Better.com Possible Antitrust Violations

Better.com Possible Antitrust Violations

A copy of the request filed with the DOJ, CFPB, and the FTC asking to review practices of Better Real Estate, LLC brokerage.

Better.com Possible Antitrust Violations

Copy of author’s official request that asks the United States Federal Trade Commission (US-FTC), the United States Department of Justice (US-DOJ), and the United States Consumer Financial Protection Bureau (US-CFPB) to investigate Better Real Estate, LLC brokerage on the grounds of alleged violation of the Federal Trade Commission Act of 1914, alleged violation of the Sherman Antitrust Act of 1890, alleged violation of RESPA (12 U.S.C. 2607) Section 8, as well as any other possible violations of antitrust and consumer protection laws currently ratified and enforced in connection with possible market allocation, consumer allocation, and price-fixing practices.

Attn: Citizen Complaint Center, Antitrust Division
Department of Justice
950 Pennsylvania Ave., NW Room 3322
Washington, DC 20530
Attn: Office of Policy and Coordination
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave. NW Room CC-5422
Washington, DC 20580
Attn: CFPB Regulatory Implementation
Consumer Financial Protection Bureau
1700 G St., NW
Washington, DC 20552

Please find the information below with regards to possible antitrust violations.

What companies or organizations are engaging in conduct you believe violates the antitrust laws?

Better Real Estate, LLC
312-F East Market St.,
Leesburg, VA 20176
VA real estate license #0266029484

Further, a partner network of an unknown number of real estate agents who choose to execute blanket broker-to-broker referral agreements in an alleged collusion scheme with Better Real Estate, LLC brokerage.

Why do you believe this conduct may have harmed competition in violation of the antitrust laws?

Better Mortgage, also known as Better.com, is a tech-enabled mortgage company that claims to automate each stage of your purchase or refinancing loan using an online process. The website is operated by Better Holdco, Inc. with services offered by several subsidiaries, including Better Mortgage Corporation as a direct lender licensed under NMLS #330511 at 120 Broadway, 5th Floor, New York, NY 10271 and Better Real Estate, LLC is a Virginia Licensed Real Estate Firm with its principal office located at 312-F East Market St., Leesburg, VA 20176 and a real estate brokerage license #0266029484. Better Mortgage serves markets almost every state in the United States.

Better Mortgage makes several savings claims to consumers such as “Better Price Guarantee” where Better Mortgage claims to match any valid competitor's offer, and credit you an extra $100. If the company can’t match the offer, the consumer receives a $100 as a gift. This claim is legitimate, since the company offers this deal on its behalf, meaning, this is an incentive to use self-performed services.

However, Better Mortgage further operates a real estate broker “partner network” of an unknown number of real estate agents who choose to execute blanket broker-to-broker referral agreements in an alleged collusion scheme with Better Real Estate, LLC brokerage.

The company claims to save money by working with a real estate agent in the Better Real Estate referral network. Purchasing through a referred agent and financing through Better Mortgage earns a consumer up to $2,000 in lender credits through the company’s Better Real Estate discount program. To be eligible, consumers must choose Better Mortgage Corporation as the mortgage lender and a real estate agent who was referred to the consumer by Better Real Estate, LLC brokerage.

According to the Better Mortgage website, the terms of what it calls a “Better Real Estate discount” program are as follows:

Better Mortgage is offering purchase borrowers to take $2000 in lender credits when the borrower uses a real estate agent referred by Finche, LLC, dba BRE, dba Better Home Services.

Offer is open to conforming loan product customers who have (a) entered a purchase contract on a home using a real estate agent referred by Better Mortgage’s affiliated real estate brokerage, Finche, LLC, dba BRE, Better Home Services and Better Real Estate(“Better Real Estate”); and (b) closed a mortgage loan on said home with Better Mortgage Corporation.

“$2000 in Lender credits” refers to the amount by which your closing costs will be reduced if you use a real estate agent referred by Better Real Estate. The agent must be confirmed by Better Real Estate in a manner satisfactory to Better Mortgage Corporation in its sole discretion prior to issuance of the Closing Disclosure on the loan. The reduced rate will appear on the Closing Disclosure.

Offer is only valid in states where Better Mortgage Corporation is currently originating loans. It includes all conforming loan products on single-family residences, condominiums and PUDs.

Offer is not available for refinances.

Offer is not available in every state.

To claim offer proceeds you must (1) lock a mortgage loan rate on the purchase of a primary residential property with Better Mortgage; (2) have your use of the Better Real Estate referred agent confirmed by Finche prior to issuance of the Closing Disclosure to the satisfaction of Better Mortgage in its sole discretion; and (3) close on the mortgage loan with Better Mortgage Corporation.

Better Mortgage reserves the right to rescind or modify the terms of this offer without prior notice.

Consumer Allocation

In exchange for matching consumers with a Partner Agent, Better Real Estate LLC is compensated by the Partner Agent with an undisclosed percentage of their commission, agreed in advance. There is not a single mention of this referral fee anywhere on the company’s website, and consumers have no idea that this hidden fee is exchanged between an agent and the company in return for the referral.

Brokers often possess a “mentality” of referring other brokers to consumers in exchange for value to be paid and received – a referral fee. RESPA (12 U.S.C. 2607) Section 8 and the U.S. Code of Federal Regulations 12 CFR Part 1024.14(g)(v) narrowly allows payments pursuant to cooperative brokerage and referral arrangements between real estate agents and real estate brokers. This limited exemption on kickbacks only applies to fee divisions within real estate brokerage arrangements when all parties are acting in a real estate brokerage capacity.

