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How to Take Advantage of Struggling Real Estate Agents, as a Home Seller

Would you like to know how to take advantage of struggling real estate agents? As a home Seller, it is much easier than you may think.

Let's take a look at my local real estate market to get a good idea of what I am talking about...

In March of 2008, there were only 195 sales in the Colorado Springs real estate market. This means that less than 390 real estate agents in Colorado Springs got a paycheck in March of 2008. (I say ‘less than' because some real estate transactions only have one real estate agent involved. For example: The Wagner iTeam ‘brought the Buyer' to 2 of their own listings in March, and there was not a Buyer Agent on the other side of the deal.)

And with over 3,000 active licensed Colorado Springs real estate agents in the Pikes Peak - Colorado Springs area, this means that OVER 80% of the agents DID NOT GET PAID last month.

OUCH.

We will often recommend that our Seller clients offer the Buyer Agent (the agent who represents the Buyer who purchases your home for sale) a higher co-op commission.

See, when you list your home for sale, you agree to pay a total commission (which is determined at time of signing the listing agreement). From this total commission, we decide how much to co-op, or ‘share' with the agent who ‘brings the buyer' ... this amount is generally 3% (in Colorado Springs).

However, in a market where less than 20% of real estate agents are getting paid every month, can you imagine how inticing a HIGHER COMMISSION would be?

Especially in situations where there is a lot of direct competition in the immediate Colorado Springs neighborhood, offering a higher co-op commission can really make your home for sale stand out.

Think about it...

A struggling real estate agent has a Buyer client looking at 3 very similar properties, but ONE property is offering 3.5% co-op commission. At the average sale price of about $225,000, that would mean that the commission would be $7,875.

$1,125 MORE than the same priced home offering just a 3% co-op. A thousand dollars can make a WORLD of difference to an agent who needs to feed their family.

Guess which home this agent will be more likely to promote to their Buyer clients?

Money talks.

In the cases where our Seller clients choose to offer a higher co-op than 3%, they get MORE SHOWINGS and usually get an offer in a much shorter time than their competition.

So, in ‘taking advantage' of the real estate agents who are struggling in todays Colorado Springs real estate market, by offering to pay them more - you are actually helping THEM out and helping YOU sell your home in a shorter amount of time.

Posted By: Mariana Wagner - Colorado Springs Real Estate Agent - Wagner iTeam
The Wagner iTeam is a power team of Keller Williams Hope Realty,
specializing in Colorado Springs Real Estate and Monument Real Estate.

Posted by Mariana Wagner ~ Colorado Springs REALTOR® on 11/24/2008 01:42 AM

Comments (148)

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148 Comments on How to Take Advantage of Struggling Real Estate Agents, as a Home Seller

APR

2008

Hmmm. I'll have to try that one... pay a high commission and your house will sell faster. That's a neat concept.

Mariana, that's the way to see real estate through very realistic eyes. Money does talk to some agents.

Makes sense. Those numbers are bad...not many people getting paid.

I know an agent that used to do that around here and on open houses they would be lined up at the door with agents

Mariana, Our areas sound very similar. We do have some agents offering higher commissions and as you said money talks!!!

Money is a great motivator, this is a great marketing tool!!!

Mariana...it's great to hear a little reality check! I was trained in the late 80's and all of the old techniques are coming back...I love it!

My homeymoon was paid for by an agent bonus that was a Caribbean Cruise on a bank owed property I sold back in 1992! Plus it was a 4% to selling agent commission! Bring back the old days!

On another note...I called you today about the KW Maps Blog Coaching Program? I couldn't find it on KW Connect? How do I get more information?

This is definitely a trend in our area, Mariana. Lots of folks not getting paid each month and some not since the end of last year, Yikes. I have to say, though, as a buyer agent I try to help my buyers find the best home for their needs (many of them decide what THEY want to see) and never even look at the commission. So it may or may not make a difference.

Jeff

I agree with Jeff. I have never never shown a buyer a home just because the selling agent offered a bonus or a higher commission. On th other hand, I have put some listings at the bottom of my list because they offered a very low buyer split. Sellers should be aware of how much their listing agents are offering to cooperating buyers' agents.

Stacy - it is like clockwork ...

Ray - Money DOES talk.

Chuck ... and to figure that agents, like us, held SEVERAL sides of transactions in that month. Many agents are not gettign paid.

Dave- It is interesting, huh?

Mana - Higher Commissions are definitely an incentive.

Craig - It is a good marketing tool.

Bill- a Cruise? Cool!!

Hi Jeff! Yes. We are the same way and a higher commission really will not be a factor for some agents. But a higher commission DOES increase showings and our experience has shown the increase in GOOD offers asa well.

You are right. A LOW co-op is a bad decision on a Sellers part.

I agree with Jeff. I have never never shown a buyer a home just because the selling agent offered a bonus or a higher commission. On the other hand, I have put some listings at the bottom of my list because they offered a very low buyer split. Sellers should be aware of how much their listing agents are offering to cooperating buyers' agents.

(Sorry, I wasn't logged in before.)

Mariana. Agreed. And I discuss this very issue with sellers as well. You don't know who it might impact, and certainly a low co-op can be a big negative in this market.

Jeff

Interesting post, I do not show properties because of more commission to me, I show properties because it fits the needs of my buyers, I would rather see agents give a bonus to the buyers not the agents! I also do not look at the commission to the selling agent, I always put my buyers first not the money, even though I do not like making a lower commission, my fiduciary duty is to my buyer

APR

2008

Mariana, now I'm going to go look at all the closing in Washtenaw and see how many didn't get paid. It is true, I have gone round and round with a relo company on this issue.

Good points.

I always, always show agents in training the benefit of offering higher co-ops. It pays in shorter listing periods, less angst from sellers, less mareting and advertising costs, etc., and makes contract negotiations so much easier.

Agents who try to make big bucks on every deal lose in the end because they have more expired listings and more angry sellers.

There are a lot of agents not getting paychecks these days.

Hey Mariana~You are exactly right. I have been using this tactic over the last few months with some success.

Jean - This post was intended to share a good marketing tip with Sellers and their agents. There are a lot of real estate agents who will try harder to sell a home that is offering a higher co-op. I am not implying that these agents are not putting their Buyers first, just that when looking at comparable homes, some agents ... the struggling ones ... DO factor the co-op into the equation. Although it is not a part of how we, personally, do business, it IS how other agents may work.

Missy - I bet you will be amazed. I can only hope that the agents who are NOT getting paid are not the sole bread-winners for their family.

Karen - Thanks.

Lenn - There have been times where I have added some of my side of the commission to the co-op, just to make the home stand out more.

Doug- Great!

