seems to me that the problem is commissions. If everyone worked on flat fees (yes, even agents) then the money would be made in making the deal (i.e. getting the customer what he wants) instead of maximizing the price (and thus the commission). I don’t think FICO scores plays into it that much for the agent side. I can see it being issue in places like escrow, where money is directly involved.

    S-Crow, I just wanted to say once again that I love your posts. People like you and Jillayne (and I’ll mention our “newcomer” Ira as well) show that there’s still honesty and integrity in the RE industry.

  11. 11

    RE: two comments here:
    Why would anyone want to work with someone not working for their best interests?
    Because they don’t know it. I’ve met lots of agents and lenders who were friendly and smiling and saying all the right things, but I think there’s a “scratch the surface” kind of thing going on, that many of them are “smiling devils” who are only pleasant and upbeat when dealing with potential clients and grouchy and grumpy when out of view. Me? I’m grouchy most of the time.
    Re: flat fees vs. % commission? Why not?
    Personally, I’d change the whole fee structure. That the sellers pay the whole thing is kind of a fallacy, and I like the idea of being paid an hourly wage as a real estate agent. One would not have the temptation to swindle if one didn’t depend on a commission ( I’m not talking about myself. With me it’s all ego…I want people to realize that I’m hardworking and honest and truly looking out for my client’s best interests, I’d rather get praised than rich.)

  12. 12
    WestSideBilly says:

    1) Why would you ever work with an agent (or any service provider) that you didn’t feel was looking out for your best interest?

    I wouldn’t choose to, obviously. But we’re all human (well, maybe not all of us) and most of the people involved in a real estate transaction stand to profit more if the buyer pays too much. So the 800+ FICO, hundreds of referrals, smiley happy face, whatever makes you feel at east with your agent / service provider – they still have a financial conflict of interest. There are good people out there who will tell you you’re overpaying $20000 (costing them $600 in turn) but a lot will see $600 of extra money and tell you it’s a good deal. The RE profession as a whole seems to be screaming BUY BUY BUY even though a lot of other things indicate HOLD HOLD HOLD… the conflict of interest should be apparent.

  13. 13
    S-Crow says:

    One of the issues I see is that consumers transact real estate very few times over a lifetime. And purchasing a home is a complex transaction with so many moving parts. Therefore, I think that due to the complexity and the expense involved, consumers should be able work at minimum with a high level of competency and experience that an industry sets for those licensed to practice.

    Lake Hills,

    Yes, it is not that people don’t want to pay for service, but that they don’t want to pay for a level of competency that is subpar.

    I think it should really make experienced agents with years of work experience grind their teeth together in anger when a brand new agent in their office can charge THE VERY SAME RATE OF COMMISSION than that of a long time agent. I sign off on commssion checks for tens of thousands of dollars to R.E. Brokers who’s agent has months of experience and then a short time later write a check to the same Broker for a similar amount , but same rate(6%) which will go to a veteran professional.

    This is the absurdity that consumers seem to convey, but the real estate industry doesn’t seem to address in a meaningful way.

  14. 14
    patient says:

    LOs, I think there should be a law put in place where LOs are required to present the consumer with all loan types that are available for them and a break-out including the monthly cost and total cost of paying off the loan at current interrest rate/index levels.

    Agents, the current system where the seller’s agent effectively pays the buyer’s agent should be prohibited. It might also be benefitial to make it law that agents can only be licensed as either a seller agent or buyer agent.

  15. 15
    NotaBull says:

    S-Crow said:

    “Actually, broker compensation (in most circumstances) is disclosed. It just does not appear necessarily under the borrower column.”

    When is it disclosed? At the escrow office once I’m about ready to sign? If so, that would seem a little late for me to decide to move to another broker because I got hosed on the YSP.

    Or is it disclosed the day I meet the broker, get a credit check, and see a list of options?

  16. 16
    Sandy says:

    “Basically, you’re saying that it is the responsibility of the consumer to make sure that their RE agents, and mortgage brokers are acting in their best interests.” Well yes. I’m not saying that additional regulation would be a bad thing…but I’m not sure that government regulation will fix the problems that we have. Especially when you consider that most regulations are passed as a result of lobbying, and that it isn’t the consumers that are lobbying our governments, it is the real estate brokerages, lenders, title companies, etc. That means that most of the regulations you will see will be more likely to be detrimental than helpful. They will tend to protect powerful interests, and so, must always be suspect.

