Understanding RESPA Laws & Why Brokers Should Not Fear Networking Partnerships

Collecting Fees for Networking Services is Legal

The Real Estate Settlement Procedures Act, better known as RESPA, was updated in 2011 to better protect consumers from exorbitant and abusive charges during the homebuying process. Built within the law are numerous rules about how real estate brokers, mortgage brokers, lawyers, and mortgage lenders can interact. These provisions, often misunderstood, have caused many real estate brokers to avoid business networking partnerships for fear of RESPA violations.

Under RESPA, though, it is not illegal for a brokerage to receive payment from vendors in exchange for networking services. The key is that those payments cannot be proportional to the amount of business generated. Instead, the charge must be based on service provided.

A brokerage, then, can provide networking opportunities or advertising on its website to a service provider for a monthly fee, but that vendor must pay the same rate per month whether it gets two leads in April and two-hundred in May. The agreement must be non-exclusive, and the homebuyer must be made aware of the relationship between broker and service provider in writing. The details are spelled out a bit more thoroughly in this helpful article from Realtor.org.

Apart from RESPA violations, many brokers are concerned about civil liability for making business referrals. We did a bit research in our home territory of southern New England. A WestlawNext™ search of reported court cases found approximately 1100 lawsuits in Massachusetts involving real estate brokers. Of those 1100, 24 contained the word “referral” or a variation thereof, but none of them involved a claim against a broker based upon the referral of a service provider.

The numbers in Connecticut were approximately 1600 and 39 respectively, but there were again none against a broker concerning their referral of a service provider. Apart from the dearth of reported cases, attorneys with whom we have spoken found no basis for a liability claim based simply upon the referral of business in the absence of some special consideration or duty.

Vendor Networks Are a Profit Center for Brokerages

Simply put, a well-managed vendor network is a perfectly legitimate profit center for real estate brokerages. By offering networking and advertising opportunities to local service providers, from lawyers and lenders to electricians and landscapers, brokerages can take advantage of their unique position at the center of the homebuying process. We’ve previously explained the process in a bit more detail.

If you’re still curious about how RESPA or other laws impact vendor networking opportunities, check out the links below or consult your local legal adviser.

RESPA FAQ (Realtor.org)
Real Estate Settlement and Procedures Act (FederalReserve.gov)
An Analysis of RESPA’s move to the CPB (Realty Times)

Posted in Real Estate Links, Real Estate News

Our Treat: Real Estate Links for Halloween

Halloween is All About Real Estate

Halloween, America’s most peripatetic celebration, is in that way our most real-estate focused holiday: neighborhoods are toured, houses are approached, and, in the brief moment when the bowl of Hershey’s miniatures is presented to costumed children, parents and chaperones—potential buyers and sellers among them— can peek into the living rooms of their neighbors.

Or perhaps their future neighbors: it’s no new strategy for a homebuyer to trick or treat the neighborhood to which they’re thinking of moving. If you’re selling, beware the opportunity. Rake the leaves, tidy up, and hope the neighbors do the same.

Rather than speculate further on strategies for effective Halloween marketing, though, we want to share a few Halloween themed real estate links. Enjoy.

Tips for Selling a Haunted House

Even the most skeptic among us may be put off by a house labeled “haunted,” especially if the supposed haunting is connected to a very real past, such as an untimely death or an eccentric former resident. This article presents ideas for winning over reluctant buyers.

The 20 Best Cities for Trick or Treating

Zillow blogger Alex Fiander counts down the top twenty cities in America for Trick or Treating using Zillow’s own troves of data as well as census data on crime and median home value. Seeing Los Angeles at #2 surprised me—part of the Halloween fun for us here in New England is the struggle to stay warm.

Houses with Character

The Boston Globe presents some of the more compelling houses in the regional market. All seem in far too good a state to be considered spooky, but these homes have the unique details and architectural charm to look haunted after a few decades of neglect.

Connecticut Ghost Village for Sale

The village of Johnsonville in the town of East Haddam, Connecticut, includes a mill, a chapel, a general store, and several homes. And they’re all abandoned. From the article: “Online bidding for the historic mill village starts at $800,000 on Oct. 28. On about 62 acres, the property is described in its listing as a ’19th century village with 21st century living.'”

Agents Share Stories of Creepy Homes

Marketwatch Editor Amy Hoak recounts true stories from agents nationwide: Rooms filled with reptiles, mannequins in the worst places, and more of the inexplicable from sellers who seem to be trying not to leave.

