As with any profession, recognition and respect should be given to those who have studied and become experts in the field. We’re hiring people to do just that. Otherwise, you’ll be left handling the divorce and plumbing yourself.
But what happens when trusted experts disappoint us, lead us in the wrong direction and cause us to lose confidence?
We watched as Bernie Madoff led thousands of people down a path of smoke and mirrors, taking and losing money through lies and deceit. People were willing to part with their savings, thinking that if so many smart people were investing and doing well, why not invest too?
Madoff was running a sham business that seemed too big to fail. The more success he had, the more people wanted to get involved.
In fact, he alienated hopeful customers and attracted even more investors. This idea of exclusivity, of a rare network, created the illusion that only the best of the best had access. It was a profitable and dangerous equation.
Along the way, questions were asked about Madoff’s conduct, concerns were raised, and even calls of fraud were raised. But all this was ignored because it was signed by the smartest people in the world. Mob mentality crowded out any semblance of common sense, and the problem continued to grow.
Until, overnight, Madoff’s fast-moving money train crashed, leaving no financial survivors. It was an expensive lesson in many ways.
I’m sure all of Madoff’s victims wish they had come forward more forcefully. I have a friend whose father met with Bernie and is considering investing together. When he asks for more information, Bernie becomes furious and basically tells him to either invest or get lost. My friend’s father realized Bernie was a scammer and immediately walked out the door.
Fear, intimidation and real estate trust
Big egos rule with fear and intimidation tactics, and we’re seeing it on full display in the real estate industry right now. Entire industries, the trust we have built over decades, are being toppled domino by domino by large corporations with enormous size and capital.
Consider a private list as an example. Off-market sales have always existed as an option for sellers, but companies like Compass are pushing to make it the default marketing strategy. This accomplishes several things at once.
To keep listings in their network for long periods of time, Compass agents are likely to be on both sides of the transaction, increasing Compass’ fees. Compass also encourages double-end deals through a 10% internal referral fee.
This is all done under the guise of the seller’s choice, but the seller always had the option.
Licensee real estate agents are required to comply with fiduciary requirements and fair housing regulations, regardless of their brokerage policies. The golden rule as a real estate professional is to put your client’s needs above all else, especially your own.
Unless special circumstances such as divorce, celebrity, or security require otherwise, home sellers almost always want to maximize the real estate market by offering their properties to the open market. This has been the common sense way of doing things for decades.
It’s easy to see that getting as many eyeballs as possible gives you the best chance of getting a buyer at the best price.
However, a new description created by Compass encourages sellers to list their home privately on Compass for the first 90 days. It has become part of their nomenclature. In fact, it is written into the exclusive contract as part of normal business operations. They made the exception their rule.
Sellers will be appalled when they begin to realize that organized manipulation is pushing them to accept lower prices than the market as a whole offers. Unfortunately, they should be furious because they can never know what the market will produce and have been misled by hoarders despite signing disclosures.
The reality is that even very smart people can have very selfish thoughts.
If we all zoomed out, we would see that Compass is billions of dollars in debt, its stock price is nowhere near enough to satisfy its debtors, and its only chance to survive is to become the only site in town to sell homes. As they say, “We want to be the Amazon of real estate.”
I don’t begrudge businesses trying to make money. By all means, build, grow, and prosper at the expense of consumers. In private listings, the means do not justify the ends. In fact, Compass is violating its fiduciary duties by building this private network that obfuscates transparency and hides metrics such as days on market.
Things are starting to unravel as the New York State Attorney General launches an investigation, and the government is currently facing a myriad of lawsuits, spreading the false narrative that it is being fought at the state level. New York state just passed the Free and Fair Listing Act, which restricts private listings, and is awaiting the governor’s signature.
Although Compass interprets this as a victory for seller choice, this law was not written to codify seller choice. Plain and simple, it is intended to protect homeowners from predatory behavior and financial risk.
My only hope is that consumers don’t get caught up in the web of lies that smart people make sound appealing. As we enter a real estate market where inventory is tight and prices are unaffordable, the absolute worst killer is to hide inventory through private property networks and make the American Dream virtually impossible.
If you sense a Madoff-style rip-off, like my friend’s father did, be wise and walk away.
Editor’s note: An earlier version of this article said the Justice Department was investigating Compass. He’s the attorney general of New York.