    So yes, short of government regulations that will probably be ineffective or ultimately harmful anyway, I do think consumers need to exercise caution when hiring service providers. This is part of being responsible for yourself and not having a victim mentality where you are looking for government to take care of you in instances where you can take care of yourself.

    One of the problems that we have is that there are a lot of people out there having bad experiences with real estate agents. I think part of this is that the expectations within the industry and on the part of consumers, are quite low. I can’t tell you how many times I have seen agents with no education, no experience, and who are ethically challenged, foul up a real estate transaction and then you find that they were only hired by their client because they were a relative or a friend. Would you hire an accountant that way? Wouldn’t you expect that in addition to having a CPA license, that they have some other tangible way for you to assess their skills and education? An accounting degree perhaps? Wouldn’t you ask for some referrals? Interview a couple of people to find someone who works in a way that you are comfortable with? Why is it asking so much for people to take a little responsibility for themselves–like people on this website seem to want to do–and let their wallets do the talking. Best way to drive the bad people out of the business is to not hire them.

    (Brokers should not hire bad people either, but that is not something that consumers have direct control of.)

    I admit we have some problems that need to be addressed somehow–I’m just not sure of the best way, and in the interim, I’m working with the structures that exist).

    “I’d rather get praised than rich”–Ira, we agree on that. The money isn’t why I do my job. I work within the structures of the industry as they exist but were they different, were I paid less, I’d still do it because I think that what I do for my clients is important and I know they value it because they tell me so. If the industry ever moved to a flat fee or commissions-divorce basis, I would still do my job because I like people and I enjoy the work of helping them buy and sell homes.

  17. 17
    biliruben says:

    On-topic:

    Yes- Fiduciary responsibility and unfettered, strong enforcement.

    Off-topic:

    S-Crow – how do you make money? Flat fees and volume? Investing the float? How much money do you make?

  18. 18
    biliruben says:

    Great post, BTW.

    The above questions are because I’m just genuinely curious, not because I’m trying to turn the tables on you.

  19. 19
    Ubersalad says:

    No offense, but majority of escrow work is really just clock work.

  20. 20
    Sandy says:

    I can answer for S-Crow if he’s not online. Escrow companies get paid on a flat fee, but it is a flat fee that has a “sliding scale” so that the fee is typically higher for more expensive properties. But it’s not a percentage per se. They make their money on volume.

    They get most of their business through referrals from agents, as do title companies. Technically, the buyer chooses title and escrow, but in practice because most buyers have no real preference, the buyer’s agent provides referrals to their “trusted title and escrow partners” and the buyer chooses from that list. So they tend to schmooze us quite a bit.

    One of the big issues in title and escrow right now is the affiliated business arrangements through real estate offices. Almost all of the major real estate brokerages have a title and escrow firm, as well as a mortgage lender, with whom they have an affiliated business arrangement. It makes it very hard for little guys like Tim’s company to compete. Just on principle I don’t use the Windermere affiliated business arrangement providers. Unfortunately, I also don’t use Tim’s company but if I ever do I am sure they will do a fabulous job. They have an excellent reputation up here in Snohomish county. His wife Lynlee who is their LPO is a super-smart cookie. She doesn’t blog though. :-)

  21. 21
    on topic says:

    seems to me we’re seeing a general vote of no confidence in most of the RE industry with claims of “predatory lending.”

    this indicates a need for the industry to either clean up it’s act, find someone else to shift the focus to, or get replaced.

    considering that no other transaction in a normal person’s life requires professionals to grease the wheels anymore (investments? cars? travel? insurance?), i think this is an issue that could kill the industry if not responded to aggressively.

    with Redfin, any bank (they all offer 30 yr fixed loans at about the same rates), and a lawyer to read things over, why do i need anyone from the RE industry?

  22. 22
    biliruben says:

    Thanks, Sandy.

