Better remains one of the more controversial real estate companies due to its poor leadership fueled with massive VC capital. Their layoffs fiasco is merely the tip of the iceberg. The real problem with Better is price-fixing and unlawful kickbacks it receives from Realtors.
“$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.”
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 legally negotiated buyer’s rebate mechanism.
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 a random Realtor for the act of steering, while the consumer only gets $2,000 as a “discount.” This is not savings — this is plain collusion.
There is a lot to be said about the value of collusion: it is per se unlawful in the United States; it leads to higher profits at the expense of consumers; it reduces the competitiveness of the market; it limits open competition by deceiving, misleading and defrauding consumers. The core of collusion is that it is a weakness before a greater force called “the market.” The market is brutal and it has a long memory, especially in real estate.
When consumers begin to realize that Vishal Garg has cheated them out of tens of thousands in competitive tax-free buyer rebates, they will retaliate in more ways than one. Eventually, collusion yields terrible UX.
To build upon price-fixing with nearly a billion USD in funding is like building a luxury skyscraper on a foundation made of sand — it will fall, and it will fall fast and hard.
As always, it takes an outsider to break the status quo.
Related: Better Real Estate, antitrust, price fixing, wire fraud, kickbacks, RESPA, Sherman Act, FTC Act, market allocation, consumer allocation, false advertising, unlawful kickbacks, wire fraud, price-fixing practices, 18 U.S.C. § 1346, 18 U.S.C. § 1343, 15 U.S.C. § 1, 15 U.S.C. § 45, 12 U.S.C. § 2607, C.F.R. § 1024.14