You can add photographers to that list too, Jay, and yes, it happened to me too. Can I name the national brand that stuck with me the most? Not only did they want to pay to be on the list, they had levels, a menu of options (all with their own additional fees, of course), and the strong suggestion to sponsor a happy hour (that they would arrange, of course, at one of their 'preferred' locations, for [as near as I could figure] 20-30% more than it would cost me to 'arrange' something similar on my own).

Before I was a Realtor, I owned a moving company and was included on many Realtors preferred vendor lists. When one of the larger offices asked for a $150 per year fee to be including on their list, I was surprised but gladly paid for the inclusion. It gave me a lot of business and I think I deserved to be included on it.

Today, I don't think I would ever ask someone to pay for the right. There is way too much liability.

As a mortgage broker in the NW with fourteen years experience and a college degree, I would no longer consider lending 'ancillary services'. Buyers have full access to listing addresses and photos via rmls.com and historical prices and building permits via portlandmaps.com . What they likely don't have access to are experienced loan officers that can save them .5% over what national banks are charging these days. I pick the agents I work with and would openly laugh at any realtor suggesting I pay them to be a business card in their pocket. Great write up.

Maybe I have watched too many T.V. shows, but isn't this what the mob, sorry, organized crime does?

How can a buyer ever trust a list when both the person putting the list together and the people getting on it think that bribery is the best way to decide who should be recommended regardless of how they perform?

I saw on trulia when one agent asked for others to refer each other clients to. The result was "take me, take me!" Not one out of dozens said I have high qualifications and would be a great asset because of (insert here). It was just put me on the list paying a finders fee (bribe) is fine if I get a client.

Trust, ethics, integrity, honor are those all missing in much (not all) of the real estate industry? Reading this it is obvious a realtors oath mean nothing. Placing the interest of the client above their own would mean one simple thing in this discussion. Offer qualified and competent people (as some have said they do) alone for buyers. Remove any financial incentive from creating a list and everyone would win. Realtors are qualified, vendors are qualified, buyers get what they asked for.

Someone please explain how the realtors oath is not being broken by the practice of taking bribes for recommendations. It is completely inconsistent with looking out for buyers interests.

I looked in to getting on the preferred vendor list for Coldwell Banker.

I don't think there is anything morally wrong with it, but I did think was kind of expensive. I ended up not doing it. I prefer working directly with the agents. I give their clients great service, and they keep sending me to more clients for free. It works out nice.

@ Bill Risser

"they also forbid any other non-paying vendors from marketing within the office. In my opinion, morally bankrupt is not strong enough for these actions…"

The only thing as bad as that I can think of is Google restricting your search results based on what *they* think you should see… (but that was just to be funny.)

@ Darin Persinger

"got sued by a consumer for being recommended"

Gee, I wonder if real estate practitioners will start suing the vendors who pay for virtually every RE convention with their "approved vendor" fees. We're coming up on our 10-year anniversary as a software vendor to the real estate industry and we don't do these. It's the most classless thing the real estate industry does. Later, we got interested in the "camps" thing, but $200 and you can't talk started turning into $1500 and you can't talk. Ridiculous.

@ Brian Wilson

"what bothers me more are the national franchises who hold conventions and charge their agents way too much money to attend to hear speakers that are also charged way too much to speak. Agents assume that the speakers are chosen based on what they can offer the attendees when actually those spots are bought and sold by the franchise."

Yes, and maybe the advice some of those speakers are giving is detrimental to your real estate business.

@ Scott Warga

"participating in these types of programs is unethical"

It's great to know that some see through this.

We have a client who owns multiple, large regions for one of the top real estate companies. While corporate pushes what a vendor pays to get pushed, this person uses our software for his own, personal, very large business. Why? Because he wouldn't use the "approved" vendor's solution if they gave it to him for free.

Earlier in our business, we researched *every* major and middle-level convention we could participate in. All of them charge absurd fees. But that wasn't the most significant thing. What was? That no one - not one single entity - had any thought or desire to actually review our software to assure that it could be "approved". Not one.