    Is it legal for them to invest the money held in escrow?

  23. 23
    biliruben says:

    I used to work in insurance and, though it isn’t true so much anymore, insurance companies largely made their money through investment income. Now they appear to have decided to make even more money by trying their damnedest to pay out as little as possible in claims, but that’s a bit off-topic.

    Just curious if escrow works the same.

  24. 24
    Sandy says:

    on-topic–are you of the opinion that Redfin and banks are not part of the real estate industry?

    Trust me, someone will always find a way to make money off this industry. It might be less per transaction, but they will make it up on volume and there will be fewer of them. That’s not a bad thing.

  25. 25
    bubblebuyer says:

    As a recent home buyer who used a real estate agent and a mortgage broker I would have to say I have a huge issues with mortgage brokers. At least with a realtor you understand the costs and incentives. However, the only motivation of a mortgage broker is to maximize YSPs while trying to pass themselves off as having your (the buyers) best interest at heart. I would prefer that the wholesale mortgage channel dissapear and take all the scum bag brokers with it. This would leave only institutional mortgage lenders where loan officers would originate the mortgage. They should be licensed (more than just a pulse check) and should provide the buyer with a disclosure of their role in the deal as well as how they are compensated. Every price / interest quote should include a detailed breakdown of costs including dollar profit on the mortgage for the financial institution originating the mortgage. This profit should be based on a benchmark mortgage rate or the actual cost of the specific loan.

    In my case, I spent a lot of time understanding the mortgage terms and comparing to benchmarks to understand exaclty how much profit my broker was trying to screw me over on. It turned out that he made about $4500 off me on a straight 30 year fix jumbo mortgage with 20% down where $1,000 would have been a reasonable profit for the work performed.

  26. 26
    Wm Swanson says:

    Ira: I think most here appreciate your honesty as a RE agent. However, I for one also feel you are patronizing and maybe pointing out too much goody two tissues on these forumsin hopes of trolling for business. Part of selecting an agent is the Company he/she keeps. I know you work for Skyline which from my understanding in talking with several Broker friends in the area does not provide the same agent backing as working for say JLS or CBBA. Skyline is more or less a shop where any agent full-time or part-time can hang a license and not do a deal all year long. Why dont you work for an established Brokerage? If I were to sell, I would be interviewing from the traditional established Brokerages in the area. Dont mean to offend, just a view from somebody here not in sales with several properties owned i nthe area.

  27. 27
    S-Crow says:

    Bili-

    Volume. End of story.

    Escrow generates revenue by the escrow fee which is, by law, charged equally** to each party (buyer/seller).

    **builders get away with a small $125-150 escrow fee is beyond my comprehension, particularly up in our neck of the woods where a lot of new construction is well over $500K. How do you explain to a borrower that the builder (mostly from tradition) on a $1.875 million dollar sale is only charged x amount and the borrower pays full fare. A volume discount of sorts. Strange. I can tell you that at that rate, charged equally, we are out of business and quick.

    Anyway, when we started the business, the rate for any purchase under $500K was $495 plus tax per party (buyer and seller). It didn’t matter what the price of the home was. I intentionally eliminated following the archaic schedule that title companies used which was like reading an “Airline schedule.” Plus, it was easy for our real estate customers to remember and eliminated the “if it’s this price then what do you charge?” or ” if it’s that price what do you charge” phone calls. Essentially, all things being equal, it does not cost more to close a $500K home than a $250K home. Risk? That’s another beast.

    And no, the trust account is sacred grounds, so there is no double dipping and investing those funds. Now, the banks love escrow because they are making serious float. And they really like it when we have several million (much more for the big players) in our account over long weekends! But that goes without saying.

    In aggregate our small business is largely dependant upon the swings of the market…um, let me backtrack. Our market share is still improving, but our business is largely dependant upon how our agent and LO customers business is doing. The probability of escrow going out of business is much higher than say an agent in a difficult market because they operate with virtually no overhead. They have no employees with benes’, no lease per se, not even in the same ballpark professional fees, licensing, insurance fees, and they do not have the expense of auditing and so on. So being dependant upon others business nuances is problematic for a lot of reasons, much of which has nothing to do with the real estate market, but moreso the structure of how escrow functions and is paid only if a transaction closes. This is a very close to the kitchen issue for me professionally. We need to divorce that arrangement by Legislation so that escrow can function the way it was originally intended, INDEPENDANT of any influence. Period.