APR

2008

Hi Mariana - I always discuss this part of the commission component with my sellers, and I do feel it makes a huge differece. Every agent, especially buyer's agents who have a contract with their buyer client, needs to be looking at the fee offered. They have a fiduciary duty to their client to let them know if that fee offered is less than their buyer agency contract stipulates, so they can make the decision as to whether to look at it.

And yes, agents do look at fees offered, at least they do here in my area. And you can bet a slightly higher fee is going to be a bit more enticing than a lower one on a comparable home. Good for you for having these discussions with your seller clients!

Ann

Ann- You bring up a great point. In many cases a Buyer Agency will stipulate a specific fee, and if the co-op is less than that fee, the Buyer COULD be liable for the difference.

APR

2008

Bleak statistics for us but winning advice is always well received.

MAY

2008

Money doesn't talk - it screams! But the home still needs to be very aggressively priced in order to sell.

Great post!

NOV

2008

Does this tactic upset other brokers in the area? Kind of like setting precedent?

Mariana, I must be the only one not on the same page with your post and the comments above... Let me clarify it I get 6 % on Condo's and SFR's and 8-10 % on Land Listings. I on the other hand ,when I represent Buyers do NOT look at the Commissions, Rather focus on what the Buyer Wants and Needs are. Consequently I get repeat Buyers, Sellers and Referrals. I am sorry but .5% is not going to jeoperdize my looking out for the wellfare of my buyers.I find & hope, that is only a small per cent of the Realtor population who will take a .5% over the wellfare of their buyers.

I understand what you are saying but i think these times are coming to an end -- with all information that is available on the Internet Buyers are more informed; and with the Sellers that need to sell pricing their homes aggressively a Buyer is going to wonder why you are showing them a home that is $40 or $50k more than the one down the street -- when they find out it is cause there is a higher commission split these agents run the risk of losing all credibility with the Buyer -- just my 2 cents -- good post

I do not understand why the assumption is being made that if a buyer's agent has three choices and he/she/they choose the best paying choice to showcase why anyone would believe it is at the expense of someone else. That is a fallacy that needs to stop. I dislike circular arguments. They go nowhere.

The final decisions always rests with the seller and buyer having a meeting of the minds when they make an offer and a acceptance... We work for them and the fact of the matter is if the buyers offer less money and the sellers accept, no one has any idea if the 3% or 3.5% will pay the most because each contract is unique to the situation. Comparing the two may be a moot point.

Excellent post and very interesting commentary. BTW, I can not name one broker who would refuse more money if it were offered to them, so lets keep it real people. We all work very hard and believe we and our efforts are worth every penny. (LOL)

The ghost post above is CTannStarr. Server kicked me out again (LOL)

I bet you didn't expect to find so many agents who show their client the house regardless of the commission. If you are truly trying to find the best house for your client and it happens to have a low commission, you can always ask the listing agent to raise the commission.

I never look at selling comp hard until I find a home that fits the clients. My income is important to me but so are my customers satisfaction.

Interesting post. With so many buyers looking on line and so much public access to the mls, I rarely get the opportunity to select the homes to be shown to the buyer. If the buyer narrows it down to 3 possible homes, how can you ethically direct them to the one that is paying the highest commission? Someone already said this but in the end the buyer decides.

It's sad to hear that offering a little more commission to the buyer's agent actually motivates them to promote one home over another.

I agree with this concept a little bit. But at the same time, with the same premis, buyers agents are just so happy to do a deal, I dont know if a bonus or a higher co-op would really make the difference. Unless it is so far off, buyers agents will want to take the client to the properties available. What if the one that pays slightly less is the one that they really want, is price right, shows very well... etc ? Is interesting... it seems when we offered a bonus or higher co-op, it would have just ended up the same if the co-op was lower... The flip side is that it cannot really hurt either so it is all good : )

Hmmm...here the minimum service agents sometimes pay less commission.....the "more than" has not worked.....too much inventory to have it stand out...and these days I would think that would be the same anywhere. I would have a real problem promoting a higher commission listing...it stops being about them...and that should never be what it is about at all.

In the Orlando area - the builders are back to 5% or 6% commission - they either love or hate us. Well they love us now!!!!

Marianna,

I would have to disagree. I actually have clients that sold out in Colorado Springs and moved here to Greensboro, NC. Secondly I have never steered a client toward one listing or another just because of agent incentives. Besides with new guidelines and rules coming down the pipeline about full disclosure of payouts you will find your buyers taking a dim view of that practice. I if anything will look for buyers incentives. I have noticed here in NC that if you really want results take that same money and offer incentives to the buyers. Buy a home warranty, include a membership to the local gym, offer closing costs help. The buyers are the ones that ultimately making the decision.

Those are some interesting statistics--I never thought I could make someone buy a house because it offered a larger commission---hmmm

INteresting post! Thanks for sharing

Mariana -

We've been offering a higher-than-market co-op for over a year.

Although we can't be 100% share that our faster sales are due directly to the higher co-op, we know, in this market, every little bit counts. Perhaps our Buyer's Agents worked a bit harder to keep the deal together through the Inspection & Attorney Review 5-day contingency than they might have for a lower fee.

Also, as a Real Estate Team, we are getting the reputation that we pay our Buyer's Agents well on our listings they sell. When they see one of our listings come up new on the market, they not only know it will be priced right and staged correctly - they will make more money if they sell it, versus one listed by a "traditional" real estate agent.

It's a win-win all over - for the seller, for the co-op broker, and for the Listing Agent.

Check in anytime!

DEAN & DEAN'S TEAM CHICAGO

I think buyers are steering the agents these days with choosing which homes they want to see off the MLS, and since they cannot see our agent "co-op" then it really doesn't matter what the agent wants to show or "push". I like to think that my client picks the home that is right for them, regardless of the commission that is offered.

A higher commission will probably get the home shown more, but I have never been able to twist a buyer's arm to buy a home that isn't the right layout for them, or doesn't feel right to them, or may be overpriced, etc.

BUT, a lower commission, if I happen to notice it, will get it at the bottom of my stack when I am showing homes to a buyer.

Sellers sometimes think that is the magic bullet, to offer a bonus or bigger commission, but I tell them that they buyer has got to WANT the house and to believe that it is a GOOD VALUE. Because these days, they have seen EVERYTHING on the market before they make an offer and they are extremely well informed.

Having said that, it only takes one buyer, and if that buyer came by way of a larger commission offered, then it worked!

Sarah Rummage
Nashville TN
sarah@Nashville-Homebuyer.com

I see the virtue in your post, and I have to say that many agents believe/say that they are not influenced with a higher co-op and to that I must wonder. I have seen these listings with a higher co-op sell faster and when in escrow the agents fight like a pit bull to see that the escrow closes. I know that ethically as agents we must look out for the client, and I agree with that. But on the other hand if we are so altruistic as agents should we not donate our services?