@ Jay Thompson

"I’m adding “extortion” to the list that includes “morally bankrupt”…."

Tell it like it is Jay.

I am actually getting married this August and I had the same terrible experience with preferred vendor lists that the wedding venues, the florists, and everyone else would give me. I couldn't trust them because I know that they pay for the right to be preferred vendor.

It is like being handed the ad section of the paper and automatically trusting each of the people that paid for an ad. After all, that's all it really is.

@Jay

Jay you are aware I linked to this and know a touch about whether what I am going to say may have a touch of truth to it

I tried to hint earlier and even mentioned the explain it to the public thought...I understand the point but IMO many NON-

RE people do not because they are not part of the RE culture nor do they view or distinguish things the same way. If there is any intent at all that this Blog or discussion is to infor non-agents then some splainin should be done IMHO. I have already received over 30 emails from non-re people/public WHO DO NOT UNDERSTAND what yer discussing because they see absolutely no difference between your "Preferred Partner" scenario and Agents paying for referrals...PERIOD They are saying check out those Agents more "Those lenders shouldn't, talk about other Agents are less honest then go pay for referrals, what a bunch of...."

Saying or implying the public doesn't understand and then not explaining clearly the distinctions between things Agents presume/assume/or know only raises suspicions..The reaction is more that something is being hidden, not wow they's so smart...

I want people to understand and as you know I have hundreds if not thousands of times defended the use of Agents...But here's the bottom line, I feel it the Agents job to explain and do it in a way that people "potential clients" clearly understand the distinctions/definitions being

used. That is if this is intended in any way to inform them, if this is just a Agent/Pro site/blog to BS and explaining things are not the intention then carry on but I'm just sayin, so far the people I'm hearing from who are non-agents are just sayin what a load of while here it's.."yeah you're right, good talk"..Someone missed the boat and if any Agent thinks it's the "potential client" that missed the boat then maybe the explainin/talkin is the reason not that the "potential clients" were slow..

Anyway good luck bot my observation is Agents sure enjoy this discussion and seem proud that they agree with you but the Non-Agents I'm hearing from..There suggesting it's just Agents & more yadda yadda look I'm stating how honest I am..."Hey got any referrals I'll pay ya"

You have not made the distinction and I think it's a serious mistake to assume non-pro's are aware of them/it or that THEY should go become better informed...It's your job to inform them if you want something besides....Look more yadda yadda I'm honester than them stuff...

Apologize for the interruption but before I email these people back I thought I'd mention WHY I have to email these people back...THEY AIN'T GETTIN IT!!!!!!!!!!

Scott, I do not collect referral fees from anyone other than real estate agents that I send to.

I encourage mainly lenders to participate in marketing (chip in for gas)

Home inspectors have to low a margin.

First and foremost I do not choose anyone because of their money, I choose because of their service and competence.

I have loan officers at my door all the time asking for business. My usual response is, do you have a buyer for me, usually I don't from them any more.

Let's face it real estate agents are the front end of the marketing and lead generating.

I realize there is plenty of abuse out there. I do not abuse anything.

I hope that helps

Scott, I didn't say any of what you wrote about.

It appears you already had a bone to pick and I drew the lucky straw.

As far as getting a piece of my action, if I send you referrals you are already getting a piece. Do you think I have little elves that come in at night and work for free driving traffic and generating business.

If a transaction fails because the buyer did not like the findings during the discovery period so be it. I am good with that.

Rob,

I have no bone to pick, I must have simply misunderstood what you were saying.

Help me understand when you feel it would be ethical for an inspector or warranty or title company to pay a referral fee.

I see a conflict. If you don't then help me understand

My former brokerage had such a list. Still does as far as I know. Woe be to those who didn't use it.

Oops, sorry about my signature on the last post, I didn't realize keywords were there (it was auto-populated). Please edit it accordingly.

LOL, I have no illusions about the reality of your post. I assume (until proven otherwise) that vendors recommended by some brokerages are definitely there exclusively because of payments made. There are just too many 'questionable' vendors that I see being recommended for me to take it without a grain of salt. Great post.