    Along those lines of business health, if the agent who sends us the most work decided they wanted to move to another area or state, (and it happens) it can have a detrimental impact. The problem is that the industry is Realtor centric for those referrals, when it should be consumer centric.

    Sandy,
    Yep, the AfBA’s make it tough for the AUTHENTIC independants, except for one thing. You and scores of others are reading it. And thanks for the remark about my wife. She is cool, but hates blogging. Any post she makes is the result of much bribery on my part.

  28. 28
    biliruben says:

    Thanks, Tim.

  29. 29
    sweatermeat Johnson says:

    As a renter I have to ask this question about that picture. Couldn’t you afford to buy a sweater that was made sometime this century? After all you are saving a ton of dough buy renting. The least you could do is have some style

  30. 30
    biliruben says:

    He owns a very nice house, sweet meat.

    As do a large minority of those on this site.

  31. 31
    Ubersalad says:

    I want my earnest money back…

  32. 32

    “Ira: I think most here appreciate your honesty as a RE agent. However, I for one also feel you are patronizing and maybe pointing out too much goody two tissues on these forumsin hopes of trolling for business.”

    I sure wish I knew what goody two tissues was.
    Also, yes, indeed the company you keep is important.
    I interviewed at Windermere and John L Scott. I realize they are successful traditional brokerages. They want their agents to follow very specific methods of attracting clients. I cam’t do that, I feel that they are carrying on the tradition of the “now is a great time to buy” bullcrap. I chose Skyline because of the level of independence it affords it’s agents. I have flexibility in how I do my business and to a certain extent how much commission I can charge. Yes, Skyline does have a lot of agents who make one deal a year, just enough to pay their desk fees. I don’t really have a feeling for them one way or the other, other than the fact that they don’t seem to be a cabal of crap promoters. They make their money off of desk fees.
    Also, can’t I honestly hold the beliefs that I do without being patronizing?
    Am I trolling for business? I don’t think so, especially that I’m telling people NOT to buy houses now, that doesn’t seem to be a recommended technique.
    I post because I feel that I have valid contributions and it’s a much more interesting forum than hanging around a bunch of cheerleader type agents.
    Like I said, I’d rather get praised than rich, and if I can make this dialogue a little more interesting, then that is a great reward.

  33. 33
    WestSideBilly says:

    with Redfin, any bank (they all offer 30 yr fixed loans at about the same rates), and a lawyer to read things over, why do i need anyone from the RE industry?

    I assume you were referring to agents, brokers, and/or escrows when you referred to the RE industry, as banks and RedFin are surely part of the industry. The cynic in me believes that a knowledgeable buyer only needs an RE agent to open the door (literally) at prospective properties. Of course, most people are not all that knowledgeable, so RE agents certainly have their place. I don’t know about brokers and escrows, though.

  34. 34
    laxtosnoco says:

    S-crow,

    I was offline all day, but what I was trying to say in my earlier reply was that mortgage brokers in California already have a fiduciary responsibility to their clients.

    There is no separate mortgage broker/loan officer license in CA, only a real estate broker license that covers mortgage brokers. The license imposes a fiduciary responsibility on mortgage brokers. Bank loan officers and some finance companies are exempted.

    My point was that licensed brokers in CA don’t really behave any different than anywhere else just because the government adds language to the code about a ‘fiduciary’ responsibility. You have to change the compensation structure (ex. eliminate YSP) or have some ferocious enforcement to change behavior.

  35. 35

    S-crow,
    I hope I’m not being redundant (I’m kind of late to the party with all of your comments)…

    First of all, just a reminder that the licensing requirements only in Washington State apply only to Loan Originators who work for Mortgage Brokers. If your LO works for Countrywide, WaMu, Wells…(bank mortgage co.s); they are not held to the same standard or state requirements.

