Rehava ads spark ethics complaint
By Molly Parker
mparker@scbiznews.com
Published Feb. 16, 2009
One local real estate company’s ad campaign — encouraging homebuyers to “break up” with their agents — has stirred up so much controversy that the broker in charge is canceling it.
Steve deGuzman, owner of the Rehava Real Estate Store that opened last summer in North Charleston, says he has done nothing wrong. Still, deGuzman said he will halt the campaign out of “professional courtesy.”
Some billboards have already come down, and deGuzman said the advertisements posted on the stall doors of dozens of public restrooms will disappear soon. He also plans to take down the campaign’s accompanying Web site, www.breakupwithyouragent.com.
Several real estate agents have alleged that deGuzman’s campaign violates articles of the National Association of Realtors code of ethics. Mainly, they say deGuzman’s ads flout an industry standard that says a Realtor shall not attempt to interfere with another Realtor’s clients. The opening line on deGuzman’s Web site asks viewers: “Is it time to break up with your agent?” The entire ad campaign is based on this premise.
It follows with a list of other questions, such as: “Is your current agent giving you half of their commission when you buy a home?” “Do you feel trapped in a real estate relationship?” and “Is it time to move on?”
An official grievance against deGuzman has been filed with the Charleston Trident Association of Realtors. If it is found that deGuzman violated the code, the infraction could merit simply a requirement that he take an ethics refresher; or it could result in a yanking of his Realtor title — a rare sentence for first-time offenders.
Grievances filed against Realtors are not generally made public. DeGuzman forwarded the complaint to the Charleston Regional Business Journal.
DeGuzman said he’s being targeted because other agents are intimidated by his business model.
“You wouldn’t believe how much grief I’ve received over this,” he said.
The six real estate agents he employs are paid a $30,000 salary, and they do not work on commission, as is the industry norm. DeGuzman courts clients with the promise that half of the commission his company earns at the closing table will be rebated to the buyer.
The ad campaign was created with the help of Hook USA, a Charleston-based marketing firm. The idea started with a poll that asked people what would prevent them from doing business with Rehava. The overwhelming answer, deGuzman said, was that people choose a Realtor based on personal relationships, such as choosing a sister or a friend.
“It was a clever kind of thing. We created a questionnaire we thought was funny. Then we rolled out the dollar bill billboards. The response was overwhelming,” deGuzman said.
The billboards deGuzman referenced went up at the beginning of January. For a week, the billboard featured a picture of a dollar bill. The next week, the billboards were replaced with a picture of a dollar bill ripped in half. Another week later, the billboards were replaced again, this time outlining Rehava’s offer of half the Realtor’s commission.
By summer, deGuzman said Rehava will have spent $250,000 on the marketing blitz. DeGuzman said the money is coming from an angel investor in Pasadena, Calif., who has asked that his name not be revealed.
Before opening Rehava, deGuzman worked for several years for Sandlapper Real Estate Group in Charleston. But deGuzman said it was during his time as a franchisee with Hooters that he learned how to effectively brand a business. For years, he ran several Hooters restaurants in Philadelphia and other Northeastern cities.
DeGuzman thinks his real estate concept is so cutting-edge that Rehava will eventually become a national franchise.
But so far, business has been relatively slow. The company participated in 13 closings in 2008.
And deGuzman’s detractors say they are not intimidated, just committed to the ethics of the industry.
“He’s deliberately soliciting the relationship the person already has with a Realtor,” said David Wertan, broker in charge at Re/Max Advanced Realty. “I think they know it’s unethical to do what they’re doing. I think they just think they can get away with it. I think that’s the thing the Realtors are so upset about, is he’s not only doing it, but doing it very blatantly.”
Wertan is not the broker who filed the complaint against deGuzman.
Gettys Glaze, president of the Charleston Trident Association of Realtors’ multiple listing service, said it’s important that people follow the ethics guidelines. But as to deGuzman’s business model, Glaze said people are free to experiment with whatever ideas they have.