Jay, How about the Property ID case in California last year where they had to refund 5.5 Million in refunds to consumers that overpaid for Natural Hazards Disclosure Reports (NHD) who was their preferred Natural Hazard Disclosure Statement provider? Agents were lead to believe that the product was superior, while the Brokerages benefited financially.

Large Brokerages like Coldwell Banker (NRT), Prudential California Realty/Home Services of American, a Berkshire Hathaway Affiliate, Re/Max, Century 21, and ERA real estate.

The lawsuit alleged that from 1996 to 2006, Property I.D. formed sham "affiliated businesses" with real estate brokerages in order to share profits from the sale of reports priced from $99.00 to $114.00.

After deducting $50.00 per report to cover expenses, Property I.D. allegedly split the remaining $50.00 profit with referring brokers.

http://www.firstlinedata.com/newsarticle.asp?ArtI...

As incredible as this is to believe it's a on-going practice with some Brokers providing profit sharing from affiliated business and insisting their agents steer consumers to their in-house services. Preferred vendor lists exist with cozy back room deals

Everybody knows that when you go to a car dealership and arrive on a price to bring in your outside financing for the best deal. Yet many consumers don't take the extra effort to shop around to get the best rates at their loss. They rely on their real estate agent to advise them, only to be referred to our "in house" lender, title company, or escrow company.

I guess the message her is Buyer and Seller beware. Be sure that the people advising and guiding you have your best interests at heart - not the Broker's. Trust but verify!

I don't think that payment should be the requirement.

I think if they are a preferred vendor then they should pony up for the business.

The analogy I like to use is, we can take my car to Vegas, but when I stop to get gas I was hoping you would pay your fair share. Not more, just fair. BUT that is because you are already on the list.

This practice is the oldest trick in the book. Let's call it the technical way around the RESPA rules! Or the other name is a disinterested business entity. No matter how you slice it and dice it the consumer is looking to the professional to find a way to acquire preferred professional services without the risk of unfamiliarity. There are plenty of ways for consumers to be served in this manner. When it comes to a real estate transaction the fed thought it to be prudent to not allow agencies and agents for that matter to gain without disclosure. So as it was performed in the movie Cool Hand Luke "that's the way he wants it that's the way he gets it". There are two views at hand is the consumer served and is it legal. Certainly the third and the crux of the issue IS IT MORAL?

So an Agent referring a Agents for just money without disclosing that fact is a committing a disservice and an Agent referring a Inspector for money without disclosing that fact may find themselves a defendant..

OK I see that difference ;)

So no Agents/Brokers/Agencies pays Lenders, Inspectors or Appraisers for referrals (legally)..Is this correct?

I still as a Non-Agent/Consumer do not quite grasp the difference between "those vendors" pay to be on your referral list and "You" (a vendor) pay to be on referral lists that refer you as"the Best Agent in the Area" on nothing more than you paid...

Simply it seems like what's good for the goose is good for the gander....not I can't believe they do that, hey can I subscribe to your Agent referral Search machine, will you as a National RE site refer clients to me for money or hey fellow Agent will you refer me if I pay you..Seems hypocritical at Face Value...

So what would any member of the public who felt that way be mis-understanding? What's the difference? Some Agents pay other Agents for referrals and do no verification of if that Agent is good or incompetent..(I've seen it to often at Trulia to listen to any "it doesn't happen tales.)

Thinkin it's obvious Agents believe there is some sort of difference so......

What is the difference that would convience non-agents that this is NOT all about the Kettle calling the Pot black?

Part of the purpose of this is to inform Consumers who are not informed isn't it? If it's strictly an Agent discussion site and Consumers/Non-Agents should look elsewhere for answers please let me know so we uninformed can go elsewhere to ask questions of Agents...

Ah, yes. Milking vendors so they can milk your clients. What a crock.

I've been asked--by Keller Williams Offices--to pay $1,000 to give a presentation. With a straight face. And I didn't call them. They invited me to speak at a lunch dillio, I was barely interested as it was, but said OK.

