Should Brokers and Agents Charge Royalties For Property Listings?



In the wake of Abbott Realty Group’s announcement that they will no longer allow third party websites such as Zillow, Trulia and Realtor.com to use their listings, I think it’s time that brokers and agents begin to think differently about how the internet is affecting their control of property listings, which are the “bread and butter” of the real estate brokerage business. Like a songwriter with their songs, or an author with his manuscript, property listings are intellectual property created by agents and brokers.

is it time third party syndicates shared their profits?

There can be no argument that the internet has brought fundamental changes to the professional real estate industry. Today it’s much easier to expose properties to a national audience of buyers. But at the same time, brokers and agents are witnessing the loss of control of their listings, and their property information, to third parties like Zillow, Trulia and Realtor.com, who have been using this information to build their own for-profit businesses, at the expense of agents and brokers.

Those who are not licensees may not realize how expensive it is to operate as an agent or broker. There are school and licensing fees and hundreds of dollars in yearly dues to their local and national associations. They pay fees to their local Multiple Listing Service so that they can list their properties. They also pay additional money during their licensing period to cover required continuing education courses. And there are additional fees and penalties for failing to update the status of their MLS listings. They can even be penalized around $50 if their listing is cancelled due to foreclosure, unless they send their MLS written proof of the foreclosure notice.

There are also key fees for access to those fancy digital lock boxes agents use today, and those lock boxes are also pretty expensive as well. Agents also need “errors and omissions” insurance, to guard against lawsuits that may arise from errors in property listings, or other issues that they become liable for once they are licensed.

Realtors have to pay big bucks for licensing fees and dues. Courtesy of dannyfowler

On top of that, agents often pay for all of the advertising services provided for a property listing. You know those real estate books that are given out for free at restaurants and convenience stores? A single page in one of those books was about $1,200 when I became an agent back in 1996. And those nice big signs you see in front of many commercial properties are paid for by the agent, often at a cost of hundreds of dollars for a single sign.

The listing agent often has to split the property commission on the sale with the buyers agent, who may be brought in to represent the buyer, after the buyer spots the property listing on the internet.  After that 50/50 split, both agents usually have to pay their broker a share of their commission. In most cases that is another 20% or more.

So a listing agent spends hours prospecting for leads, then when they get one, they spend hours of their time and their own money to promote the leads trying to get the property sold. When it does sell, they often split their commission with others. They pay all of the expenses and get only part of the commission.

Signs like this don't come cheap either... Courtesy Diana Parkhouse

Once I was the listing agent on a property, and at closing the attorney informed me that the seller was not current on the property taxes, and that an additional $1,500 in property taxes had to be paid or the closing would be cancelled. The buyers agent and I agreed to pay $750 each for the property taxes, out of our commission, rather than lose the deal altogether.

When a third party listing syndicator like realtor.com, zillow or trulia comes along and publishes the property listing for their own site, they make big bucks selling ads to other real estate agents, mortgage companies, and other industry related advertisers, while those who created this valuable content are expected to be happy with “exposure”.

I think it’s time for brokers and agents to realize that yes, the internet does have value, but so do all of those  property listings. I can’t imagine a songwriter or musical artist allowing a radio station to use their song for airplay, and in so doing, allow the radio station to make big bucks from selling advertising, then accept the excuse that “it’s good exposure” for the songwriter or the artist. And an author who writes an article that is published in a magazine which makes money by using that content to attract readers and sell advertising, would certainly not be willing to allow those magazines to publish his work for free because it’s “good exposure” for the author.

Should realtors be happy with just 'exposure' for their listings (which are often wrong anyway)?

Brokers and agents have lost control of their intellectual content, by allowing the internet and third party publishers to profit from it, without any thought for compensating the creators of that content. In fact, some third party websites have created successful and highly profitable membership websites by using the property listing information created by licensees, without having to pay a dime for the use of that content.

Perhaps it’s time to come up with a new business model in which the creators and owners of property listings are compensated for their “original works” by creating a royalty system in which third party syndicators pay royalties to agents and brokers similar to the way it works in the music industry for songwriters and publishers. Agents are essentially the authors of property listings, and brokers are similar to publishers. This could allow for the use of property listings by third parties and make listings widely available, without taking unfair advantage of the creators of that content.
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Donna Robinson is a 16 year veteran of the real estate industry and a staff writer for RealtyBizNews.com. She began her career as a real estate agent, and today is an active real estate investor who also provides coaching and consulting services. Contact her at donnaconsults@reihelp.com or call her office at 888-915-9968 to inquire about coaching or consulting. 