“That’s the beauty of capitalism,” Glaze said. “The market will dictate what happens. That’s free trade. The consumer is going to say what value the real estate agent brings to the table.”
Reach Molly Parker at 843-849-3144.
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Comments:
Added:
16 Feb 2009
Let's see - why can't one real estate agent go after existing clients of another one? Why this muzzle - this just protects the agents and keeps the commissions artificially high, even in a day of crashing business and lots and lots of agents, when commissions should be coming down.
Sounds like the FTC should get involved in this one.
Peter Lucash
Added:
16 Feb 2009
The math doesn’t add up with the closing track that he is on. He will be out of business soon.
skip
Added:
16 Feb 2009
With so many agents in the Charleston MLS, how long did this guy think he was going to last with his "new" business model? How does he pay $180,000 in salaries on 13 closings? Obviously he is well funded and trying to disrupt an old model that has worked well for buyers and sellers for many years. Who approved this type real estate business...SCAR? CTAR? I disagree with this being free trade. Who is changing the rules in the middle of the game? No one can seem to answer how this was company was allowed into the local board.
john
Added:
16 Feb 2009
I would like to learn more about rehava's business model. It is good that real estate companies are trying to save consumers' money.
I also noticed that the quiz cautions those that are currently working with an agent not to proceed with it; the article has not mentioned that.
From rehava’s website:
*NOTICE: If you are currently in an exclusive agency agreement, please do not go any further. rehava is not soliciting your business if you are currently in an exclusive agency agreement.
I hope to read more about rehava!
Leon Griffin
Added:
16 Feb 2009
I am a licensed South Carolina agent. I am also a member of the National Association of Realtors (NAR). I really see nothing wrong with this ad campaign and don't find it unethical. NAR, as well as local brokers are fighting dearly to maintain the same old worn out business model that has been in motion for decades. It's only a matter of time until this model fails. I have wondered many times how this has lasted this long. Don't get me wrong, I'll take the commission checks and ride this wave until it hits the beach, but do we really deserve make more commission on a million dollar house than we do on a $100,000 house for filling out the same forms, listing it the same way on the MLS, pulling the same public tax records (and the rest of the public records)? Both homes require the same amount of work. If fact, the $100,000 quite possibly requires a bit more hand holding.
I think what Rehava has done is quite revolutionary if fact. Today's buyer is a bit more savy. They usually have taken advantage of services available online such as Zillow, Trulia, etc. Besides, with Google getting ready to get into the real estate business everything is going to change and the days of the commisioned gravy train are doomed.
Anthony
Added:
16 Feb 2009
what a lame excuse for journalism
steve deguzman
Added:
17 Feb 2009
Anthony, if you are doing the same marketing/work for your million dollar homes as you are for your 100K homes, then I would feel horrible if I were one of your million dollar clients. I'm guessing you don't have many.
I see nothing wrong with Rehava's business ethics. Do I like it? No. But this is a free market. Do I feel threatened as an agent? Definitely not. I am a Realtor in Charleston as well. I know the problem lies within their business model. Salaried agents won't have the drive that commission-based ones will. Plus, Rehava is rather gimicky, and the people will know that they are getting limited service.
John
Added:
18 Feb 2009
John said "Anthony, if you are doing the same marketing/work for your million dollar homes as you are for your 100K homes, then I would feel horrible if I were one of your million dollar clients. I'm guessing you don't have many"
John, YOU JUST PROVED my point right there. You just admitted that you don't give the same attention to your $100K clients that you give to your $1,000,000 clients. Why do you not do the same amount of work for you $100K clients John?
Anthony
Added:
18 Feb 2009
Wow! What a guy! I think he backed down too soon. What an awesome idea. I respect a person who bucks the system and feel he did absolutely nothing wrong!
Lorraine
Added:
19 Feb 2009
Why would anyone want to use this company when they are clearly soliciting the relationship people already have with a Realtor. Wouldn't all Realtors in Charleston in turn not support them in listings and sales? Maybe that's why they only were part of 13 sales in all of 2008.