Posted in Fun, Real Estate Links

Selling by Design: An Education Strategy Transposed for Real Estate Agents

Book Cover

Backward Design Starts at the Ending

As I’ve written here before, real estate agents and brokers can learn a lot from the education industry. But that’s true from more than just an institutional perspective. Real Estate Agents must think of themselves as teachers, too. That’s because they are teachers: they help homebuyers develop the knowledge, skills, needed to successfully own a home.

So it follows that the strategies which work for teachers can also work for Real Estate Agents. One of the most prevalent strategies in schools across the country is Backward Design, a method of curriculum development that starts at the end.

Backward Design arose in reaction against the day-by-day approach often found in American schools: A teacher handed out the novel, and the class discussed the book chapter by chapter. Once they’d finished reading, talking about, and writing about the book, it had successfully been “taught.”

In the last two decades, though, such models of education have fallen out of favor. There’s little transferable benefit to having merely observed the words of The Great Gatsby. The novel must be contextualized and analyzed, and its themes extrapolated into the contemporary world. The day-by-day method often only glossed over these larger goals.

Many agents, though, still use the chapter-by-chapter approach to selling: They start with a home or a list of homes, then work through that list until the buyer finds something they like. Below I offer an alternative way of thinking about the sale inspired by successful educational strategies. I don’t mean to suggest it’s the new and improved way to sell a home, but I do hope it offers new a perspective on client-agent relationships.

Call it Selling by Design

Understanding by Design, the leading book on Backwards Design, asks teachers to create objectives for student learning that are based on skills and understanding, and then design instructional strategies and measurable assessments. “Students will read The Great Gatsby” is insufficient in such a context. Instead the teacher must answer why the students will read it, and then work backward to the novel itself.

Saying “I will Sell this Home” is like saying “Students Will Read The Great Gatsby.” It’s the end goal, but thinking in such simple terms doesn’t help determine the process by which a home can be sold. To Sell by Design, an agent has to start with the homebuyer and work backwards to the property itself.

So instead of starting with a showing, consider starting with lunch: Learn what features the homebuyer is looking for. Learn whether the homebuyer has the financial footing to match her desires, of if she’s perhaps aiming high or low. And for everything learned (those topics just suggested are fairly basic) dig deeper.

It’s from these deeper specifics that a plan can emerge: with that knowledge, you can answer why a particular client will buy a particular home, and predict what knowledge and skills the homeowner needs to gain in order to buy it—that is start from the sale and work backward. Is the asking price just out of reach? Educate your buyer on financing before they have time to doubt themselves. Does the homeowner have dogs? Get an estimate on fencing before the showing. Do they want a sun-room? Know ahead of time whether additions are permitted, and how easy those permits are to get.

Preparing for all possible buyers and scenarios, is of course, impossible. But that’s the situation an agent sets up when he thinks of the home before he thinks of a specific client. By starting with the buyer and working backwards to the home&mdas;selling by design— the agent can best meet his clients needs and improve his chance of closing a sale.

Technology is on your side. Just as a student might read SparkNotes online, a homebuyer will have already seen listings and catalogs of features. There’s no need for you to waste time sharing what they already know—don’t summarize the plot when you can analyze it. Spend the saved time getting to know your clients on a personal level, and meet their needs in ways that only a real estate agent can.

Posted in Tips

OwnerAide Featured on Inman News

Inman News

OwnerAide, Inc., was this week featured on Inman News. The write-up provides an overview of the software and commentary from some of our first customers. Read the full article here: Software Eliminates the Need for Pesky Vendor Referral Groups, E-mails.

From the article:

Brokerages using OwnerAide’s platform can maintain a master network of vendors that their agents can pick and choose from to create their own personal networks that they can share with clients.

[Broker Matt Lloyd] said that Keller Williams Realty Greater Hartford plans to fund part of the cost of the software by charging vendors to be listed in its network.

“It’s almost a no-brainer for the vendor where they have an opportunity to be advertising their business to 250-plus agents within our local area,” Lloyd said.

Posted in OwnerAide News

Student Loans and Young Homebuyers: More Complex than an Inverse Proportion

Last week the Consumer Finance Protection Bureau released prepared comments on how student loan debt affects homebuying, family formation, and the domino effect of student loans and housing on the wider world of personal finance, including automobile purchases, entrepreneurship, and retirement.

The comments coincided with data analysis released by the John Burns Real Estate Consulting Agency on the measured effects of student loans on the housing market. The firm published a helpful infographic of the effects; the full report is for paying clients.