Then I had to apply to be a preferred vendor and that was a 997 check. Before the lunch. I said no way, they retaliated with insults questioning my capacity and...if I had $1,000.

Jay,

AWESOME! post.

I owe you a beer or two ! (Real beer not that watered down Bud Light)

Cheers to you for calling attention to this!

You are an honorary hero in the affiliate/ vendor world!

Jay, sorry to chime in late here, I just found this blog.

This has been a huge issue in AZ for years.

I have had RE offices solicit me to pay to be on their list, some of them have different levels (Red, white, and Blue) The Red level gets you on the list for a small monthly fee or an annual fee, the White list costs a little more but get you on the list and you get to make one office presentation and you are invited to one lunch meeting, The Blue list cost a lot more, your on the list, get to make one office presentation per quarter and get to come to as many office lunches as you want.

The AZ Board of Technical Registration (BTR) has determined that participating in these types of programs is unethical and strictly prohibits home inspectors from paying to be on referral lists.

If you know of home inspectors participating in these programs you can file a complaint with the BTR.

I had one large RE office that used to refer lots of work my way, when they implemented their paid referral list program I not only refused to participate but I sent an e-mail to all the agents in that office I had worked with to let them know that I would not be on the list and the state actually prevented me from doing so. The Broker got so mad he sent an e-mail accusing me of being unethical for spreading rumors. For some reason I don't get much work from them anymore.

Another trick that RE offices play is "advertise in our relocation guide" Sounds simple enough, but if you don't advertise in the guide you are not allowed to place any marketing materials in their office. One more way people try to get around the laws.

I agree it is pathetic to only provide the names of vendors who have paid for your referral. Even worse are the brokerages that prohibit competing vendors from stepping foot in their office if they didn't pay for the privilege. I have a good friend who happens to work for a Title Company and she has been told by many real estate offices that she is not allowed inside because a different title company has paid to be the "official title company" of that office. So much for free market economy.

As someone who get is on the end of getting pitched, I can tell you this practice definitely happens. You look at as a disservice to your buyers and sellers, my perspective is one where it can be a disservice to agents.

I will say that there usually are some quality controls in place, so that they don't just allow anyone to being a 'preferred partner'. There is typically a screening process and the relationship should usually be viewed a mutually beneficial partnership. For example, they’ll screen the best couple of virtual tour providers, not just accept money from an unlimited number of companies. And many times the agents do benefit because there is often a special negotiated price for the particular service offered, in exchange for exposure to the particular agent group - or a higher service level is promised.

However, this also means that companies who offer really awesome products/services that aren't willing or can't pay the associated fees, will get passed by.

what bothers me more are the national franchises who hold conventions and charge their agents way too much money to attend to hear speakers that are also charged way too much to speak. Agents assume that the speakers are chosen based on what they can offer the attendees when actually those spots are bought and sold by the franchise.

I have seen one way of doing this that is fair. An agent who has an extensive database in the thousands and spends serious money mailing to it asks a service provider that he/she has confidence in to put money toward the cost of the mailing in order to include a coupon or advertisement. I think when it comes to shared marketing, there are some reasonable possibilities there.

Not only does this just seem morally wrong, it seems like it should be ... illegal. When I was an agent, I had a VERY short list of lenders, home inspectors, etc. with whom I'd had good experience and who I recommended solely for that reason, and always did so with the caveat that my clients could choose whomever they were most comfortable with. This all just smacks of ... sleaze. The companies doing this may not be breaking any laws, but they're spitting in the face of ethics.

One of the stranger moments in my life was when one of the homely girls husband pitched me to pay him to be a "preferred vendor".

At some point my pride kicked in and nothing else in my world mattered...

So this might be the wrong question to ask me.

Because I can't quit thinking about me actually PAYING to hang out with that girl.

http://www.zillow.com/blog/mortgage/2010/05/03/re...