    Part of the licensing requirement does include a significant background check. If a LO has significant liens against them; they may not be allowed to be licensed as a LO for a Mortgage Broker.

    Your suggestions to having a LO provide their credit score and financial history could also apply to an Escrow Officer who is processing the funds of the transaction. We’ve seen many commit their own share of fraud, embezzlement, etc. The former head of the Escrow Association of WA, Ted Grimes, is a classic example. He was building his view home using $$ that was not his from the escrow accounts of his company.

    Regarding YSP. This issue is really spinned out of whack. Mortgage Brokers are the only ones who are required to disclose it. Bankers are paid on the back end as well and are simply not required to disclose. Just because you don’t see it; doesn’t mean it ain’t there.

    If you’re going to shop lenders (which I won’t get on my soap box about that right now); do so by total closing costs in section 800 and the note rate (forget APR). Make the LO guarantee their their GFE in writing. Good luck!

  36. 36

    Disclosure is rather a sore point with us right now. We got stung big time in 2004, and we are still reeling.

    In 2004, we were new arrivals in Washington. Faced with rapidly rising home prices and afraid of being priced out of the home market, we put our trust in a Redmond Windermere realtor.

    The realtor put together a home purchase and renovation package for us. He brought in a construction company to evaluate the renovation potential of a home on Education Hill, in Redmond. Based on the representations of the realtor and the contractor, we purchased the home. And based on realtor’s glowing recommendations of the construction company — he told us he had observed their work over the years, that the company was the best he’d seen, that it had a unique pricing system, and that it did “superb” finish work — we hired the company to renovate our home.

    But the realtor failed to tell us the construction company was not registered, bonded, or insured as required by law. And he failed to tell us that he himself was one of the original incorporators of the company, a 20% shareholder, and corporate Vice President.

    How did the renovations go? They were a disaster. Among other things, we have a bathtub electrified at 110 Volts AC, a swayback roof, an unstable kitchen/dining room extension, and upside down kitchen cabinets. Much of the work was done without permits and inspections, and done by unlicensed people; much of the work does not meet code. Every system and feature they touched is flawed and the original statement of work was not completed. Much of the work will have to be demolished and redone.

    We have told our story in detail at http://RenovationTrap.com

    In 2006, we were sued by a subcontractor alleging it had not been paid by construction company. First thing, we wrote to the Windermere agency – help! Nothing.

    We answered the suit, then we called the Windermere agency to explain the problem. We had a nice sit-down meeting with the manager, the owners, a broker, and the Windermere lawyer, and we showed them the documentation on our web site. Those gentlemen listened politely, and at the end of the presentation, the Windermere lawyer told us – in effect – “So sue me.”

    Go to the Windermere website and look at their Mission Statement: “The highest ethical standards. Uncompromising honesty and integrity.”

    Yeah, right.

  37. 37

    ….and wm swanson asked me why I wasn’t affiliated with one of the traditional established brokerages.
    I know that the traditional brokerages do have honest agents as well as dishonest agents, but it’s the John L Scotts etc who put full page ads in the paper and ensure that articles aren’t even handed. Aren’t the traditional brokerages part of the problem?
    I just like to participate here. And part of it is to show that not every single agent out there will do anything short of selling his mother for a commission.
    How would working for John L Scott, etc make me more honest?
    I recognize that there is a diversity of opinion here and I like that, but to first praise me for my honesty and then attack me for being patronizing and trolling for business? Not nice, and very wrong.

  38. 38
    biliruben says:

    I, for one, appreciate your contributions Ira. I hope you stick around and continue.

    As a Realtor willing to participate in online discussions at this point in the market, you are going to have to develop a thick-skin, I’m afraid.

    The more experienced professionals willing to share their side honestly and without acrimony, the better.

  39. 39
    biliruben says:

    That’s just a horrible story, Mark.

    But if you’d just been represented and put your trust in Real Estate Professional, you would have avoid…

    …oh yeah, that’s where you went wrong.

    Unfortunately, until RE professionals of all stripes are required by law to put their client’s best interests before their own, we are going to continue to get this horrendous stories.