Reporting on a conference call with that agency, the Los Angeles Times explains that student loans will cost the industry over 400,000 transactions and $83 billion. The Motley Fool ran the following headline: “Your Student Loan is Killing the Housing Industry.”

There’s More to Loans & Homes than Hype Suggests

Those are frightening statistics and frightening headlines. And as we here at OwnerAide don’t have access to the methodology, we can’t dig in much more deeply than other outlets already have.

But we remember a different report from a different agency that caused numerous outlets to predict a millennial housing “boom.” We are skeptical about that extreme as well.

What we want to insist is that student loans and homebuying do not create a simple inverse proportion; the housing market is, of course, far more complex than that.

A columnist for The Atlantic explained in May that, while the share of young homebuyers is historically low, the actual homebuying rate for that age group is not far from average. Much of the difference in homebuying share can be attributed to the incredible rise of corporate cash buyers, which distorts overall percentages.

The Brookings Institute published a report last spring that describes the limitations on analyzing the loans & homes correlation. A report from the Demand Institute reports that many millennials acknowledge that loan debt causes problems, but many young homebuyers seek alternatives to the traditional down payment & mortgage sequence; millennials want to buy and are willing to take necessary steps to do so.

Student loans are making it difficult for young homebuyers, but the effects are not as severe, and are much more nuanced, than some recent reports would suggest. If you’re selling to a young homebuyer, keep this in mind.

Posted in Real Estate Links, Real Estate News

Education Industry Can Show Real Estate Brokers How To Approach Technology

Boston Latin Public High School

Online Education Grows Alongside Online Real Estate Services

When was the last time you saw a commercial for an online, for-profit institution? This morning? Right now? The University of Phoenix alone has over 300,000 students, and is the only university whose stadium hosts a NFL team. It might seem that online education is taking over the industry.

After all, when was the last time you saw a commercial for an Ivy League School like Yale or Harvard? Never? Maybe you saw an ad for your state’s flagship university a few times during their last football game. Does that discrepancy suggest these institutions are failing?

Of course not. All that the difference in airtime shows is the power of reputation and repeat business. A top university has a powerful network of alumni and a reputation of success to bring in more business than it can handle, both from new applicants and repeat business from legacy applicants. So why bother with ubiquitous television ads?

There’s little risk of prominent brick-and-mortar institutions becoming obsolete. Future students know they can get something they can’t get anywhere else. For the same reason, there’s no reason that brick-and-mortar real estate brokerages should become obsolete, either, so long as they offer services that online tools cannot.

What Challenges Do Online Services Pose to Brokerages?

Brokerages, nevertheless, have lately been at the center of doubt among real estate industry pundits. Newspapers, blogs, and magazines nationwide have lately questioned their value. In a column published this summer, Forbe’s contributor Ben Kasanoff writes that 95% of a real estate broker’s responsibilities could be better handled by well-designed online systems.

He’s not altogether wrong: Some of a broker’s traditional responsibilities are handled by well-designed online systems. Consider what June Fletcher wrote in a column titled “The Gofer Broker” for the Wall Street Journal:

“In the past, agents controlled what houses buyers saw and provided data to sellers about local markets. Now, sellers can advertise their homes online and buyers can do their own research, without a middleman”

It’s not exactly shocking stuff. But consider that Fletcher wrote those words in October, 2007, and the reality sets in: Zillow is publicly traded with a $4.2 billion valuation. Trulia is now one of the the 100 most visited sites in America. And then Zillow went and bought Trulia. Meanwhile, startups like Flipt, Realscout, and Placeter continue to attract millions in funding from venture capitalists. The internet has permanently changed the way a brokerage does business.

So What Can Agents Learn from Education?

The internet has changed the way educational institutions do business, too. Even prestigious universities such as the University of Southern California and Harvard offer online degree programs. Online high schools exist as well. But no one claims Harvard will soon have to close down its campus as students move online. (In fact, the campus is expanding across the Charles, near OwnerAide headquarters.) So why do they make such a claim about brokerages?

The reason is a simple matter of understanding: Any former student knows that a good teacher is more than a delivery system for content. An impersonal lecture, after all, can be delivered through any medium—many online courses include a prerecorded video. But the memorable and effective teacher finds a way to reach every student in a unique and meaningful way. And that individualized relationship is more than just manners in the classroom. It inspires, energizes, and shapes the way a student learns.

