A copy of the request filed with the DOJ, CFPB, and FTC asking to review practices of HomeStory brokerage.
Copy of author’s official request that asks the United States Federal Trade Commission, the United States Department of Justice, and the United States Consumer Financial Protection Bureau to investigate HomeStory Real Estate Services brokerage on the grounds of an alleged violation of the Federal Trade Commission Act of 1914, an alleged violation of the Sherman Antitrust Act of 1890, as well as any other possible violations of antitrust and consumer protection laws currently ratified and enforced in connection with possible consumer allocation, unlawful kickbacks, price-fixing, and market allocation 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.
HomeStory Real Estate Services, Inc.
320 Congress Ave., Suite C
Austin, TX 78701
Phone (713) 392-2223
TREC (Texas Real Estate Commission) License #605602
Further, an unknown number of licensed Partner Agents who choose to execute blanket broker-to-broker referral agreements in alleged price-fixing collusion with Homestory Real Estate Services, Inc.
HomeStory operates under a broker license issued by the Texas Real Estate Commission #605602, but it does not produce any services that are typically offered by real estate agents and does not represent consumers when buying or selling real estate in any state. In exchange for matching consumers with a Partner Agent, HomeStory is compensated by the Partner Agent with an undisclosed percentage of their commission, agreed in advance.
To promote this scheme, HomeStory Real Estate Services enters into “partnerships” with random credit unions and mortgage companies, offering a “rewards” program to consumers in a form of a price-fixed buyer’s commission rebate. Qualifying for the "reward" requires utilizing a network’s “partner” real estate agent to complete the real estate buying and/or selling transaction. The reward amount is based on the sale price of the home purchased and/or sold and cannot exceed $6,500 per buy or sell transaction.
HomeStory claims that it is “a digital & virtual real estate company that matches consumers with agents and lending solutions best suited for their home-buying needs. … Our cashback reward program allows consumers to earn up to $6,500 when they buy and/or sell with one of our qualified HomeStory network agents."
In reality, HomeStory is a broker-to-broker collusion price-fixing scheme that utilizes mortgage companies as a channel to obtain consumer’s information. All Partner Agents agree to pay HomeStory a pre-arranged and undisclosed referral fee, on all closed transactions, through their employing broker. A referral agreement between HomeStory and a Partner Agent for a random transaction that may or may not happen sometime in the future is executed in advance.
HomeStory engages in consumer and market allocation schemes with Partner Agents brokerages, because it is a broker itself. Instead of representing consumers to help buy and sell homes, the company actively disengages from its licensed activities so that every Partner Agent knows that HomeStory brokerage will not compete with them.
RESPA (12 U.S.C. 2607) Section 8 narrowly allows payments under 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.
HomeStory does not act in a real estate brokerage capacity, instead, their real estate license is used to collect a blanket referral fee from the largest number of brokers possible. Sherman Act effectively requires all active real estate brokers to proactively compete for consumers. An agreement or an understanding between brokers not to compete for a mutual profit is a "per se" violation of antitrust regulations in the United States.
The following is a partial list of mortgage companies HomeStory currently (as of July 2020) utilizes to promote their scheme:
HSBC Bank USA
1800 Tysons Boulevard Suite 50
Tysons, VA 22102
JPMorgan Chase Bank NA
270 Park Avenue
New York, NY 10017
Lakeview Loan Servicing, LLC
4425 Ponce de Leon Blvd
Coral Gables, FL 33146
1900 5th Avenue North
Birmingham, AL 35203
The Money Source Inc.
135 Maxess Road
Melville, NY 11747
Alliant Credit Union
1200 Associates Dr, Ste 102
Dubuque, IA 52002
Home Point Financial
2211 Old Earhart Road, Suite 250
Ann Arbor, MI 48105
The entire RESPA prohibition against kickbacks was enacted specifically to stop mortgage companies from entering into “symbiotic relationships” with real estate brokers. HomeStory scheme may seem like a clever by-pass of RESPA’s prohibition against kickbacks, but this loophole is built entirely on “blanket” collusion agreements prohibited by the Sherman Act.