Tony
Added:
20 Feb 2009
With the market the way it is, Rehava gives people a way to list their homes for less. 3% of a $300K home is $9k. A listing with Rehava is $3k. It just doesn't make sense to go the 'traditional' way. I don't think ANY agent works hard enough to justify that much in commissions. Local Realtors ARE blacklisting Rehava listings. I'm sure there is something in the code of ethics about that too. Home buyers just need to be aware of the situation and insist on seeing listings they are interested in even if they are listed with Rehava. Better yet, maybe they should use Rehava and get 1/2 of the commissions back. You're crazy not to!
Jane
Added:
24 Feb 2009
Why advertise for new business with a marketing focus on the competitions business model of not Rebating money and feeling trapped. That statement violates the intent of Realtor members not to disparage any business model. The ethics violation may not be so severe as to warrant expulsion from the association as this may severely limit a state licensed person from actually making a living in residential real estate. Realtors are just a voluntary organization and pay dues for the benefit of being able to market and offer an incentive to other members to facilitate buying and selling. Many licensed real estate sales people are not Realtors and practice without the benefits of the associations and they are not required to adhere to the Realtor ethics specifically but their are state laws covering their actions and I don't expect attacking the competition's business practices is illegal. The Business model of quality works and if you can provide quality for less and build a better mousetrap I expect the masses to beat a path to your door. The business model of rebating money as long as legal, RESPA, HUD 1 and your State Law. Brokers who hire, train and supervise agents provide a great service and need to establish business models to effectively compete and survive in the market place. Please keep in mind sales in general is a high turnover field and the broker/owners are the responsible party offering commission incentive to member Realtors. If you help enough people you don't ever have to worry about money. The commission you rebate or charge your clients doesn't concern me and I will try to help you sell your listing if it meets the requirements of a buyer I'm workin with. Realtors should be respectful of the decisions other homeowners have chosen to use to sell or buy. This is a tough time for a lot of people and I want to be respectful to the agents who need to get a second or 3rd job to pay the bills but our association has spent considerable effort and training to elevate Realtors as trusted advisors and disparaging of fellow members should not be allowed to get ugly.
Broker/Owner
Added:
24 Feb 2009
I appreciate the fact that Steve has agreed to take down the website and the ads, if anyone doesn't agree that they are against the Code of Ethics of the National Association of Realtors I can forward you a copy.
I personally do not have a problem with his business model at all and feel that a few years ago it probably would have done very well. There are numerous other companies that have and still do the same or similar things with great success and nobody complains about them. There are national companies like Help-U-Sell that will sell your house for $500 and several local companies that will do the same.
There is more than enough business in our market for everyone to make a good living, so I wish Steve the best in his new endeavor. Sincerely, David Wertan, Broker/Owner of Re/Max Advanced Realty
David Wertan
Added:
28 Feb 2009
I personally have no problem with Rehava's business model and wish them great success. There are numerous other companies out there that are very similar, such as Help-U-Sell that are national franchises, and they all solicit business within our Code of Ethics, are all members of our Board and are not black listed. We do busines with discount brokers on a regular basis. I applaud Steve for taking down the site and the advertising that was a direct violation of our Code of Ethics, if anyone wants a copy just e-mail me and I will forward you a copy. There is more than enough business out there for everyone, even in this economy I personally had 77 closings last year, more than 5 times that of the Rehava office. Now is a great time to buy no matter who you use as long as you buy and you are comfortable with your agent as this is the biggest purchase you will likely make in your lifetime. David Wertan of Re/Max
David Wertan
Added:
9 Mar 2009
According to the February 16 article, "He also plans to take down the campaign’s accompanying Web site, www.breakupwithyouragent.com."
I have no problem with him trying to make his business model succeed, but here it is March 9, 2009 and the site is still live. It takes minutes to take down a website.
That's what I like, a man of his word!
Bob Nitkewicz
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