Comments

  1. Lest we forget . . . it’s really NOT the agents’ information, it’s the home owners. The home owners’ information about their property is deciminated via their agent under the listing contract. And, unfortunately, the DOJ lawsuit (which I always have suspected to have been a behind the scenes inside hachet job) create the MANDATE that the listing information is available via and IDX, AVM, VOW. Property owners have no clue how they’re being pimped out by this. No clue at all.

    Of course, there’s an “opt out” check box on the listing sheet and all a property owner would have to do is NOT want their home displayed all over and they can opt out.

    Zillow et al came on the scene at the same time the DOJ opened up this Pandora’s Box in the guise of making the listing information avaiable to the “consumer”.

    Zillow, Trulia and any other site that has a VOW, AVM and/or IDX DO pay a fee . . . it’s to the MLS’ that they obtain their information from. The MLS’ are pimping out their members to these sites. We’re the ones supplying the data to them, whether as a listing agent, or the selling agent . . . the REALTOR(r) has worked in their professional capacities to generate the “data” that is used.

    And you’re absolutely right, IMHO, Zillow, Trulia, etc. make a lot of money off the backs of agents and supply the “daate”, but it all stems from the home owners who want to sell their property and advertise it using tha licensed real estate agent. The minute the property owner engages the services of a listing agent . . . the information about their property is broadcast (unless they opt out). The MAJORITY of home owners don’t know how ZiLlow, Trulia, etc. etc. are using THEIR homes’ information to pimp out the information so this revenue generating third-parties. These sites are not under ANY control of a MLS membership and they pretty much do what they want. I’ve been saying this for years . . . if the property owner only knew how their information was amalgamated into fun and profit for this sites.

    Real estate was bought and sold for MANY, MANY, MANY years . . . long before any of these aggrevators, err, aggregators came on the scene pronouncing themselves to be GOD. All they want is to make money, and they do it on the backs of real etates agenets’ data supplied by the property owner.

  2. I’m with Bradley on this one.

    Humoring the idea of agents/brokers charging royalties, however…seems would expose you to financial liability even further when the owner isn’t happy with your services or if the property doesn’t sell to their satisfaction. Just a side thought really not a major point.

    Every business has “sunk costs”. A successful business has enough profit to offset and make those costs worth it. The internet has brought great change to many industries. Those who can adapt, especially during tough economic times, are those that will survive. We no longer live in a time where a certain degree or a certain license guarantees a certain job at a certain pay rate.

    I feel you completely on the costs a typical agent incurs out of pocket before any sale happens and it truly sucks when no sale happens. I’m glad you took the time to outline them all because I don’t think most people are aware of that.

    During the hey-day of the housing boom, we had a marketing budget alone of $5,000 per month. Today, we have adapted our business tremendously (if we had stayed the same we’d be out of business right now) and thanks to the internet our advertising is less than $100/mo when we don’t need to do a mail campaign which would take our budget up to $250/mo. We haven’t done a mail campaign in close to 2 years as the majority of our business is referral based now.

    Feeling the pain of lost income or tougher competition forces you to reTHINK about your business/profession and figure out how to expand your profit centers with what you are already doing. The internet provides so much opportunity for this. We’ve discovered many ways where previous “sunk costs” (mainly our time) can be turned into a profit center.

    We’ve lost many listings for whatever reason, but many times our marketing efforts for that property brought us clients that took on our next listing before we could even get it loaded to the internet. It’s a numbers game and harnessing the internet is certainly a cost effective way to get your business out there.

    • Thanks to you Shannon and to Carla also, for your comments on this topic. And Shannon, I totally agree that adaptability to the changes the internet has brought are very important for the real estate industry, especially licensees, who’ve been very slow to recognize how these changes effect them.

  3. Hi Donna,

    I enjoyed your article but as an investor (small business owner)the cost of doing business is unavoidable whether you’re a realtor or an investor.
    I’m an investor and I have grown my business by
    working only with “transactional brokers” and cost effectively market my properties online via the MLS
    and the other relevant websites. I recently sold a $650K property
    in ONLY 68 days in this manner with NO concessions
    under 1% of list price for $639K! It appears you are more a realtor and feeling the effects of a difficult market and the downward spiral of the ancient realtor “business model”.