This has always been my thought on reasoning not to take lower commissions. Let face it agents are people.

I agree with you, I think we are in a market that requires creative ways to drive traffic to see our listed homes. With so much inventory how do get your house stick out when agent is screening them through the MLS when everything is comparable.

Good Suggestion,

Matt Naumann

REALTOR

www.mattnaumann.com

Personally, I don't show properties based on commission because I want my clients for life and as friends when all is said and done. However, we recently offered 3.5% on a very nice property and had just one showing (and one PA). On our bank-owned properties, the banks offer only 2.5% and its written in the listing contract so we are bound by that.

" OVER 80% of the agents DID NOT GET PAID last month"

Thats rough, what are they doing to get by?

I have to question the ethics of offering a higher co-op and having it matter to the agent. Shouldn't it be that agents are looking out for their clients not themselves. since when should an agent push a home with a higher co-op onto a buyer rather than the house that is right for them. I find this concept really offensive.

It works; there's no doubt about it that many agents are motivated by money...but I think it will eventually backfire on this entire profession. Agents (who already rank right up there with used care salesmen) will be further perceived by the public as looking out for their own paycheck instead of looking out for the best interest of their clients. Agents should be showing all properties that meet their buyer's needs, not cherry-picking the houses that meet their own financial needs. I would imagine that the public would find this very offensive, and give them more reason not to trust a real estate agent.

Miriam, I agree with you, it is an offensive idea. However, when push gets to shove it is the reality we live in. We have to use some kind of criteria to sort out the options. Sometimes there are just too many homes to show.

We are not talking about unique properties here where it seems that for some reaon the sellers think it is a privilege for us to spend tons of money to market their home at a loss and earn less.

When comparing two like houses (with the same floor plan in similar condition listed at the same price in the same neighborhood)and you have forty houses to choose from -- and this happens, believe it or not -- which house will go to the top of your list and which house will go to the bottom of your list: the house that brings you 3.5% plus a $1,000 bonus to the selling broker or the house offering only 2.0% commission?

At that point the ethics issue goes away and it becomes pure economics..... unless the buyer specifically requests to see the 2.0% house. Then there is absolutely no question. You have to show it.

I know there are agents that only show the homes with the higher commision. Personally I do not believe they are being fair to their buyers and in the end it will catch up with them.

I agree that our clients MUST come first...if we are trying to build any type of referral business at all. However, if you are looking at 2 similar floor plans, or a client asks for your opinion....if they are the same, almost all of us will 'vote' where the better commission is.

The stats are alarming. I guess you need to be creative these days.

Are you advocating a Realtor steer clients to the best commission even if a similar home may have been a slightly better fit?

This is something I question, as well. I just met with a seller a few nights ago to list her house, and when it came to commission and explaining why she might want to list at a higher commission (thereby increasing the co-broke commission), I just felt like I was suggesting some agents put their interests above their buyers. I've never felt comfortable with this, although I do understand and agree that this is the reality out there. Can be a tricky thing to address...

There is an agent here that listed his own home and proudly offered 1% to the buyer's agent, justifying it because his house was "the best in the neighborhood". It was also grossly overpriced. I hope he found his own buyer.

I fight it because I would never show a home strictly because of the higher commission but I must admit it helps.

For me it is all about the buyer and the buyer's needs. I find your concept appalling and would hate to think any ethical Realtor would show or not show a house based upon the amount of compensation. When I read what most of your thoughts are it's no wonder Realtors get such a bad rap and thoughts of steering and price fixing arise. If you are not able to work ethically maybe this is not the business you should be in.

Interesting strategy. Thanks for the numbers that back it up. I always try to show whatever homes the client wants to see, but money does talk, and probably more often than it should!

Interesting post here, Mariana. In our marketplace we always offer a higher coop to the buyers agent. That being said, an agent that will more aggressively promote a higher coop listing borders on being unethical (IMHO).

You may want to be cautious in setting your example by not using percentages...we're warned all the time about anti-trust conversationd from N.A.R.

This seems like a pretty neat marketing tool!! Thanks for sharing

Mariana~I have addressed this same topic in a post in the past when I questioned whether an agent was more inclined to show a home if the co-broke fee was higher or there was a bonus. I was surprised to find that more than 50% of the responses indicated that it was a factor in determining whether they showed the home...but the other 50% stated that they showed properties regardless of commissions.

We have a HUGE number of foreclosures in our market right now, and I'm seeing banks offer agent bonuses. Your right, it works.

My intent has always been to show the clients properties that meet their needs, not mine. It seems more professional and less self-serving.

It's true they say 20% of the agents do 80% of the work and that can be seen throughout the country. Im glad we are cleansing our profession right now. IT needed it.

You originally posted this in April and I said I would look. I did and the same thing is happening here. Out of 1000 agents in Ann Arbor less than 1/2 have not had a pay check. It never hurts to offer a buyer agent more, as they will do their best to make sure they show it. But, the final decision is on the buyer, I have never had a buyer ask me what I was getting paid, so they don't have a clue or care. However, if it is lower than usual commission offered it is hard to get a showing for that seller.

I don't see any difference between putting a listing on the bottom of the pile because it offers a low commission and putting a listing on top of the pile because it offers a high commission. If a Realtor uses that practice, does he/she disclose that to the clients?

My motto is "Clients First" which just doesn't go well with "Money Talks". My clients determine which properties I show. Sometimes I'm lucky and I get a higher than average commission and sometimes I get a lower than average commission. It usually balances out. If a situation arises where I just couldn't work for the amount of commission offered, I would disclose it to my clients and either have them sign an agency agreement, or ask for a higher commission in the offer.

Sandy

Are we assuming the buyer's have no input? We could show them every extra commission, added bonus home and if the home doesn't fit them, they're not going to buy it. Most buyers do a lot of online weeding out before we are even out with them showing homes. The REO's are paying full freight and they are quick closes - but that's because the price is right! Anna

Nice insight and few see it this way. Many still take the position that because there are fewer sales then they should only give away 2% so they make what they can when it finally happens.

Sad but true....no matter what the buyers "needs" are...if you line up to houses that are close in specs, the one paying the most will get shown the most.

Thanks

I would never compromise my integrity by trying to induce a buyer to select a home with a higher commission. While I would show them the house I would NOT try to influence them in any way. That would not be ethical. When I do sell a home with a higher commission I usually split it with them or give it to them outright.

Betina

Hi Mariana;

Great post and I do appreciate your efforts, Thank you!!!!!!!!!!!

Money is a motivator and so were the subprime loans. I consider my self to be ethical and honest and I would never push a client towards one property over another simply because I was going to get paid a higher commission. I in fact just talked a homeowner out of selling because she did not have too and would not get in todays market what the true value of her house. I am also proud to say I have steered my clients away from unethical lenders and have worked with them to find a house they can AFFORD. Yes, I have had some clients/customers decide to work with another agent because of this. But I do believe that my honesty and ethical approach has paid off......In fact despite the dismal market, I have had my best year ever.

