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If the Public Only Knew What They Don't Know

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An exercise in fantasy thinking for wishful thinkers!

If the Public only knew what they don't know:

They would not call the company listed on the "for sale" sign in front of the house to arrange for a showing of that house.
They would interview agents to find out who takes agency seriously instead of who was cheapest.
Every home buyer would get an agent to represent them because it doesn't cost the buyer anything!
There would be a hue and cry for commission reform so each client would pay their own brokerage.
Agency disclosures would be taken seriously.
Contracts for representation would be taken even more seriously.
Agents would be held to a higher standard of performance than currently.

Why would these things change?

Calling the listing company to see their listing puts the buyer in one of two scenarios if they buy that house: no representation by an agent at all or dual agency which in Minnesota "limits the level of representation the broker and salesperson can provide". Sounds like the pro's against the innocents to me.
While the pocketbook is important, thousands of dollars can be lost by an agent who doesn't take the fiduciary duty of confidentiality seriously and gives seemingly benign info to the opposite side of the transaction.
The seller negotiates with the listing company what the listing commission will be. A portion of that amount is offered in the MLS as incentive to other agents to bring a buyer. Under the current system, the buyer does not have to provide for payment for the agent they use.
It would make sense for the seller to pay their agent and the buyer to pay their agent instead of the seller paying both. The old sytem for compensation is a a carryover from when all agents represented the sellers and buyers had no representation.
The disclosures would be taken seriously because agency was taken seriously!
A contract is a legal binding document with requirements for all signing parties. Once the public understood how an agent is supposed to represent them, the contract would become better understood and more important.
If the public understood what an agent is supposed to do, they would hold the agent to that standard. Slough-offs would have to leave the business!

So much for wishful thinking. If wishes were fishes, we'd all have a fry!

Posted by Bonnie Erickson on 11/13/2006 11:02 PM

Comments (17)

real estate agents, fiduciary duties, real estate agency

Originally posted at: Houses and More: If the Public Only Knew What They Don't Know

17 Comments on If the Public Only Knew What They Don't Know

NOV

2006

They just want to see the house.

But Bonnie—doesn’t the buyer in a very real sense, already pay the commission? Is it not factored in to the price of the home? I suppose if buyers were to agree to contract with, and to pay X% to their buyer’s agent at closing—separate from the offer on the home—of course then, the buyer’s would factor that in to what they were willing to offer—the mind boggles.

Still, beyond the “Boggle factor,” I see where you are going with this, and I agree.

Jay

I guess people don't really think about all of this stuff. many of my clients just sign because I asked them to. i explain the contracts and give advice but they seldom really read it or pay attention.

I agree with Maureen... they just want to see the house. Beyond that, they think they can look out for themselves.

Sometimes when I try to explain some of these types of things (agency, for example), I see their eyes glaze over. Oftentimes, it just comes down to trust.

If buyers were to pay their broker out of pocket, it would likely make buying a home more out of reach for some that are struggling to save for a decent down payment.

It is not a big deal to most buyers. They want a house. They want to do it efficiently. They want to work with someone pleasant, knowledgable.

If a business model wants to sell agency to a consumer, they have to do that selling before the buyer starts driving around calling on for sale signs... or in this day and age, maybe before the buyer starts running around the internet. Maybe that is what Bonnie is doing here?

Jay sign up for RealTalk... there will be the regularly scheduled "Who pays the commission?" discussion starting shortly...

Yes, agreed. I think that's what Bonnie is trying to accomplish here. Since most buyers start by looking on the Internet, that would be the best place to start educating them about important issues that may affect them. Having said that, I still stand by the last sentence in my previous comment.

Hmmm... my 'human test' says "Passion" yet I've never heard anyone refer to the fruit as simply 'passion' but rather 'passion fruit'.

Bonnie it is a shame but we take our duties and responsibilities much more serious than the consumer does. They just want to buy a house. I only work with sellers so don't have quite as many issues. It's not like they can drive around with their house in their pocket looking for buyers:)

BTW "if wishes were fishes we'd all have a fry" is a great saying. Is it yours? Being from the south and having attended many a fish fry it brought a flash of joy(memories) to me. Thanks

Only been in the business for four years so I don't know if there has been any effort by anyone to change the system so that buyers pay their agents and sellers pay THEIR agents. It makes sense to me. But what do I know.

As for buyers....when I have floor time I even get calls from people standing in front of a house with a sign from a different agency; they just wanna know the price; they had to take the time to call directory assistance on their cell phones to get to our office - that never made any sense to me but it points to buyers being clueless at times.

...or... maybe the buyer did initially call the phone number on the sign and the agent who answered the phone wouldn't give him the price and tried to use a script to get them to commit to an appointment or giving out their contact information before giving them the only thing they wanted... to know the darn price!!!

