Clever Real Estate is a referral network that claims it does not endorse, validate, or recommend any legal agreements between homeowners and buyers and real estate professionals, but we find these claims to be false.
Using its website,
Clever Real Estate engages in a process known as price fixing because it sets listing rates and rebates for independent real estate professionals using the network.
Clever Real Estate sets a flat listing fee of $3,000 for homes sold under $350,000 and 1% listing fee for homes sold over that amount; for home Buyers Clever Real Estate sets a 1% rebate. For purposes of the present discussion, brokerage fees are always negotiable and no broker should set rates and rebates for other brokers. Each firm should establish its own policy as to its fee structure and charges, amount of commissions, and rebates.
Price fixing is prohibited by federal antitrust legislation. Individual agents must never discuss, or set rates with brokers outside of their own company.
By setting rates and rebates for other brokers across the United States, Clever Real Estate operates with a sole purpose to collect referral fees, where such service effectively results in lower quality of service, pay-to-play bias, and a "blind match" with agents willing to participate.
Consumers using this network have zero control over what agents the company shares their information with. Instead of being "sold as leads" consumers looking for a competitive and fair representation can consider negotiating directly with real estate agents, or with help from unbiased consumer-focused online services that do not collect referral fees.
Why Price-Fixing Damages Consumer Experience
Clever Real Estate claims to connect consumers with an agent who will charge $3000 or 1% of the home, and that their "service" is free. First of all, Clever Real Estate is not free, their fees are simply hidden within a referral fee that the agent will pay after the transaction.
More importantly, price-fixing is an uncompetitive practice, and every agent who participates with Clever Real Estate is a participant in the scheme. Saving consumers from having to pay excessive brokerage fees can never be justified with price-fixing, especially in exchange for a financial gain between brokers.
Antitrust laws are essential for real estate professionals. Real estate professionals customarily operate in cooperation and competition with one another, a practice that presents a host of opportunities for antitrust violations. In reality, it is easy to comply with antitrust laws. Agents simply need to be aware of the rules and take care to conduct business lawfully.
Several laws combine to form the core of federal antitrust laws, but the Sherman Act is the primary piece of these regulations. Section 1 of the Sherman Act states: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce … is declared to be illegal.” This means that (1) there must at least two parties agreeing to take action, and (2) the agreed-upon action must restrain free trade.
The parties in this case are Clever Real Estate and any broker they refer you to. These two independent parties are carrying out a common course of action by setting fixed commissions with the use of blanket referral agreements for mutual financial gain.
Agents must never agree on commission rates or rebate amounts with any outside party. Agents must take care to avoid even the implication that they have discussed or reached an agreement about their service fees, service offerings, and rates due to any outside influence.
Commission rates should never be fixed through collusion. All commissions and rebates must be set by each real estate agent individually and may only be negotiable between the consumer and the real estate agent.
Further, it is a per se violation of antitrust laws for brokers to set “standard” compensation that will be paid to other brokers. Referral fees amount paid to Clever Real Estate (the money it receives for your information) are "blanket" fee agreements.
Real estate agents (only when they act in full brokerage capacity) may discuss or negotiate the referral fees concerning an individual transaction, but real estate professionals are not allowed to enter into “uniform” or “blanket” agreement on how a commission will be split, or a “standard” referral fee paid. The reason for this is exactly the premise behind the Clever Real Estate business model – brokers (yes, Clever Real Estate is a broker) work to steer consumers toward other brokers in exchange for a pre-arranged referral fees.
From this discussion, it becomes clear that quality and honest real estate professionals establish pricing for their services independently, and without any kickbacks. The truth is, every single agent is different, and every single agent has an individual commission structure.
While Clever Real Estate price fixes an arbitrary rate for all agents, such proposition becomes absurd when comparing home transactions worth $15 Million to home transactions worth $150,000 in different states, rural, or urban areas, variable market conditions, etc. Obviously, in some situations, consumers' interest maybe with the lowest fees, in other cases, consumers are looking for the most experienced agents, etc.
The true VALUE of any real estate agent is their ability to negotiate honestly. If an agent is unwilling to negotiate competitive terms in compliance with the law, there is no reason for consumers to assume that they will be willing to negotiate competitively when it comes to their home purchase or a home sale.
Update: on June 19, 2019, Clever Real Estate has originated a request to the editor asking for this review to be removed.
The following is a
to the notice originated by Clever Real Estate, dated June 19, 2019.
The following is a
to the reply written by the editor of this review, dated June 28, 2019.