    In my opinion, adding ANY costs to an already expensive process is counter productive and exposure is beneficial and to compare a listing to a song is somewhat comical in that realtors are “agents” and the homeowner’s investment far exceeds the agent’s investment and creates the finished product.

    But as a successful investor I work to eliminate “transaction costs” and the 2.8% to 3.2% listing fees
    and in this tight market are a deal breaker.

    Love to hear your thoughts,

    Bradley Odom
    RG LLC
    Morrison, CO

    • Hi Brad,
      I enjoyed speaking with you today. Thanks for your comments. As you now know, I am not specifically operating as as an agent or Realtor at this point, though I spent 8 years as a licensee and still hold a license. It was not an attempt to defend an antiquated model, rather as I mentioned in earlier responses, I am attempting to stoke the conversation on this issue. From our phone conversation, I think you are now somewhat more aware of the technical issues involved here, that are not widely known even to agents and brokers.
      Donna Robinson

  4. Hi Donna – Brad from Zillow here. Since your post and comments are very lengthy, I won’t take up much space here, but your comment above about:

    “If third party syndicators were not deliberately blocking access to the listing agent who posted the listing, that would be enough to help justify the “exposure” argument.”

    I can only speak for Zillow here, but every listing on our site shows the listing agent, and the source that feeds the listing to Zillow. We are not deliberately blocking any agent from any listing. There is no cost for agents and brokers to syndicate listings on Zillow, and our member profile and setup is FREE.

    I could leave a really long comment to address some other incorrect areas (Zillow specific) but it would be easier and probably more appreciated by readers if I just provide a link instead.

    Please read: http://www.zillow.com/blog/category/professionals/

    This should help as you said in your words, “justify the exposure argument”, not to mention that 100 million other homes NOT FOR SALE are also available on Zillow making an agents profile and presence even more significant.

    • Hi Brad,
      Thanks for responding on behalf of Zillow. I’m happy to know that Zillow is not blocking listing agent info, and I certainly want to clarify that for the readers. And I’ve approved your entire comment so that it will allow readers to have a balanced view. Please understand that I am not anti-syndication, or anti-Zillow, but as I indicated in my reply to Gary, my motive is to stoke the conversation on this issue. As a former agent I’ve lived through the changes that the internet has brought, and the competitive challenges that have come from losing proprietary control of property listings.
      As a real estate investor who used to pay hundreds of dollars per month for the same property info that can now be found online virtually for free, I know how easy syndication has made it for other segments of the real estate industry to find information. So there are advantages and disadvantages that have come with the development of the web. As you probably noticed, I am rather passionate about the issue, and would like to see the development of a win-win for all parties involved, as the agents and brokers are responsible for doing the really difficult work of getting the listings, and deserve to be shown on those listings, no matter who is reposting them. I applaud Zillow for not blocking listing agent information, and hope that articles like this, though somewhat controversial, will help bring about changes that will benefit those who had to pay fees and get licenses in order to have the legal right to post those property listings.

  5. Donna,

    Its a rather interesting take on a situation which lost control years ago. I am very “Pro” Agent in my views and what LX3 is creating, however, the very notion that Agents should charge royalties seems to omit one very vital element and that is the Homeowner who actually owns the intellectual property rights, including the evasive pictures taken of their property, the use of the address and the details of their property. I like your analogy of the music industry but lets put it into perspective: The homeowner is the recording artist, the Real Estate Agent is the Agent / Manager promoting the artist and the record labels are exposing the content (Technology).