I've turned two callers away today because when I asked if they already have an agent, they said that they were just looking at homes. They don't want an agent yet.

Well, we're agents so I guess we can't help you. Good by.

Sometimes you just get tired of being treated like a leper. I'm sure I could have gotten an appointment for one of our agent to take these buyers on a tour and probably sell them something. But, sometimes, I just want to hear someone on the phone say.

"Hi, we're looking for a home to buy, can you help us?"

That's what I want to hear.

Jay, If you check out the FSBO listings you will find they are priced right at the same price that MLS listings are. They don't discount their homes to compensate for the amount of the commission they are supposedly saving. Yes, the buyer's broker commission is included in the price as is the listing broker's commission, but for some reason the public doesn't get that. The seller thinks the listing company is getting the whole thing regardless of how many times we explain that it includes XX% for the buyer's brokerage.

Back in my first days on another real estate forum, agency was argued incessantly. Lenn's comment that the buyer only wants the house blew me out of the water. I knew she practiced single agency and yet her experience had told her, the buyer only wants the house. That insight coupled with a marketing person pointing out that trying to shove agency down a client's throat when they are not remotely interested hit me between the eyes. That had been my whole marketing program. One of my websites devotes a lot of space to agency. Does it rank? Nope, but the one that emphasizes "the house" does. That's why I say, if the public only knew what they are susceptible to they would make different choices!

Think about what the buyer is exposed to everyday. I was in the Dr office today and picked up a issue of Cosmo. In it was a short blip about real estate and purchasing a house while you're single. The advice that they shelled out was awful, and they had agents that they quoted. One basically said that if the agent tells you you need to buy the house now run fast... I imagine that the bulk of these buyers would be in a price range of entry level where good listings really do go fast. I have lost buyers because I've told them the truth...decide, or the decision will be made for you. I don't like dishing this out, but these buyers are on the lower side of 100K...if it's cute it's going to move.

The other tidbit that they shared is "don't get too excited in front of the agent, because it will lead to a higher sales price". If I'm representing the buyer that excitement will IN NO WAY be factored into my negotiations. I try to caution my clients not to get too excited because I want them to be able to walk away if we can't talk reason to the sellers agent, not take advantage of my clients enthusiasm. The press doesn't understand it and so the public gets a skewed view as well

Bryant, "If wishes were fishes . . . " is not mine. I've heard the saying from my infancy which, believe me, was a lonnnnng time ago! I have no idea where it originated but I was an Iowan, and a Hoosier, and then a Minnesotan. Somebody somewhere knew how to fry fish! Bullheads if you're from Indiana. Sunnies and perch in Iowa. Walleye, bass and pike in Minnesota. Oh, that's right, we're supposed to catch and release everything now! (eye rolling) Personally, catch and release makes no sense at all. Why go to all that work and expense for a story to tell. Me, I'm all over eating freshly caught fish! Otherwise, I'll save my money and just play in the water, thank you!

Somehow it's kind of depressing to think about representing clients to the utmost best of my professional and ethical abilities and then hear that they just want to see houses. So myabe I'm having MY wake up call tonight. I still feel better about doing it the 'right' way though. Maybe if we dressed up like clowns as we did the Agency forms they'd be more interested? Ok I'll try not to become too cynical!

Bonnie, Loved the list. It really rings out. I didn't read all the comments because I am tired, but I must admit, that there were some discouraging comments. I wish all agents would take all these aspects seriously. Realtors are low on the trust scale just above car salespeople. Why? Because there are enough people who don't properly look out for the client and only themselves. Treat the fiduciary responsibility with the top importance and you will gain respect of clients and colleagues.

NOV

2006

Adam, The problem is there are too many consumers that are reading the likes of Cosmo which Chris Tesch mentioned above. Some of the heavier media, i.e., US News, Time, finance publications, Consumer Reports, etc., do have good articles on agency, especially exclusive buyer agency, but that not the norm. The public is more likely to be exposed to the Cosmo "crap" (pardon my French!).

Carole, I'm with you. It's discouraging to find out that the one most important thing I bring to a transaction is totally irrelevant to my client. I just have to continue to be the best agent possible and hope that someday my clients figure it out. Their lack of understanding certainly isn't because I haven't tried to explain it!

I received an off line comment that stated that my comment was very nasty. I am sorry if it offended anyone, and was not meant to paint the broad picture toward everyone that commented. There was only one comment that I felt was a little off base, and I purposely did not refer to the person, as I do not believe it is appropriate to do so in an open forum. As such, thank you to the person who contacted be directly to respond. It was mentioned in that comment that I must have been tired. I was, and also must say that although I still think the point I was making the point I was making was valid, it may not have applied to those who have commented here.

Adam

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