I agree with your idea of increasing the commission to the buyers agent. I know from my own experience that I prefer to show those homes that offer at least 3%. There are just too many listings on the market right now to try and low ball buyers agents.

I am working for my buyer and I show them whatever property fits their needs; my money is important but my customer needs always come first.

Ethics, integrity and not greed drives my Real Estate business. Personally & professionally I would never "promote" a listing because it pays me more. I have to admit that after reading all the comments I wasn't going to make one however.... I am compelled to agree with many of you that it's about our customers - worst case scenario; what if we didn't show a property that is a perfect fit because of the comission and later our buyer found that house and asked us why? How would you answer that?

This is a business/marketing decision and it often does result in a sale, in a "stressed market".

That is a very interesting way to look at the monthly stats -- 80% not getting paid -- whew!

I do agree that it is enticing to offer buyer agents a higher commission, but the challenge is that, as a buyer's agent, I am not able to make my client fall in love with a home, I want them to find a home that they instantly fall in love with.

On the other end of the spectrum, if agents see 2.0% or 2.5%, I think they are less likely to show the home. We're just walking a fine line as listing agents!

It might work with some agents. However, most of the properties that I know of around here that offer higher commission or selling agent bonuses still sit on the market. Pricing them lower and offering standard commission sells faster than bonuses.

MANY THANKS to all who have recently commented. I cannot address each of you individually, but I AM going to address the common thread of comments, in general...

_________________________________________________

PLEASE UNDERSTAND ... THIS WAS A POST DIRECTED AT SELLERS AND THEIR AGENTS (ME) - NOT A BUSINESS PRACTICE RECOMMENDATION FOR BUYER AGENTS (I AM NOT A BUYER AGENT).

I WAS NOT EVEN ASKING ABOUT WHAT A BUYER AGENT SHOULD OR SHOULD NOT DO. I THINK IT IS AWESOME THAT SO MANY AGENTS WHO COMMENTED IN THIS THREAD ARE SO ALTRUISTIC (AS THEY SHOULD BE). BUT THERE ARE A LOT OF AGENTS WHO WILL SHOW/SELL ONE LISTING OVER ANOTHER SIMILAR LISTING WITH THE CO-OP AS A FACTOR.

I AM SIMPLY STATING THAT STATISTICALLY ... OUR LISTINGS WITH HIGHER CO-OP'S GET MORE SHOWINGS AND QUICKER CONTRACTS ... WHICH IS A BLESSING IN THIS MARKET.

_________________________________________________

"Does this upset other agents in the area?"

No. Not at all. I am not setting anymore of a standard than the agents who offer LESS than the area average.

____________________

"Buyer Agents shouldn't look at the co-op."

Why not? It is their paycheck. Should they base their "showings" on the co-op? No. But statistics don't lie and starving, commission-only paid agents are not all that altruistic. Why not use that to my advantage? My fiducuary duty is to my Seller Clients and the increased co-op has consistently proven to be an asset.

____________________

"An overpriced home with a higher co-op ... Buyers are too smart..."

That is so NOT what I am talking about. I am talking about the SAME priced home - basically apples and apples as far as price, condition, location, etc. Buyers are VERY smart (smarter than a lot of agents, in fact...).

And? In this market, when my sellers' competition is bank-owned and pre-foreclosures that can be a bunch of dain bramage AND they are offering a low co-op ... My sellers can REALLY stand out.

________________________

"For me it is all about the buyer and the buyer's needs. I find your concept appalling and would hate to think any ethical Realtor would show or not show a house based upon the amount of compensation. When I read what most of your thoughts are it's no wonder Realtors get such a bad rap and thoughts of steering and price fixing arise. If you are not able to work ethically maybe this is not the business you should be in."

For ME it is all about my SELLER and what I need to do to sell their home for the most amount of money in the quickest amount of time regardless of the market. Do I show homes based off of co-op? NO. I have no need to. (My team is successful enough to make NO MONEY on a buy-side if it came down to that.) If you would have actually read my entire post, you would have understood that I was talking about a marketing strategy for SELLERS and their agents ... not a business practice recommendation for Buyer Agents.

...and I am one of the most ethical agents you would ever meet. I do not think it was wise of you to question that about me in a public forum. There is NOTHING unethical about me, the listing agent, offering a higher co-op on my listings...

_______________________

In closing ...

Of course we should always put our clients first. That is a no-brainer. But in MY case, as a Listing Agent, MY fiduciary duty is to my Seller. I see the numbers and I know that offering a higher co-op works. It is not my JOB to be the ethical babysitter for every Buyer Agent who shows my listings. It is my job to get my listings SOLD ... and a higher co-op WORKS.

The perspective of this piece is awesome. It does make a case for defending against the commissionectomy.

This is true for my area. Properties that have higher commissions get the most agent interest.

You are spot on. Not only are we seeing some higher commissions, particular from builders iwth standing inventory (can you believe 5% commission from one?) but also bonuses - particular bonuses in the form of AMEX gift cards. It used to be in Delaware that commissions traditionally started at 7%, unfortunately, fear set in with some agents and it became dueling low commission.

Great piece. Thanks. Janice

What if we didn't show a property that is a perfect fit because of the commission and later our buyer found that house and asked us why? How would you answer that?

I don't show homes based off of commission. In fact, I rarely show homes at all. However, this thread has turned into a question of how I WOULD treat Buyers in a scenario where I was showing them homes ... So, here is how I would do it:

Scenario A: 3 similar homes, 2 competitively priced and one $20k overpriced with a higher co-op. I would show all the homes and see which one the Buyer wanted to see. If they liked the overpriced one, I would recommend offering market price (or maybe even lower). If they liked one of the other ones we'd offer whatever my Buyer wanted to offer.

Scenario B: 2 similar homes, similarly priced, one with a higher co-op. Again, whatever my buyer wanted...

Of course, if all RE agents were like me (and many of you) then my co-op marketing plan would not work. But, numbers don't lie ... so I will continue offering a higher co-op and selling my competitively priced, great condition homes quicker than the competition.

Listings with higher co-ops DO get more showings. Pure and simple. If you are in a market with lots of inventory that is similar, a higher commission will drive more sales. Regardless of what a buyer's agent should or should not do, the simple fact is the a higher split to a buyer's agent can help drive traffic and help a seller sell their property. As the listing agent, I think that is sort of what is supposed to happen. Your job is to help them SELL their home. I don't see how that is unethical.

Great blog MW and great way to start conversation on this topic. We've seen builder's offer higer commission in tough times - what's wrong with resale doing the same thing to set their listing apart from the others?