  40. 40

    I’m not sure that more laws are the answer. Realtors are already bound by a strict set of ethics. The problem is more that they ignore these ethics, but every single brokerage out there talks about how important being ethical is. They mouth the right words.
    There also seems to be a too cozy relationship between realtors, lenders, appraisers, builders, inspectors, etc where the referrals don’t happen because the agent, for example, respects the work of the lender, but because there is some sort of cozy arrangement going on.

  41. 41
    biliruben says:

    Are you referring to the NAR code of ethics?

    What sort of enforcement is there for breaking that “strict” code?

    Is anyone ever tossed out of the big R, similar to disbarment?

  42. 42
    S-Crow says:

    Rhonda,

    Yikes! Guess Ted Grimes didn’t share the same set of virtues, ethics, moral or professional standards Lynlee and I have.

  43. 43
    Alan says:

    The agent referenced in Mark’s story is the same agent that was selling the house written about in that “$100k price drop” article in the paper several weeks ago.

  44. 44

    Washington already has a full set of laws to guard against this kind of thing. We researched it before we complained, and cited our research when we wrote to Windermere: http://RenovationTrap.com/letter-1.html

    Primarily, the laws are contained in RCW Chapter 18.85 http://apps.leg.wa.gov/RCW/default.aspx?cite=18.85

    But the Department of Licensing has explained that, in effect, they are starved of an enforcement budget. See http://RenovationTrap.com/phs/#21 .

    The Department of Labor and Industries suffers from lack of budget as well. They have been very helpful with some aspects of the case, but they have just a handful of inspectors to manage the whole state. See http://renotrap.com/hih/#23

    Great laws mean little without enforcement, and according to what we are told, the mood of the courts right now is not in favor of enforcement. Those agencies have to do their investigations without the power of subpoena, and they cannot take testimony under oath.

  45. 45
    tlw says:

    wow, Alan, you got an excellent long-term memory.

  46. 46
    tlw says:

    Tim, I think you should have a blacklist post and add crooks like Paul Stickney to the list.

  47. 47

    Aw, come on, S-Crow, Ted Grimes is not the only Escrow Officer who couldn’t keep hands his hands out of the cookie jar! You can check DFI’s list and find EOs mixed in with the LOs…not as many…but they’re there.

  48. 48

    I will add that escrow has to be one of the toughest least appreciated jobs in the RE industry and I give hats off to the closers that do it right as I’m sure Legacy does.

  49. 49

    tlw said, on November 15th, 2007 at 1:48 pm
    > Tim, I think you should have a blacklist post and add
    > crooks like Paul Stickney to the list.

    We would be the first to disapprove heartily of Paul Stickney’s business methods. But consider this: Windermere is DEFENDING Paul Stickney through its Demco Law Firm, http://democolaw.com.

    What does this tell us? It tells us that Windermere, the largest real estate firm in the Northwest does NOT disapprove of Stickney’s business methods. Stickney has been with Windermere for more than TWELVE YEARS (http://www.RenovationTrap.com/phs/#14), and we have an affidavit from a Bellevue attorney that Stickney used the same (ahem!) methods to sell him a house in 2001 (http://www.RenovationTrap.com/phs/#7).

    Always we must remember, cui bono (who benefits)? http://en.wikipedia.org/wiki/Cui_bono

    For every home Stickney sold, Windermere took half the profit. Windermere’s responsibility for Stickney’s actions is clearly established by RCW 18.85.155:
    “Responsibility for any salesperson, associate broker or branch manager in conduct covered by this chapter shall rest with the broker to which such licensees shall be licensed. In addition to the broker, a branch manager shall bear responsibility for salespersons and associate brokers operating under the branch manager at a branch office.” [http://apps.leg.wa.gov/RCW/default.aspx?cite=18.85.155]

    And RCW 18.86.100 (2):
    “… This subsection does not limit the knowledge imputed to a real estate broker of any facts known by an associate real estate broker or real estate salesperson licensed to such broker.” [http://apps.leg.wa.gov/RCW/default.aspx?cite=18.86.100]

    To see how much real estate business Windermere controls, turn to the real estate section of the Sunday Seattle Times.