    Data is and was for that matter a partial key to a successful real estate agent. Trulia, Zillow and Realtor.com found a way to give some benefit to the world by allowing the consumer to view what is available but in all cases they have not disrupted the industry. They seized on a tiny fraction of the industry in exchange for some advertising dollars from Agents and third parties. Its short lived once a group develops what MLS was about in the first place. The only different is Agents need tools and control over the detail information and the consumer needs to know what is available and that its property is given the very best chance to sale. All this at an affordable expense. Agents are paid by selling a property. If you are now saying they deserve more than the 4%-7% fees and a slice of running an internet company then they may as well stop all their listings and build an internet company. It is not easy building a sustainable internet company. It is harder then most of you would believe. Its not some group of young kids who dream up something and spit it out over night. Trulia has blown through $38 million of investor capital and is in 4th place but only gets 4% of the market share. Zillow is 8+ years of hard work, well over 70m of investment capital prior to going public and yet barely makes a profit and Realtor.com is 10+ years, owned by Move, Inc has the full backing of NAR with a market cap of 350+m and does not make that much money despite owning Listhub, the majority of the rental markets and of course the #1 or #2 hits per month website called Realtor.com. Lets not forget, most every agent is a NAR member and NAR only backs Realtor.com so the issue is not about loosing money to these aggregators sites as they are not making that much money, its about how to improve the real estate industry, preserve the reputation of the real estate agent and provide transparent / outstanding service to the “Homeowners” around the world. I think people see the fact of Zillow being a public company being worth 900m as a market cap but fail to look at the profit of the company. Ask yourself this, “Do you really want to be a Tech company or a Real Estate Agent” Lets not forget who Agents serve at the end of the day, “homeowners, sellers, and buyers. Without their money and their homes there is no $$$ to be made. I am not for “FSBO” as I believe a professional should always be used for things people are not qualified for such as a doctor, lawyer, real estate agent, a pilot or a tech guru. The industry is a simple fix yet no one has done it as the “Real Estate Industry Veterans” wants to remain in an old system and complain, yet even with NAR nothing is really getting done. Greed seems to be taking over but I would argue that we all do one thing great and less than stellar at everything else which is why we hire experts. The industry needs another product, a product for the agent and something which gives the homeowners value. I believe LX3 is on that track and its a very “crowded tech space” to say the least. Real Estate is a global business yet this has been overlooked for too long given how technology has connected the world. Aggregation will be a dying business, its not the answer the Real Estate Industry needed but then again, just look at “who” the aggregators hired to advise them. There are many agents sitting on the advisory boards of these companies when in fact these agents do one thing incredibly well, the know how to sell real estate and protect their clients. Their impute needs to be taken into consideration but they are not the expert in technology are they? How many agents know how to code? How many agents understand the concept of SEO? How many agents have hired an expert to create a website? So far, not one Real Estate Aggregator has solved the problem, they took the listing information, displayed it for the world to see and wrapped an advertising model around it. Fantastic but not the answer! So I agree with you on one thing, Aggregators provide a service and a platform and if you want to be at the top of their list you must pay for it. Fair? Value for money? Profitable? What are the other alternatives today to the agent? Is it not time to solve the problem? Its very expensive to be a good agent these days and it does not have to be.

    Love to have your feed back.

    • Hi Gary,

      I appreciate your lengthy response. You clearly have a good understanding
      of the technical and business side of the issue.
      Correct me if I’m wrong, but from what I can ascertain, you are also
      a listing syndicator.

      I really wanted to stoke the conversation, and since I was in
      the music industry for years prior to real estate, the songwriter analogy
      came easy for me. And while I did not mention the home owners in the
      article, because that was beyond my intended scope, you are correct, they
      are essentially the owners of their content. I think your general
      point about them is accurate, but they too have lost control of their
      privacy if you want to look at it from their point of view. I doubt most
      of them realize the extent to which their home is spread around on the
      web. And even if they do cancel their listing, to some extent, their
      property info is still floating around the web for some period of time. So
      they might indeed have some real concerns about this if they really knew
      what is going on.

      I hope that what this article accomplishes is a real conversation in the
      industry about what is happening, and new ways of thinking of solutions. As
      a former agent, and one who was involved in internet marketing before
      Realtor.com came along, I’ve seen both sides of it, and have always felt
      that agents and brokers were taken advantage of.

      If third party syndicators were not deliberately blocking access to the
      listing agent who posted the listing, that would be enough to help justify
      the “exposure” argument. But in essence they are blocking the very info
      that the agents need to be included. And this is being done so that the
      syndicator can sell ads to other agents who are then seen on someone
      else’s listing. That is the part that I feel is really a bad practice. If
      a website published my articles, and then accepted money to put someone
      else’s name on it, I would not be very happy about that at all. Perhaps
      a listing syndicator should to be required to include the listing agent’s
      name. I think that is only fair.

      Donna Robinson