Successful brokers do the same thing. They offer individualized preparation, nuanced feedback, and personalized content that cannot be accessed through a URL. But that value is more difficult to measure. Most people remember a favorite teacher, but a favorite real estate broker? Perhaps not.

Brokers need to assert and adapt in the same way that educators have: By embracing technology where it better allows them serve their clients, and by expanding and improving upon that service when technology frees them to do so. Myriad web services, platforms, and databases empower both teachers and brokers to create stronger, longer-lasting relationships than ever before. Brokers must use these tools to provide individualized metrics and analysis, offer unique buying and showing opportunities on a per-client basis, and get to know each client—and so better anticipate and respond to his needs— better than ever before. Instead of looking through listings the client has already seen online, take them to lunch.

Consider the calculator: It saves both the teacher and the student time so that they can focus not on the calculation itself, but the structure and relationship of variables that need to be calculated. Web tools can be just as valuable: If home sale data is easily accessible on a website, the broker can focus not on counting and sharing numbers but on forming the relationships and variables that make those numbers possible, and by supplementing available data with additional information and insight.

In the coming weeks, I’ll review in more detail a few contemporary educational paradigms, such as differentiation, backwards design, flipped classrooms, and more, and explain how the principles therein can be applied to real estate. The two industries are facing a common challenge. The adaptations are common as well.

Posted in Real Estate Tech, Tips

Chicago Tribune: Real Estate Industry Still Ripe for Tech Growth

Chicago Tribune Logo

A recent article in the Chicago Tribune highlights how the real estate industry is ripe for tech growth. The article features comments from a vice president at NAR and several tech entrepreneurs. The consensus is that real estate technology growth lags behind that in other industries, and that there remains significant economic opportunity.

From the article:

Many of the marquee innovations in the space are half a decade old or more. A few seem stale compared to the dynamic innovation in other tech sectors.

Those “marquee innovations” include tools like home search, document signing, and home tours. The new generation of tools will shift focus on customer information to customer experience.

From the article:

Brokers need a streamlined, automatic system to share important statistics and data with customers quickly; a way to stay on clients’ radar screens after a transaction in a business that depends on referrals; and ways to make communication on brokerage teams more efficient.

It’s a familiar issue. Brokers will not waste time with technology that doesn’t improve their relationship with a customer. Strong broker work ethic and a reliance on proven if traditional interpersonal strategies is, perhaps, part of the challenge: An investor in the article is quoted as follows: “They don’t have enough patience or time, and [technologies] need to be foolproof.”

Read the full article here.

Posted in Real Estate Links, Real Estate News, Real Estate Tech

How Big Data Affects Buying and Selling Homes


Yes, Big Data is another buzzword of tech that defines little, just as “Cloud Computing” or “Internet of Things” or “Web 2.0.” Like all of these, it is a mass-market term for a set of principles that have been around for over a decade, and which are far more complex than the name suggests.

“Big Data” doesn’t just describe the amount of data being considered (although over 90% of all the world’s data was made in the last two years). It also describes how that data is compared and analyzed over non-relational databases with flexible algorithms in a fast and efficient way. Facebook, after all, cannot create targeted ads for swimwear if it takes until to October to calculate your preference.

So while it’s a marketing simplification, it’s a satisfactory one. Talking NoSQL, BASE, Hadoop, with a client won’t get you very far. Of course, simply talking about Big Data won’t achieve much either.

It’s Not the Size of the Data, It’s How You Use It.

Real estate brokers should be familiar with the applications of Big Data and the tools that can leverage it. A tool like SmartTargeting, which analyzes numerous data points to predict which homes in a given area are most likely to sell in the next six to twelve months, is just one example. SmartZip, the company that created SmartTargeting, just raised 12 million.

Your own analysis of school performance, commute times, crime rates, and local market trends might help you arrive at similar conclusions. But a Big Data tool makes an educated guess more precise, and so helps you skim more success and saved dollars off the top of your marketing budget. It might also reveal truths about the neighborhood which are more difficult to see. One advantage of Big Data is how it finds meaningful correlations between seemingly disparate factors.

To answer the question I posed in the title, you probably will not “Do Big Data” in the branch office. But Big Data is going to affect the way you buy and sell homes. Big Data tools, including some you likely already use, will reveal demographic preferences, neighborhood trends, and unexpected connections that will help you to better serve your customers. You’ll have more-targeted showings, share more accurate market information, and better anticipate your client’s needs.