  50. 50
    Sandy says:

    Couple of things–first, full disclosure: I am a Windermere agent. What does that prove? Nothing. Nor does it prove anything if someone works for JLS, Skyline, Preview or is an independent. There are good and bad apples at every company.

    Am I surprised about what happened to Mr. DeCoursey? I wish I could say yes, but having been in this industry for a few years nothing surprises me anymore. I am often saddened by the behavior of my colleagues in this business. On the other hand, sometimes someone will do something that makes you smile, too.

    We get all kinds in this business. Ask any escrow officer. The truly bad apples are rare, as are the stars. Most people in the industry struggle to achieve mediocrity. I think that maybe, that makes us like all other industries except that the barriers to entry are so low. We leave it in the hands of consumers to decide which among us will succeed, and which will fail. And I’m not sure consumers understand the importance of the decisions they make. They think we are all the same, and don’t take the time to research their decisions, or even to take care with the people they hire to assist them with one of the most important decisions of their lives.

    The real estate business draws an assortment of people, who each are in the business for different reasons. The one thing we all have in common is that unless we have a broker’s license and decide to operate independently (and most people with a broker’s license do not choose this route) we each must work with a broker who is supposed to make sure that our actions are in compliance with the law.

    The brokerage structure is INTENDED to protect consumers, as well as those in the industry. And I think in some offices, it works as it is intended.

    But not always. One challenge is the ownership structure of real estate brokerages. Did you know that most of the big brokerages are actually franchises, and each is independently owned and operated? Each broker is supposed to make sure his agents obey the letter of the law, and uphold company standards, but unfortunately, all that independence means that each brokerage is actually run quite differently. I’m not sure that’s a very good recipe for ensuring that people have a good experience.

    So I guess one thing people should be aware of is that the brand name doesn’t really mean that much. I chose Windermere because I felt that my brokerage was professionally run. They at least verbally espoused the same ideas I believed in, and when I told them how I wanted to run my business and how I wanted to work, they supported me. Most importantly, I think they provide really good legal oversight, and I respect most of the agents I work with.

    But I can tell you, I’ve met agents I respected at every other brokerage too. And, I’ve met some Windermere agents that made me embarrassed to be working for the same company.

    I interviewed at other Windermere brokerages that didn’t seem to be as well run. And did you know that Windermere has something like 375 offices and 8500 agents? Even assuming that 99 percent of us do a good job, (and I doubt the number is that high–it’s probably more like 75 or 80 percent, which in any customer service industry is usually considered an abysmal score for customer satisfaction) that still means there are 85 bad Windermere agents out there potentially harming the public.

    The odds may not be great that you will be one of the people harmed, but if you do not treat the hiring of the agent who will represent you as the important decision that it is, you increase your chances that something bad will happen to you.

    And, most punishments doled out to agents are in the form of fines. It’s very hard to get your license pulled. You have to be pretty much a flagrant, repeat offender.

  51. 51

    The irony is particularly bitter when Windermere’s false boast is “honesty and integrity.” And as you point out, it leads directly back to the hiring and employing corporation. If the corporation does not live up to its promises, and if the government hasn’t the resources to prosecute transgressions, the agents are left to their own conscience, as weak or as strong as that may be – and to customers like us who take legal action when they get ripped.

    Would you believe the Demco Law Firm has the nerve to argue that we should not have trusted Stickney?

    We are not interested in having Stickney punished – but how else can you get someone’s attention to suggest they amend their ways? Without punishment, it seems, Windermere and Stickney would go on their merry way, cutting corners on the law, hurting customers, and fighting back when someone calls them to account.

    Many people don’t have the money or the appetite to face a well financed law firm toe to toe. Like the bully who stole your lunch money at school, day after day and week after week, they will continue until stopped.

    That seems to be the call that everyone faces at some time or other. Like the man says, “Our giving up what is ours merely to escape trouble would only create greater trouble for someone else.” – Louis L’Amour, The Man Called Noon.

  52. 52

    I have to agree with Sandy that there are good and bad apples at any brokerage, and also it seems to me that someone ought to be held accountable. Mr. Stickney? Certainly. It does take a lot to get a license pulled, but the more bad stuff on his record, the more documentation is there for when he gets reported again. It seems as though he deserves a big fine.
    And Windermere, or at least the brokers in charge of his office? Well, they are supposed to know what’s going on.