In order to comply in good faith with RESPA (12 U.S.C. 2607) Section 8 exception for cooperative brokerage and referral arrangements, real estate agents must render referral agreements in a particular instance for a particular transaction. Two brokers, acting in a real estate brokerage capacity, may discuss a commission split or referral fee only for a specific transaction at hand. Blanket referral agreements between brokers are a per se violation of the Sherman Act.

Better Real Estate LLC owes absolutely no duty of care to consumers and takes no responsibility for the real estate brokerage services, despite receiving a direct financial benefit from the home sale or purchase completed by a referred brokerage.

Actions of Better Real Estate LLC directly increase the costs of owning homes in the United States due to hidden referral fees (kickbacks), consumer allocation practices, and reverse completion between brokers. Partner Agents in the scheme have no incentive to compete for consumers with lower fees, instead, they have an incentive to compete for Better Real Estate LLC attention.

In this scheme, both colluding parties benefit from offering consumers higher commissions. Better Real Estate LLC promotes Partner Agents as a way to limit competition with those agents outside of the network, thus limiting free-market competitive forces and steering consumers in self-interest.

Better Real Estate LLC referral-only collusion scheme secretly harms real estate consumers and diminishes the efforts of competitive independent agents to provide a tangible service at an independently set competitive price.

As a matter of fair real estate transactions across the United States, there is no excuse to maintain these blanket broker-to-broker collusion schemes established by a handful of “paper” brokers, such as Better Real Estate LLC.

The government must treat Better Real Estate LLC as a broker because it is paid as a broker and is licensed as a broker. Licensed brokers are not allowed to promote the services of competitors for profit. A broker must promote their self-performed services directly to consumers and exist to meaningfully help consumers buy, rent, and sell real estate.

The entire RESPA prohibition against kickbacks was enacted specifically to stop mortgage companies from entering into “symbiotic relationships” with random real estate brokers. Better Real Estate LLC may seem like a very clever by-pass of RESPA’s prohibition against kickbacks, but this loophole is built entirely on “blanket” collusion agreements and is prohibited by the virtue of the Sherman Act.

Price Fixing

Further, Better Real Estate LLC offers a “discount” to consumers from a blanket referral fee earned, not from a commission earned. This is a form of price-fixing and is, effectively, a kickback derived from another kickback, instead of a legal buyer's rebate mechanism.

Better Real Estate “discount” scheme is equivalent to a mechanism for price-fixing services of others. By setting “discount” amounts for brokers at (the $2,000 “discount” is randomly set figure - why $2,000 and not $2,001, or $1,999. This amount is price fixed without any regard for the overall price of the commission.) Better Real Estate substitutes a legitimate competitive buyer’s refund mechanism with a price fixed amount.

The true intention of Better Real Estate LLC is to motivate the consumer to use the network with a $2,000 “discount” tangled as a carrot, despite the massive disadvantages of a hidden referral fee. In such a scenario, the consumer ends up grossly overpaying for their buyer's agent commission due to the hidden kickbacks between the mortgage company and the brokerage in their referral network.

Alternatively in the open market, for example, when using a flat fee buyer’s agent, a consumer can receive tens of thousands in tax-free rebates from their agent. Some agents offer up to 50% of their buyer's agent commission as a rebate - this amounts to $15,000 estimated buyer's agent refund when purchasing a $1M home compared to that of $2,000 “discount” figure.

On the other hand, assuming a “standard” referral fee (25%-35%) paid to Better Real Estate LLC on a buyer's agent commission for a $1M home amounts to $9,000. This means that Better Real Estate LLC receives somewhere around $10,000 as a kickback from real estate broker for the act of steering, while the consumer only gets $2,000 as a "discount." This is not savings, this is plain collusion. The company claims to have helped over 100,000 consumers in the US. Even if a small fraction (10%) of consumers utilize this scheme, this yields tens of millions of USD in kickbacks for Better Mortgage.

In this price-fixing scheme, Better Real Estate LLC is not involved in a transaction of the actual home purchase. Better Real Estate LLC does not produce any tangible service to the purchaser of a home, but it merely sets up a network of brokers for its own benefit – to siphon off a cut of the buyer’s agent commission.

What is your role in the situation? For instance, are you a user, customer, competitor or supplier?

I currently serve as a CEO HomeOpenly. HomeOpenly is an Open Real Estate Marketplace™ designed and built to improve the homeownership experience in the United States.

HomeOpenly is a technology company that designs, builds, and maintains a series of online marketplace solutions with a focus on a home search, automated valuation modeling (AVM), home buyer's and seller's representation services, mortgage origination, refinance, home insurance, renovation, design, staging, home inspections, home security, moving, home maintenance, title, escrow, cash offer stand-in programs, home warranty, and other real estate products and services.

HomeOpenly operates subject to a 0% rake as our primary competitive advantage to establish a competitive fee schedule for service providers with the use of network effects. HomeOpenly is not a broker and all service providers on our network compete for consumers individually. Our efforts are actively hampered by anticompetitive practices of “paper” brokerages.

Successful implementation of an Open Marketplace™ platform in the real estate industry requires full enforcement of existing antitrust laws that are enacted to protect US consumers.

As long as brokers can trade consumers as “leads” between independent service providers in exchange for blanket referral fees, Open Marketplace™ continues to operate at a competitive disadvantage.

If you have a question or comment about an antitrust issue, you may submit it to the Bureau of Competition at the United States Federal Trade Commission and/or to the Antitrust Division of the United States Department of Justice

If you have a question or comment about federal consumer protection financial laws, including RESPA, you may submit it to the Office of Enforcement of the United States Consumer Financial Protection Bureau

Related to: antitrust, real estate, Better.com, consumer brokering, consumer allocation, price fixing, referral fees

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Last updated: October 02, 2020
First published: October 02, 2020