Debbie, "ethics go out the window and it becomes pure economics" gee, that's ethics? how about showing both houses and letting the buyer decide which one they prefer???

Marianna - This works and it works well - most especially in sub-divisions or community's or PUD's with homes that are very similar in layout and amenities. I find that it really helps speed up the sale on properties competing against themselves (same floor plan, same street, etc).

I've had agents share/split the difference with their buyers - I've had agents keep it for themselves - etc. The key is that an agent working with a buyer should have a contract, in writing, that spells out how that agent is getting paid and how much. That contract covers the whole "IT'S UNETHICAL" scream from some of the agents comments above.

What's funny is that everyone says they don't look at commissions yet the stats and reality show that higher co-ops sell faster and at closer to list price. Hum...

FYI, my hubby as a buyers agent DOES look at commissions - he has a contract with his buyers and they need to know if the amount they agreed upon is being paid by the seller or if they are going to have to come up with something extra. If it's a repeat buyer or a close friend and the commission is more than the contract, he often splits the difference or gives the difference, depending upon the client.

True. At the very least it will encourage more showings!

Ginger - You hit the nail on the head ... "Regardless of what a buyer's agent should or should not do, the simple fact is the a higher split to a buyer's agent can help drive traffic and help a seller sell their property. As the listing agent, I think that is sort of what is supposed to happen."

Amy - I was hoping for conversation ... ;)

Christina - You have brought up an extremely VALID viewpoint as a Buyer Agent. Thank you VERY much for your insight and for sharing your experience.

I say do what works for you and apparently the numbers don't lie.

competitively priced , great condition homes that are staged to show its potential will continue to sell in ANY market. that is just my two cents..

Works everytime here. I generally will offer a higher co-broke to Buyer's Agents. Would rather make my Sellers happy, than to collect the extra buck. Faster Sales Times = More Referrals!

repeat of tweet. this is a serious seller who understands the concept of MONEY TALKS

http://tinyurl.com/5cfugt

Very Interesting. You certainly did tap into some strong feelings! Personally, I worry a bit about discussing such things in concrete terms, for fear that it could been seen as price fixing.

However, I can say, that when the coop is less than what's normal for our area, I wonder about the seller and their motives, and I share that with my buyer. What do I think when the commission is higher than normal? I think the seller is really motivated. I think the seller has deep pockets. That they will move on their price, and negotiate with my buyer on everything. Is that good? From my buyers point of view, yes.

Like many other realtors, I don't consider my commission when I show a house...however, if they tell me they are definitely looking for a foreclosure, I'll put into the contract that they could be responsible for the difference on my commission.

I fully agree with Marianna.

Although it is a conflict of interest for a buyer agent to show one home over another because they will get a better commission, that conflict is already inevitable because of varying prices on homes. Besides, that is between them, their state board, their broker, and their client. There is no arguing that a bigger commission will get their attention, and get more showings as a result.

As listing agents, we need to do what we can to get as much traffic through our listings as possible, and there is absolutely nothing wrong with adding incentives to make that happen for our clients.

I am not seeing that bigger co-op or bonus has much of an effect on the listings in my market. The only thing that is selling homes in my area is price. Listings that are overpriced are not being shown-no matter how much buyer agent co-op or bonus is offered.

A lot oa agents are not making a living -- not sure how they are surviving but they are not selling homes.

Statistics have shown that higher commissions sell real estate.

Also, many agents charge their buyer's a minimum and if the co-op doesn't reach that amount, the buyer agrees to pay the difference.

Or, if the co-op is lower than the agreed upon fee, the house may not be shown because the buyer doesn't want to pay the difference.

When we list, we offer a full 1/2% more to the buyer's agent. The idea is to get the house sold.

It avoids all of that angst when the seller calls and wants to know what you're doing to sell your house.

Good post.

I disagree, no matter what the co-op commission is I show any homes that match to my clients. I am both legally bound and morally bound to do so. My clients choose the homes they want to see not me, and they choose the one they want to buy. Extra commission does not factor into the decision making process at all.

Marianna is dead-on with how this influences things. Here it is the end of 2008 and the numbers are pretty bleak. Our average agent this year will have sold 5 transactions. Last month over a third of the sales were in some form or fashion distress sales: short-sale, bank REO, headed that way, etc. The firs thing that usually gets attacked by banks and loss mitigation departments are agent commissions. So let's really apply Marianna's logic another step further: the average agent:

1.) didn't have a closing last month

2.) They might not have had one this quarter

3.) Their average sales price is down this year

4.) What they sold has a 30% chance of being for less commission than what they "normally" would get on a listing and

5.) That short sell takes 60 to 100 days to close if it ever does

Is it ethical? I don't know. Is pre-list inspecting a home ethical? What about staging? Those are unfair advantages when no one else does it. How about a short sale ethical? Is our federal bailout ethical? Is the unexpected medical bill that led to the sellers' marital difficulties and ultimately their foreclosure, ethical?

Marianna and I work in the same market. We have 5 years (those twelve month-long things, not months, YEARS) of inventory over $600,000. At the end of the day, I don't know how a $6000 price reduction changes the game for a $600,000 seller in a crowded marketplace. I do know how a $3000 change from 3% to 3.5% might change things. So if the question is where to spend the money, price reduction or commission... bang for the buck might be on the side of commission.

Over 90% of transactions in our market have two agents involved, one listing, one selling. Less than 45% of our listings this year will sell. If probability is based on 90% of the time working with someone else, and the odds are less than half that a listing would sell... is it better to just "take the risk" and price the home like all the others, leave it in average condition and not offer any kind of special "bait/incentive" to the people who at the end of the day, you'll likely be working with?

Marianna, I knew this post would ope up a can of worms! By the way I agree with it completely. ALL listing agents should be explaining this to their sellers. If not they are doing them a disservice.

i ALWAYS check the amount of the co-broke prior to showing a listing. If it''s not high enough then I need to tell my buyer about it so he can decide whether or not he wants to see it since he may have to make up the difference based on our buyer broker agreement. It's the buyers call not mine.

Listing agents do NOT control my compensation, I do. My buyers and I have already agreed on my fee well prior to showing properties. The commission and the co-broke being offered is a non-issue.

Now for the ones that responded that they show anything regardless of co-broker please come on down to my market and go sell a MLS listing offering a $1 co-broke. Would you really be willing to work for $1 because it's in the best interest of your buyer?

What's in the best interest of your buyer is to have the commission talk before going to work. Then have them sign a BBA so they know you are going to work hard for them and you know you will get paid. It really is simple.

Mariana, Whew. What a whirlwind. I totally get your point. I have in fact done this many times over the years. Facts are- a higher commission gets more traffic & that culminates in a quicker sale for the seller. Of course the buyer decides which house she wishes to purchase. End of story.