  53. 53
    Gail Gottlieb says:

    the brokers should but often don’t know exactly what’s going on. often they can’t, especially in big offices…But I don’t think agents are as a whole “worse” than most politicians…

  54. 54
    tlw says:

    Mark,

    I forgot to say this in earlier comments, but here it is: thank you for sharing your story. You have my deepest sympathy. You’ve saved one or more poor souls from becoming victims of Paul Stickney.

  55. 55

    Thanks, TLS, that’s very kind.

    When the DOL investigated, Windermere Redmond stated that agents who had satellite offices were required to form their own corporations, even though those corporations did not have brokers. In that way, the only detail of agent activity that crossed the broker’s desk was income and commissions. Stickney’s office was several blocks away from the broker’s office. The whole set-up gave Windermere plausible deniability of Stickney’s day-to-day activity.

    Thus Windermere made it easier for an agent like Stickney to run over the customer. When disaster happens, what does Windermere do? Windermere sends its law firm to DEFEND Stickney and ATTACK the customer.

    Instead of just raking in the money, building art galleries, and playing philanthropist, Windermere /SCA Inc. (Redmond/Kirkland) should have been supervising its agents and fulfilling its legal obligations to the customers.

    After more than twelve years with Windermere, Stickney must have understood the Windermere corporate culture. No doubt he was doing what he thought he could get away with. And with their law firm, Windermere is helping him get away with it, even now.

  56. 56
    exwamuer says:

    ok–i’ve read here a lot, was a long time resident of seattle and wouldn’t mind moving back. I was in the closing business for over 10 years-washington dc area. I’ve also been the general manager of a title company. On the east coast, lawyers(such as myself) handle closings in most instances. In NC, where i also worked, lawyers MUST preside over a closing(until very recently). Even the big builders in affiliated relationships employ lawyers to handle their closings in these states. The FYI:
    1) you’re better protected in a myriad of ways using an attorney. As a lawyer, your fiduciary duty is is codified much more clearly. You have a state bar with teeth and accountability if any incompetence or funny business occurs. you also have a state fund culled from lawyer’s trust account interest which in many cases disperses funds back to consumers who are ripped off by unscrupulous attorneys.If you file a bar complaint, rest assured it will be investigated and if the attorney has underperformed/ripped you off it will cost thousands for him to defend himself, let alone the stigma, referrals down the drain etc.
    2) you’ll usually get a higher quality and more knowledgeable person handling the thing. And yes, i’ve met lpo’s and the like who know more about closings than the lawyers for which they work. And by the same token, i’ve met nurses who know more than the doctors for which they work. I am talking generally here.
    3) I could go on forever, i’ve handled thousands of closings. Things only ever got screwed up when we (or others) attempted to handle too much volume.
    4) i’d never give my credit rating or financial info to any client, agent, or anyone else except a possible merger partner. They can call the state bar and see any mistakes/ripoffs i’ve ever made. And back east, many do check. No other r/e professional should have to disclose their financial situation either.
    4) Drawbacks? yeah, sometimes it costs more. In the end,b/c of competition, our fees were the same as all but the fly by night lay-closers(as they call them there). And the closer’s fees were less than on the west coast also. Example–is the closer going to tell you that you could get a reissue rate on your title ins if he doesn’t have to? not usually in affiliated arrangements. The lawyer would have to if he has knowledge. Or you report him. Many transactions even had a buyer’s and seller’s attorney. It was a good counterbalance and excellent for the consumer. Sorry guys, there’s alot about lawyers that i don’t like(probably like many out there), but i had zero transactions go bad when there was a lawyer on each side.If you have the ability to check up on the people who are handling your transaction, you do so. Same w/ mechanics liens, remodels, etc. Check L&I, local b/r courts, etc. Homes are the biggest investments you make.Treat it with proper care. use your friggin family lawyer if you’re unsure. and by the way, we charged some banks and builders less because their docs and info never changed and a ryland or toll brothers closing took less time to complete. I think that’s fair.

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