Jay -- Being a referral service, we have always wondered what it would take to "strategically allign" or become a "preferred vendor/partner" with some of the larger real estate firms nationally. And, I can tell you that along with an INCREDIBLY lengthy application process came a hefty fee. In some cases, as much as $25,000 and a requirement of purchasing tables at conventions, etc.

We finally abandoned the idea as we saw no value in it in the long run. Sure, we get to put the company logo on our website. But, even with the fee paid and the application process completed, there was still no promise of a recommendation from the corporate brass.

The entire shooting match seemed little more than extortion. Thanks for writing this post.

Would this paid referral list be any different than Agents paying to be referred as the best Agents by someone....

Example..Trulia has Find a Pro...It says to the Consumer Trulia Find a Pro connects you

with the best real estate pros in your area

* Search – find the best match for you

Now what determines being at the Top of the Search results is who subscribes to Trulia PRO

Pay us and be rank before those who do not pay us (Go to the Top of the List) to be identified as

"the best real estate pros in your area"...not because you are not a Moron or Satan or a Good Agent but because you paid us...

Is that not just as deceptive since this is about choosing a PROFESSIONAL Agent?

Perhaps these things contribute just a touch to the "Trust/Respect for" issue or is that not an issue?

In California, it is illegal for Title Companies to give money to real estate brokerages and/or agents. They can't do anything on the office level. Prior to the law change a little over a year ago, we would hear of Title Companies supplying furniture for offices, paying for mailings, kicking back cash. We heard a lot of wacky things title companies would do out here to become a preferred vendor. I heard at one point Title reps were picking up agent's children from school and agent's dry cleaning. There was an article couple years back were one of the natural hazard disclosure companies here in California got fined big-time for kicking back a portion of the fees collected on each order.

If BankAmerica or Wells Fargo wants to pay to be in office, I don't have a problem with that. It's pretty much standard practice around here, but there is no pressure to use the company is essentially sub-leasing for an edge on exposure. We do have a regional brokerage in the area that owns their own mortgage brokerage and puts some heavy pressure on their agents to use that service.

I have not seen a list of vendors other than the mold inspectors and home inspectors and those are generated by the agents for agents - no pay off to get on those lists.

Jay,

Number 9 of my brokerages Client Bill of Rights -

"Privacy. You have the right for Privacy. We will never share your contact information with anyone without your permission. RealtyV2 will never recommend a Company based on a financial benefit – our recommendations are based on past experience and the desire to refer companies with excellent customer care."

as a "greenback" here in RE land still studying my coursework prior to taking my exam this practice sounded illegal--but apparently its just immoral and greedy? As long as they have more then 3 of the same type of vendors to recommend ---am I remembering this correctly?

Are the brokerages that practice this disclosing it to their clients? Are they even required to?? True disclosure not just small fine print brush past it disclosure---Not that it totally makes a difference but if I cant even say that I like blueberry poptarts on twitter after having eaten one from a box I got for free from Kelloggs without being in trouble for not disclosing that....then somethings really really wrong

Companies with EARNED relationships work harder for their clients for two reasons:

1. The business isn't taken for granted

2. The Paid-For-Sponsorship often comes with an agreement to give discounted fees...and we all know you get what you pay for.

Thanks for making your readers aware of this injustice!

Jay - I'm sure you can guess my stance on this issue... To take it one step further, some companies not only take money to put vendors on the "Preferred Partners" list, they also forbid any other non-paying vendors from marketing within the office. In my opinion, morally bankrupt is not strong enough for these actions...

By the way, my marketing rep will not even approach me with a request for one of these agreements, as he knows I will never pay for access or placement on a bogus list!

Okay, so I know that you wanted some controversy on this post. And for some people that practiced this to post here.

So I was trying to play Devil's Advocate.

Couldn't do it.

I second Darin's concept. The concept is so short-sited it isn't even funny.

I do get something out of it when people use the vendors I suggest....confidence and a fair amount of peace. I recommend vendors that I've had success with over the course of the last decade and those that hold the same level of integrity that I strive for. If anyone ever actually expected 'payment' for being on such a list - they immediately go on the 'other' list. As for what I get out of it, it's worth WAY more than $.