I recently had 2 condos listed in the same neighborhood - SAME price. One was updated, newer appliances, screened lanai and was very nice. The other one had RATS, original shag green carpet, original appliances,etc. SAME price, SAME neighborhood. Which one sold first??? The one that was RAT infested!!! When I asked the selling agent why, his reply was, "You had 4% commission on that one!" I was appalled, but it works!

Interesting this conversation has continued through the months. The number one agent in the Tucson Real Estate Market offers 5% co-op. Is there a point it becomes a bribe for starving (I use that metaphorically) agents. Instead of a co-op.

Is anyone kidding themselves into thinking some agents aren't steering their buyers to these listings for personal reasons rather than the best interest of their clients.

Mariana ~ My you certainly have stirred up a whole lot of comments! I understand your reasoning and in fact have used that argument with sellers many times in the past. In fact it is a convincing argument to present to sellers and for very good reason.

As a buyer's agent I am required by Colorado Law as you are too, to have a signed agreement in place that stipulates my compensation or shall I say minimum compensation depending upon how it is written.

In today's flooded market the compensation range is wide and it is very unwise for any agent to be working with a buyer without one in place. It is not unusual to see a seller offering a compensation way under what I would consider a good wage for my efforts and risk.

If such a home is appealing to the buyer, I certainly will show it because I know I will recieve the proper compensation, because my client has agreed to pay me even if the seller doesn't. When I set up our plan in this manner, there is no question when it comes time to write an offer.

In the case you describe, I would present the compensation to my client, and s/he would get the balance refunded at closing.

Depending on the property, this arrangement would be very, very appealing.

So in this case, both consumers would win!

Reading some of the comments, many protest and allude to never "driving" the consumer to a place because of the compensation. Well we do have the power to PICK the initial properties the buyer looks at. We also have the power to EXCLUDE the ones that compensate poorly.

So yes, we have the power. I do believe sellers who compensate poorly in co-op fees have to compensate in other areas to make up for it...like under-pricing their home to attract buyers.

Mariana - I didn't read through the comments and I'm on a different end of the transaction. I must say that your title was pretty damn savvy. I firmly understand your point..we need to get paid to survive, yet price is part of our power. Our field is unique, price is negotiable to an extent. Folks get what they pay for and get what they pay for. I'll sort through the comments another time, but overall it makes sense to me.

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Surprising how many comments only looked at your strategy from one side. Bottom line is we just need to ask ourselves who we represent, and then do what's best for them within legal and ethical bounds.

Lenn - I have always admired you and how you do business. Thank you for your comment.

Benjamin! Thank you SO MUCH for your input and for the stats that we can take into consideration. Ultimately, the numbers don't lie...

Marian and Mindy- Yep! Numbers don't lie. Highr co-op's DO help our seller clients.

Bryant! Bingo!! "Listing agents do NOT control my compensation, I do. My buyers and I have already agreed on my fee well prior to showing properties. The commission and the co-broke being offered is a non-issue." Exactly. But not many agents are having this necessary conversation...

Dave - I don't think ANY co-op is a "bribe"... Like Benjamin asked: "Is pre-list inspecting a home ethical? What about staging? Those are unfair advantages when no one else does it."

Kristal - You have a great idea ... splitting or sharing the larger co-op could be a great idea for everyone involved. Especially in a market where Buyers are spending more of their cash to secure a home than for moving expenses.

Jason - Price IS negotiable ... and so are terms (like commissions). We ARE in a unique field.

John! Thank you for joining ... and for seeing that there are DEFINITELY 2 sides to this issue. From the Buyer Agent side, basing decisions purely off of co-op is not okay. But from the Seller Agent side (the side I was speaking from) there is everything RIGHT with offering a higher co-op.

Great Post! There has always been a big debate about this. From a fiduciary aspect, we are supposed to show regardless of the commission amount as a buyers agent. From a realistic standpoint, realtors are human, and yes money talks. There have been a few times that I have encouraged the seller to give an extra 1% to increase showing activity and to increase offer potential. I've found that it really works on the lower priced homes. If there are 50 homes for sale at $75,000, 49 offer 3% and 1 offers 4 or 5%, assuming they all fit into your buyers needs, who isn't going to show the 4 or 5%? You may not get around to all of the other 49 though. This may also be controversial, but discounting to the co-op agent (buyers agent) is tacky and most realtors in reality say that they avoid those listings. We don't see much discounting to buyers sides here much anymore, but when it does happen days on market are looooooooooooong. That is doing your seller a disservice in my opinion. I've seen quite a few listing expire where they were offering only 2% to a buyer agent. In Texas our listing agreement specifically states what you will pay a buyer agent and we ALWAYS explain it all to them. In my opinion, you are cutting your own throat if you don't offer at least the going rate in your market. To be competitive, encourage your seller to step it up....i.e. 3% to listing agent and 4% to buyers agent......great comments out there! Have a happy holiday selling season!

I am sorry, but I totally disagree. I realize there are agents out there needing to take care of their families, but the issue is the CLIENT and meeting the CLIENT NEEDS, not the Realtor's needs...

Lori Cofer, Beasley Realty

Wow. Doesn't the Sherman Anti-trust Act require agents to not discuss commission structures because of the concern of price fixing? For those agents that are pushing a property because it pays more than another home, isn't that putting the agent into a conflict of interest situation?

The only time we care if the coop fee is higher is when we can give whatever is over our agreed to buyer's agency fee to our client. It's about the relationship, not the commission.

NOV

2008

OK I had to come back in. We are under ZERO obligation either ethically or legally to show every property that meets our customer/clients needs. I encourage anyone that belives they have to do this to post the article from our CoE that applies and/or the licensing law from your state that applies. My guess is you won't find any law and I know you will not find any articles of the CoE that state we have to do this,

BUT.....and this is a big but....you MUST have this conversation with your buyer prior to them hiring you. This is why the BBA is so important.

Look at it this way. The same folks that so gallantly say "I show houses regardless of the commission" are also the ones that say "I never reduce my commission to sellers" How can that be? Why are we adamant when it comes to a listing commission? Why are we not unethical when we refuse to take a listing where the seller wants to pay us a lower commission? Doesn't the same code and the same law apply in both cases?

If we MUST show any listing then shouldn't we also be required to take any listing? It doesn't make any sense does it? It doesn't make sense because it's not true.

Lori - So, you disagree with the option of offering a higher co-op (the point of my post)? Or are you just disagreeing it with the Buyer Agent side of this equation?

ANON - The only numbers I use are how WE do business. I am not implying that anyone else uses OUR numbers. The intent of my post is to bring up the idea to offer MORE than you (as an independent business contractor) may be used to offering. Whether you charge your seller client more or take it out of your side of the commission is completely up to you. I am not implying ANY set amount.