RESPA further requires brokers to act in brokerage capacity in order to pay and/or accept kickbacks. HomeStory brokerage must offer consumers a tangible service as a licensed broker, but instead, this broker acts as a “blanket” referral fee intermediary.
It is unclear what exact benefits these mortgage institutions receive from participation with the HomeStory brokerage referral scheme because none of them disclose this information to consumers.
What is clear is that HomeStory price-fixes the buyer’s rebate amounts for random brokers as a “carrot” aimed to capture consumers’ attention. HomeStory uses the following price-fixing schedule:
|$0 - $99K||$350|
|$100K - $149K||$650|
|$150K - $249K||$900|
|$250K - $349K||$1,000|
|$350K - $449K||$1,250|
|$450K - $499K||$1,750|
|$500K - $549K||$2,000|
|$550K - $599K||$2,300|
|$600K - $699K||$2,400|
|$700K - $799K||$2,750|
|$800K - $899K||$3,100|
|$900K - $999K||$3,500|
|$1.0M - $1.099M||$4,000|
|$1.1M - $1.199M||$4,350|
|$1.2M - $1.299M||$4,750|
|$1.3M - $1.399M||$5,500|
|$1.4M - $1.499M||$6,000|
Obviously, these are plain price fixed amounts imposed by HomeStory on random brokerages. All of this is done to profit from the largest number of transactions, without actually performing the service of a real estate broker. The scheme is disguised as if consumers are saving money, but in reality, consumers lose money in hidden kickbacks.
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 rebates for other brokers across the United States, HomeStory operates with a sole purpose to collect blanket referral fees, where all consequent services effectively result in lower quality of service, pay-to-play bias, and a "blind match" with agents willing to participate. HomeStory steers consumers toward a specific set of brokers, and away from others.
Consumers using this network have zero control over what agents the company shares their information with. These price-fixed amounts, of course, are significantly underpriced to account for hidden kickbacks paid to HomeStory brokerage. Agents who compete legally in the open market can offer consumers much higher cash rebates without having to engage in collusion.
More importantly, price-fixing is an uncompetitive practice, and every agent who participates with HomeStory 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. Consumers do not genuinely benefit from price-fixing, even if it is justified with “savings” over typical commissions. In these schemes, consumers are steered away from being able to negotiate better prices with other agents in an open market. As the organizer of the scheme, HomeStory does not allow agents to compete for consumers – all rebates are price fixed exactly the same for all brokers in the network.
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 HomeStory and any broker they refer a consumer 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.
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.
Actions of HomeStory directly increase the costs of owning homes in the United States due to added “blanket” referral fees, consumer allocation practices, price-fixing, and reverse completion between brokers. Agents who are working hard to compete for consumers in the open market are left at a disadvantage since HomeStory brokerage actively steers consumers away from them.
HomeStory rakes in hidden junk fees while consumers are fighting their way through a housing affordability crisis.
As long as referring schemes, such as HomeStory, are allowed to operate, brokers looking to represent consumers are naturally encouraged to participate in the scheme. “There are no upfront costs, only pay us once the transaction closes,” is an attractive proposition to a broker who acts on this proposition by simply increasing a quoted commission to any consumer who comes as a referral. Any broker who chooses not to participate in such schemes risks losing “free business.” Such an environment is highly poisonous to a healthy real estate representation market.
HomeStory' referral-only collusion scheme secretly harms real estate consumers and diminishes 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 HomeStory.
The government must treat HomeStory as any other real estate broker because it is paid as a broker and is licensed as a broker. HomeStory is not a technology company, as it claims since technology companies do not cut into the fees associated with buying and selling real estate. A legitimate technology company, such as Yelp, can easily advertise brokers’ services to consumers, but licensed brokers are not allowed to promote services of competitors for profit. A broker must promote their individual services directly to consumers and exist to actually help consumers buy, rent, and sell real estate.
All real estate brokers must compete with one another; there is no exception. In the event brokers organize their operations into referral networks, this basic rule of free competition fails – a broker who organizes the scheme, in one way or another, refuses to compete with participants of the scheme.
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 HomeStory brokerage.
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 and consumers will continue to receive noncompetitive services.
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
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Feel free to contact us if you need further assistance. At HomeOpenly we aim to make the opportunity of homeownership transparent, affordable and an open experience.