Foxtons Inc vs. Cirri Germain Realty
Posted in Alternative Business Models By Joe Cline, Sunday, March 9, 2008.I was reading about legal decisions for the last week and saw this come across. I'll admit that I missed the initial suit (remember when the market was so hot you had trouble reading your emails!?), but the below is very interesting to me.
In the case, Cirri wrote a flier with no specific name, but obviously showing his opinion of an alternative business model. What did he get for his trouble? Sued.
Since when does fair competition justify a lawsuit? Seems like those brokers with alternative business models are just cry babies sometimes. Especially limited service brokers. Man-o-man (again this is my opinion), but it seems like those guys get mad about having to provide ANY level of care and fiduciary to their clients. We have a minimum service law here in Texas which I think is good. You can really get screwed up if you've never bought or sold and just do it with no guidance as some of the limited service brokers would probably like.
What do you think? Agree with my opinions? Disagree? I'd love to hear from people with all business models.
Anyway, check out the letter and if you are from an area that Foxtons serves see if you think they were defamed. I tried to think of a broker who uses this model here in Austin, but had no luck. Maybe there is one, but I can't think of who.
The decision of the lower court was affirmed. All of Foxtons' claims were unsuccessful.
About Austin | Coldwell Banker Austin
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-6120-05T36120-05T3
FOXTONS, INC.,
Plaintiff-Appellant,
v.
CIRRI GERMAIN REALTY and
SANTO CIRRI,
Defendants-Respondents.
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Argued September 19, 2007 - Decided February 22, 2008
This lawsuit arose from a single letter or flyer (the flyer) admittedly drafted and circulated on February 1, 2006, by defendants, a licensed real estate agency and its principal. Prepared on the agency's letterhead, and signed by Santo Cirri, the flyer in its entirety read:
================= [letter below] =================
The Misleading 6% vs. 3% Commission Myth
Dear Home Owner:
Please don't be fooled with the advertised concept that there is a 3% saving in real estate commission fees that will put thousands of dollars in your pocket!
Keep in mind commissions by law are negotiable. There are no set fees. Claiming that most other offices charge 6% fees is ridiculous! Most offices do not charge what is asserted. So why then is this type of advertising continued? This is easy to answer, to mislead and to gain a competitive advantage over quality offices.
Most reputable offices will not emphasize or advertise that they too are full service, and will not place a commission fee and state full service on signs. Why? A highly regarded office doesn't have to! Remember all commissions are negotiable; we evaluate each situation and then discuss a fair commission fee that will generate maximum exposure by all agents in our Multiple Listing System.
Since home values have escalated, the real estate industry has overwhelmingly made adjustments in reducing fees to home owners. Most offices like ours today negotiate on an average 4.5%-5% commissions.
But if your house sits below towers or power lines, or adjacent to a busy highway, it's only logical to negotiate with your real estate agent a commission that will cause more agents to show your home.
Don't be fooled by the 3% commission, which offers 1% for agents to sell your home. Real estate agents must earn a living like anyone else. What is the likelihood of an experienced agent bringing their buyer to view a house for a 1% commission? Well the probability is not good at all, extremely risky and time consuming to you, which results in fewer showings, less offers and less money in your pocket.
Today homeowners and buyers are more prone to use an experienced well-trained real estate agent. Our sales staff for example averages 18 years of real estate experience.
Given honest facts, you decide what is best if you're looking to buy or sell a home. Feel free in calling our office. My agents have a wealth of information to help in your real estate needs.
Sincerely,
/s/
Santo Cirri
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Submitted by Jon Strum on March 9, 2008 - 8:20pm.
Joe, it seems as though "justice" was apparently served in the outcome of the case. Foxton's is entitled to set its commission rate and others are entitled to express their opinions about it.
I'm much more concerned over the "minimum service law" that amounts to little more than NAR-sponsored protectionism and restraint of trade.
Rather than legislate against anyone's business model, why not let the market decide? You may think that, "You can really get screwed up if you've never bought or sold and just do it with no guidance..." but that perspective assumes that a client is receiving better "guidance" based upon the amount of commission that they pay.
I think we can all name at least one agent from a "full service" firm that collets their commission and probably doesn't provide much guidance to their clients. It's a reasonable fact of life. Why legislate to protect his brokerage from fair competition?
Submitted by Joe Cline on March 10, 2008 - 1:01am.
Hi Jon,
I agree that there are likely agents that don't go as far as full service should require if s/he wants to be called full service.
What I really think though is that the law isn't legislating a business model, but rather setting boundaries of the competitive landscape. Just like there are laws governing how securities are bought, sold, relationships disclosed, insider trading regulated, so does the minimum service law regulate the playing field for real estate. So long as the business models work within the boundaries have at it. Otherwise it's Enron all over. :) Well maybe not Enron, but you get the point.
Just my 2 cents.
Joe
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