Thank you, Bryant, for that piece of information. I had not looked at it that way before. Makes complete sense.

... also, if you note the tone of my post, it is aimed at SELLERS and is not a post directed at real estate agents about ANYTHING regarding what you should or should not charge your clients to list their homes.

Mariana,

Just tells you how much a little creativity can go. In a tough real estate market like today's this practice seems a sure winner.

Some good tips for reeal estate agents. Now i wish I could get somegood tips from realtors about my Holiday services?

Butterfly...

I'll be back. I so need to read every word before I mouth off :)

TLW...ROAR!

I have payed out a much higher commission on properties I owned and watched them sell fast with very little problem from the buyers. I don't care what people say, you pay a higher buyer agent commission and you will have every buyers agent in town pushing that listing. Now if the home is over priced it will not work, but if priced at least close to where it should be there will be REALTORS beating down the sellers door with buyers waiting to see the home.

Esko - Thinking outside the box can yield great results.

Joel - huh?

TLW - I ALWAYS look forward to your Roaring... But you know this. ;)

Wow, reading these posts is really sad. Basically it says "everybody has their price" to do something WRONG. If you are looking out for the BEST interest of your client, you will show them all properties that fit their interests regardless of commission. Talking with them before showing and letting them know YOUR rules about how much you charge (3% or whatever you need) would be helpful. If they like the home enough with the 2% commission, they will be willing to pay the extra.

I'm just curious, but does this mean you should only list homes above $300,000 because the commission won't be enough for you?

Mariana - when representing buyers I think they should know what we're earning as a commision on each house. Actually, when we have an exclusive agency agreement, they agree to pay us a fixed % - if the seller is offering less, they pay the difference. If the seller is offering more, we give the buyer the difference. The same with developers - when they're offering a huge bonus, I think it's only fair to pass it on to the buyer. However, your theory is right - for some agents, a higher commission does make a difference.

I'd like to know if the agents that are saying they'd pass any/all incentive or bonus to their clients have had this conversation with their brokers?

Attention Brokers: Google Alerts are your friend and this post is a perfect example!

Great post, Mariana. I offer higher co-ops from time to time for the same reasons as you.

Mariana...As a Buyer Agent that would not work for me because I have a nasty habit of not even looking at the co-op fee offered. Plus our fiduciary obligations to our clients would prohibit putting commissions before client needs. Deciding which house to show or pushing one that pays a higher fee is definitely a big no-no.

it's a double edged sword for me because as a sellers agent I have indeed made the same recommendation...

Sonja asked: "I'm just curious, but does this mean you should only list homes above $300,000 because the commission won't be enough for you? "

Sonja - if that is your business model that you as an individual agent has decided upon, then YES - absolutely. There is no law ETHICAL OR MORAL that requires me to list any type of property, period.

Bryant - good point. I hadn't thought about it that way, but it is true.

....I had one real estate coach advise us to tell our buyers when we are showing a house with a higher commission than the norm in the area. He said it was just getting it all out in the open and letting them know that the decision is up to them, and let them no there is no pressure, but if they pick that house, the buyers agent will make a little more. I don't know.

I just think we do have to show them what best meets THEIR needs. However, there is nothing wrong if a particular SELLER chooses to pay more than the one down the street.

Didn't Bryant just mention that listing agents don't list for the same fees. Commissions are all over the board on that, so what's wrong with them being different on the buyer side?

Sorry, but BTW...I specifically recall placing some very good friends in a brand new construction home where the builder was offering 4%....it happened to be a very reputable builder, very good quality, whose price was way below the comps!!! I was a true fudiciary for them. A competitive home would have cost them a lot more than 1%. To make a long story short, it was truly a WIN-WIN for the builder, listing agent, buyers agent, buyer, loan officer, inspector, appraisal, surveyor, etc.....we all got paid very well and my friends got their dream house way below what they imagined!

Hope that helps

The inflated commission gets my attention but does nothing for my buyers. I will make a special effort to include a home my buyer doesn't really want added to the tour, IF I've previewed it and believe it suits their needs. But not because of the commission.

Sonja - I didn't imply that everyone has their price. Numbers just show that (well-priced) listings with higher co-ops get more showings and quicker sales. As a listing agent, representing the best interests of my client (the seller) THAT is what matters to me. The motivations behind the Buyer Agent who shows/sells the home is not my concern.

Sharon - Developers/Builders offer higher co-op's here as well.

Monika - It wouldn't work for me either, but as a Seller's Agent ... it definitely works to get our listings sold quick.

Christina - Thank you for addressing that comment.

Jeff and Lisa - You bring up a great point ... As long as everyone involved is well-informed, there are a lot of great opportunities out there - for both Buyers AND their agents.

Many thanks to Broker Bryant for reminding us of this great post:

List with me and just pay me whatever you feel like!!!

NOV

2008

The home being priced correctly is also a huge factor, some sellers would rather increase the buyer agent's commission instead of lowering the price and if it's overpriced in this market, offering a higher co-op commission may not work. I show clients homes they want to see and some of them do offer a lower co-op, client comes first (of course I won't work for free though). Great post Mariana.

Mariana: I also think it is bizarre to admit that as an agent that if we have a listing to show that has less of a co-op commission that we would put it at the bottom, or not even show it (which I agree with)... then there is no difference in putting a listing that offers a higher co-op than others... into the mix of homes that I WOULD show. I will NOT push that home... but it surely will be one of the ones I choose to how. I surely would not push that home... but I most surely would make sure I'd show it.

Let's turn this argument around a bit.

In my little neck of the woods there is a big problem with buyer's agent coops. I am starting to demand X% as a buyer's agent. The reason? The coops have become so pitifully LOW that I can't make a living AND do a good job for my clients. If I have to live on the pathetic coops that are normally being offered - then I have to "rush the buyer" in order to make enough money. I might not be able to do all the things I do to push the deal to closure.

Listing agents appear to be hogging the lions share of the commission. They are doing this because the listings no longer sell like hotcakes, but why does that mean they should stiff the buyer's agent who is also working 3 times as hard???

So here is my question....Everyone is jumping all over buyer's agents for prioritizing in terms of commission. Why aren't people jumping on listing agents for hogging a larger portion of the pie? Is THAT in the best interests of their client? What about THEIR fiduciary duty??

Commission is no longer going to be an issue for me. I am simply going to state my commission on the EBA and have the buyer sign on So now, the coop is an issue for the buyer - not me. The buyer wants that commission covered. The result is that the buyer may actually refuse to look at a listing where they might be responsible for a portion of the commission. Btw, you can't "hide" listings with low coops in my area - buyers are far too internet savvy for that.

In our area the commissions are usually split evenly between the buyer and the seller agencies, with one or two exceptions.

