This could be a good FYI for newer agents -before you run into this situation-. At one time I listened to the pros and cons of buying referrals. On one hand it made sense IF it replaced other advertising and was more effective.
Lesson Learned: Ask more questions. A lead generation company emailed me that they had a seller who wanted to list in my area. Later down the road, I find that the innocent and vulnerable seller had filled out one of those web forms somewhere offering help in finding the right agent. The service of course is free to the prospective seller. The seller is unaware that this contact will cost the agent in the neighborhood of $2, 280.00 before splits and expenses when the home closes (if referral is accepted).
The rationale for the agent accepting such a proposition is that the fee replaces other brand/service advertising. In essence, we are convinced that we would be spending that much money somewhere along the line to gain that listing anyway, so why not do it the easy way?
I accepted the listing lead. Sure enough the sellers and I had a "meeting of the minds" and chose to work together. That's when I found the lead company had been a little misleading. The sellers requested an agent with "a lot of sales", hot-in other words. Well, to be truthful, I move at my own pace and would not consider myself in the big league or fast moving. I work steadily, competently. I had a good year last year, but this year stinks as far as my sales record (partly because of all the changes I've made). The sellers trusted the lead company to do what they said they would do. Odd that they sent me, and the sellers and I chose to continue the relationship.
However, when we got down to the nuts and bolts of commissions--I found that she was unaware that the referral company was charging 25% of 2% at closing. This explains one reason why more agents didn't jump at the chance to represent this fine home and family.
If I EVER consider accepting another lead referral, I will ask:
- Did you inform the prospect that you charge the agent a fee?
- What did you promise the prospect? If I do not meet the criteria, I will not accept.
Use your calculator! The particular company in question charged a 25% of 2%.of selling price before splits and expenses. Example: $456, 000 X 2% =$9, 120 X 25% = $2, 280.00 .
What do you think? Should lead generation companies disclose to consumers what they charge agents? (i.e., If and when an agent accepts our contact to them regarding your request, it will cost the agent approximately $2, 280 or 25% of 2% of your closing price. However, we provide this service free to you.
Is the lead generation company promulgating price fixing by setting their fee to agents at 25% of 2%?
Here's what I think. I think these lead generation companies should be investigated regarding potential anti-trust violations. How do I come up with that link? Because I believe they are encouraging a minimum commission across brokerages.
Suzi Gravenstuk, MS Broker License # 17787
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Here in Iowa as of July 1st by law we have to disclose to a buyer or seller in writing if a referral is being paid before a listing is taken or an offer to purchase is made. I've been receiving a lot of these types of calls lately because my website gets high rankings. The key question they ask is "Do you accept referrals?", and they don't identify themselves as an agent. I ask "Are you REALTOR?" When they say "no" and grab the script, I say twice, "I appreciate the call, but I'm not interested."