Remember, of course that a number of Big Data tools are being made for the consumer, too. Don’t be surprised when clients relay statistics and trends that they read about or calculated with the latest web service. A house, after all, has a price tag determined in large part by statistics. Until the value of a *home* is quantified, though, the interpersonal relationship you have with a client will be tantamount.

Want to learn more about big data and real estate? Check out the links below.

What’s the Big Deal About Big Data?
The author takes an detailed look at how big data affects retail business, and how that will translate soon to real estate.

How Smart Houses and Big Data Will Change Real Estate Economics
The author examines how user-generated data—gathered by the smart devices each home will one day contain—will eventually be used to sell homes.

5 Ways Big Data is Changing Real Estate
A bulleted countdown that applies the trends in big data to familiar aspects of the real estate industry.

Posted in Real Estate Links, Real Estate Tech

How Valuable is a Real Estate Broker’s Vendor and Affiliate Network?

I recently wrote about a fifteen-year old article on the rise of real estate vendor networks, and how they can add value after the sale. But networks, done right, can also add value before, during, and independently of the sale.

In the referenced article—again, this was last century—the CEO of a regional real estate company explained that pay-per-click and pay-per-impression advertising on his vendor network pages generated his firm roughly one million dollars a year in ad revenue alone.

Monetizing affiliate and vendor networks is nothing new. Mortgage lenders pay for access to buyers. Inspectors pay to be preferred. Service providers pay to be recommended. The arrangements are mutually beneficial: the brokerage gets a guaranteed annual revenue, and the service provider gets a consistent stream of leads.

A Network Must Do More than Point-of-Sale Referrals

How much a brokerage can charge for affiliation, though, depends on how effective its network is. If a network only offers point-of-sale referrals or a seasonal maintenance reminder to homeowners, then it is not doing enough. A buyer might require estimates before signing a contract, but that doesn’t mean she’ll call back the chimney service a week after the move. Consider, too, that distressed sales—which often include homes not primed for sale or even occupancy—have declined by more than half in two years, and the value of point-of-sale referrals declines even farther.

A strong affiliate network is dynamic and intelligent, and so brings value to its members year round. It acts on data and maintains relationships so that a homebuyer still calls your recommended vendor when he finally decides to fix the chimney, even a year after the estimate. Here are some questions to ask when setting up your vendor and affiliate network:

  • How does my network differentiate for each vendor?
  • How does my network keep clients engaged?
  • How does my network leverage available technology?

That value for the vendor, of course, is value for brokerage. The more money you help affiliates earn, the more they’re willing to pay for access and advertisement.

Posted in Real Estate Tech, Tips, Uncategorized

Concierge Services Must Add Real Value to be Worthwhile in Real Estate

Agents and brokers go above and beyond for clients, but there are pros and cons to dropping your client’s children off at school or giving your client a ride to the airport.

Agents I’ve talked to, including the agents-cum-software executives here at Owneraide, would like to avoid picking up their clients’ dry cleaning. But many agents agree that gestures of a type can have real value. Agents representing luxury homes, for example, might pick up clients in limousines and have hor d’oeuvres waiting. If concierge services generate new business in a cost effective way, then they’re always worth repeating.

Way back in 1999, Realtor Mag ran an article about the growth of concierge programs at real estate brokerages. Fifteen years later, it still explains how a particular service provided for your clients can also serve the business:

“Concierge” is one of the names brokers are giving to programs that link their clients to vendors that provide home-related services as a way to keep their business relationships going after their clients have left the closing table. “These programs are a way to give you a customer for life,” says William M. Raveis, president of William Raveis Real Estate and Home Services, Fairfield, Conn

Smart idea. In 1999, though, much of the software development happened in-house, and functionality was limited. Those were the days of Windows 98, IE4, and dial-up. Google was a year old. Zillow was 6 years away. The technologies have advanced at the predictable pace, but the question posed by that article’s author remains today: “Do you want to position your company as a one-stop shop for all homeownership needs?”

And that’s one key distinction between simply doing favors and adding value after a sale: providing what a homeowner needs. The real estate brokerage that becomes a trusted and necessary resource for homeownership needs can count on more referrals and repeat business, no matter what technology is being used. In the article, the CEO of Century 21 is quoted as saying “It’s the future of our industry.” As access to data and knowledge is encroached upon, it’s now the present.

Posted in Real Estate Links, Real Estate Tech

Follow us on Twitter!

Try OwnerAide for Free!

Get more from your vendor list with our Home Pro Networks. Sign up below to request a free trial.