Property Grunt

Monday, October 30, 2006

Killing the Rooster

So I read the details of the no fee scam press conference and it is pretty much more of the same bait and switch and bulls**t. Here's the article.

Below are some points that I found interesting.

In September, the committee called 223 real estate agents who had advertised no-fee apartments on and, two popular Web sites that list classified ads.

When asked if they charged a broker's fee, 31 percent said they did, despite what their ad said. Another 4 percent said the cost was noted on the posting, in small print at the bottom. Of those with fees, 87 percent charged either one month's rent or 10 percent to 15 percent of yearly rent.

What I am wondering is that if the committe also asked if the fee is negotiable? As I have stated before even if an apartment is a no fee, the landlord is only kicking in one month up front and it is still small pickings when cut between the agent and the house. Also the manager will make their agent push the client to make up for the difference. Sometimes an agreement will be reached where the client will put up less the difference. Perhaps an alternatve is having a section stating "discounted fee" or "fee negotiable"?

To better control the online real estate market, the committee recommended that the city Department of Consumer Affairs, which regulates advertising, act as a monitor of Internet listings and check into complaints sent to Web site administrators. It also suggested that the department increase its fines for violations, which range from $50 to $500, and that it relay any findings to the state Department of State, which can revoke an agent's license.

It sounds like a great idea but there are many ways for an agent to avoid being caught. As I have stated in a previous entry, when somone calls in for an apartment it is highly unlikely they will rent that out for a variety of reasons including they may not like it after they see it and of course there is the old standby "It has already been rented." and are two of the largest rental-listing sites covering the city. About 3,000 city rental ads are posted on every month, said Carl Ferrer, the site's founder. Both he and Craig Newmark, who founded, have tried in recent years to supervise the no-fee promises themselves. Newmark said he has gone so far as to kick repeat offenders off the site. Both support the City Council's suggestions.

"We rely currently on the community and other brokers to report the bad apples," Ferrer said. His site receives 20 to 30 complaints a month about deceitful agents, he said.

This is probably the best way to deal with this situation because you have a group of dedicated individuals who are willing to take the time to protect a site and if the brokers understand that then they will either leave or abide by the rules. But there is also another important reason why this should be handled by the community.

Robert Eichner, president of the Manhattan Realtors Association, said he was shocked by the fraud the committee found.

"The magnitude is out of control," Eichner said, adding that most deceitful agents probably use the "bait and switch" technique, luring customers with a deal that's too good to be true.

He was skeptical of the consumer affairs agency's ability to control the problem.

"The spirit is good, but do they have the resources and the staff for such an undertaking?" Eichner said. "I don't know."

Eichner makes a valid point. Consumer affairs is already bombarded with complaints, there is no way in hell they have the man power and fund to consistently lay the smackdown on deceitful brokers. There is one alternative one alternative consumer affairs can utilize but it isn't pretty. It is known as "Kill the rooster to frighten the monkey."

This is a saying that originated with Chinese monkey trainers back in the days of yore. If a monkey was being uncooperative, the trainer would take a rooster and then strangle it in front of the monkey. Seeing the brutal execution of the rooster would scare the monkey into submission.

If the bait switch problems shows no sign of abating, then what could probably happen is that a rooster will be chosen amongst the brokers. Not just any rooster, but a big fat cock of the walk. They are investigated and evidence is gathered and then Consumer Affairs or some other governing body pulls an Elliot Ness and a raid is conducted against the brokerage resulting in a perp walk of handcuffed agents in front of the media and the brokerage being shut down for a couple of days.

The resulting embarrassment and loss of profits would make the rest of the brokerage community drop a load in their pants and put them into lock step formation marching towards honest ads. That is until the next round of bait and switch ads start to pop up.

Honestly, I doubt it will ever come to this because as I said before it is a question of resources and I do not see going after scume bag brokers as a high priority.