To all the agents in the house,
Your voice matters!
Two weeks ago I wrote a newsletter, innocuously (or, so I thought) inquiring into Samson Properties, the Fairfax, Virginia-based brokerage that gives agents 100% commission splits. I was then deluged by about four-dozen emails from agents at Samson Properties. One accused me of running a "witch hunt." Another featured the subject header, "Wrong."
But most of the emails (including, actually, the "Wrong" one) were instructive, forming the basis of questions I asked Donny Samson, the brokerage's CEO, and eventually an HW+ feature article that was published yesterday.
Here are two takeaways I had about Samson Properties:
* In Tom Wolfe's "The Bonfire of the Vanities," Judy, the wife of main character Sherman "Master of the Universe" McCoy, explains to their daughter Sherman's job as a bond trader:
"Just imagine that a bond is a slice of cake, and you didn't bake the cake, but every time you hand somebody a slice of the cake, a tiny little bit comes off, like a little crumb."
"If you keep that," Judy explains. "Then pretty soon you have enough slices to make a gigantic cake."
Like bond traders, brokerages collect crumbs from the cake they didn't bake of people buying and selling homes.
Those crumbs are a small percentage of the sales commission affiliated agents get on the deal. Samson, though, has done away with trying to make a cake out of commission crumbs. Instead, the agents operate as potential referrals for Samson's wholly-owned title company, Cardinal Title.
That leads to a series of "choose your own adventure" decisions. First, Samson probably has to represent the homebuyer, not seller, in the sale. Then, the Samson agent is willing to recommend Cardinal Title. Next, the client has to go with the Samson agent's advice. Should this all come together, Samson collects about $2,000 for insuring the title.
So, to stretch this metaphor to its breaking point, in the age of higher agent commission splits, brokerages seek different ways to collect crumbs. Brokerages trying to make money from title is a tale as old as time. But I have not before come across any brokerage where title is the primary revenue source.
*So, um, there's this law. It's called the Real Estate Settlement Procedures Act. It was written back in the 1970s. As most people reading this newsletter know, it prevents kickbacks between different parts of the housing transaction, including real estate and title.
Donny Samson is well-aware of this law, and he is merely requesting Samson-affiliated agents use Cardinal Title. But compliance with this request would appear to form the main basis of the company's business model.
As to any potential claim that this could violate the spirit of the RESPA law, I don't know what the spirit of the RESPA law is. Brokerages request agents use their title insurer, and put said title insurer in literally the back office of still extant physical work spaces. The lifeline for entire companies is to shuttle clients to an affiliated mortgage outfit.
Agents, I would be curious to hear your take on what the modern day point of RESPA. I suppose "prevent overt kickbacks, but allow covert nudging" could just be RESPA's modern-day application. But let me know if you feel differently.
Please send me any thoughts, including how you thought I covered Samson, anonymously to mblake@housingwire.com.
Sincerely,
Matthew Blake
Senior Real Estate Reporter
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