And let's face it - both sides work hard and both sides have risks involved. The listing agent is expected to market and promote the property without a guarantee of being paid. Granted, some listing agents are content with the MLS and the default listing on Realtor.com; but many of us work our behinds off promoting these homes and trying everything they can to get buyers into the house.

Not only am I a listing agent, but I also work with buyers, and I think that's true for many of us. In my opinion the only fair thing to do is offer an even co-op. All of us work without any guarantee.

I guess the idea behind the higher co-op is that more agents will bring more buyers through increasing the likelihood that "the right" buyer will come through; it's not a matter of convincing a buyer to buy a house because of the co-op.

It's deff. worth trying out. Really smart idea

Out of the 3000 agents in your area, how many are working every day? I would venture to say that only 20% of them are actually working "in real estate". It always gets back to the 80/20 rule.So many agents think that even in today's market, they can just hang on to their license and have a payday. They are clinging to the mentality that existed back when you didn't have to work to get a commission check....

I simply show the homes my buyers want to see. They decide, not me. I don't look at the offered compensation until they have decided on a home.

Hi Mariana. Great post and so many interesting replies to it. I do not understand how someone can say they disagree.....your post is about statistics and facts and what works in your market. How do you disagree with facts??? Some people seem to be missing the point of this post. Great information as always and I have noticed the same thing in our market. Of course a higher co-op gets more viewings....people that think otherwise aren't being realistic....you are only reporting the facts and doing whats best for your seller.:)

Ruthmarie Hicks -I agree with - get a buyers agency agreement upfront with what your fee is explaining your services to them and what they and you can expect and commission never becomes an issue at looking at any one given house - it won't matter at that point - it could even be a a FSBO and it's covered. We work hard on our listing presentations how come we aren't working just as hard on our buyer presentations before we jump in the car??

In Sw Florida our company does this with great success...

More often than not, the lowest commission offerings that I see are matched with the over-priced and difficult-to-show (appointment only - 2 day notice, etc) properties. They also usually lack any serious attempts at marketing such as adding photos to the MLS or describing the best features of the home. The seller's attitude about the home sale is often reflected in the commission offered to the buyer's agent. I don't refuse to show those low coops, but my buyers usually screen them out for all the reasons that I just stated.

That may be the true explanation for why homes with higher coop sell faster - it's because the seller is serious about selling and doesn't want anything to stand in the way of his buyer seeing the house!

Hi Karen,

I'm glad to see that there is an even split in your area for the most part. In our area MOST listing agents are holding onto the traditional "full commission" but cutting the selling side to the bone. In general the splits heavily favor the listing agent - and in this market - THAT IS WRONG. About 2/3 probably favor the listing side while about 1/3 are even. A few just list for less and I include them in that 2/3. So about half the agents are hogging the lions share of the commission.

NOV

2008

Those of you who talk about how it's wrong to let the compensation affect your showing: Well, what about 0%? What about .5%?

Oh, I see: It's about not letting .5% off the standard or normal coop rate affect your decision. Just one question: What's the standard or normal rate, and how did that get set? Last I knew, it was an antitrust violation for brokers to agree on anything like that. So is a coop rate of 3% somehow out of line and unethical? How about 4%? 4.5%? 5%? 6%? Is there ANY number that you can say is out of line for any actually ethical and legal reason?

The answer is "no." If you believe a coop rate of 5%, for example, is unethical, then why? Aren't you implicitly endorsing a kind of price control? We're NOT allowed to have industry rates, guys---so if you can measure the unethicality of a higher coop rate, you're a mental violator of antitrust. (You know: If you commit adultery in your heart, you've committed it in fact. Replace "adultery" with "antitrust." And then realize that it's not really true, thank God...) 12% coop is no more unethical, and no less right, than 2% or 3 or 4 or... any other percent.

So are you ripping off your buyer if you take a higher coop? Think this through. Who pays the commission, or at least who do we always say pays it? The seller. So that money is the seller's to give away as he sees fit. If he wants to give it as an incentive, that's his right, and there's nothing unethical about your taking it. Oh, it could reduce the buyer's price? Sure: So could your not taking any commission, or taking any amount less than the coop offered. But they offered more than you see in the majority of listings, so it's a ripoff for you to take it instead of letting the buyers have it, because you'd have sold the house for less if the coop offered had been more "typical"? Sorry: Your buyers still made the offer they made, and were willing to pay what they offered. WHATEVER the components of that, on the buyer's side, are, is irrelevant and not the buyer's decision.

But the money COMES FROM the buyer? Well, they are willing to pay $N or not. If they are, what difference does it make if the seller gets $1000 more or the agent does? Think about it: You're saying that if the seller's agent doesn't offer, say, N% + 1.22%, and the seller therefore pockets that 1.22%, that's okay; but it's somehow not okay for YOU or an agent to pocket that 1.22%; if the seller is willing to pay the coop agent that (or the listing broker, who may offer it on his own, is willing to do so), nevertheless the buyer should get it back? What changed? Nothing. The buyer accepted a price, the seller accepted a price, the seller and broker made their arrangements as to compensation and cooperation. Where in this does the buyer gain any right to money depending on how compensation is split or how much is paid? I don't see anywhere that happens.

Does the seller owe more than he'll get? Then isn't the commission paid coop a direct injury to the seller? You can cut this a hundred ways and posit that the buyer or seller is injured by some not only legal, but ethical, action we take. We DON'T work for free. It cannot be the point of fiduciary duties that our compensation can be too high (assuming it's not in an illegal FORM, such as a net listing); if it can, then any positive number can be said to be too high, since any one seller or buyer would always be better off if they got to keep the commission money. Unless the point of the code of ethics and of fiduciary law or law of agency is to drive compensation down to zero (at which our profession would cease to exist), then to say we can get paid too much and we have an obligation to pay anything "extra" we receive to our customer or client, is a contradiction.

And any such argument drives toward one of two possible conclusions: Set rates of broker compensation and coop split--industry-wide--or zero compensation. The former is an implication of the argument that any rate higher than "normal" rips off home buyers and should be given back to them (why the buyer, and not the seller?), and is of course illegal. The latter eliminates real estate brokerage, which while some may see it as a good thing (I'm pretty sure the Department of Justice believes that ANY commission, any money paid to real estate brokerage, is illegitimate), would surely have tremendous costs to home buyers and sellers.

NOV

2008

David...

There is a Blog waiting to be written in your last comment :)

TLW...ROAR!

Hi Butterfly...

Hope you had a wonderful thanks day and you DIDN'T burn the salad :)

TLW...ROAR!

Interesting points David -

It is not nearly so cut and dried as people think it is. Most areas haven't faced the pitiful compensation that is routine around here for the buyer's agent. The moralizers are thinking - "I'll do my duty by taking in less and showing my people everything possible and make up for it later." What they don't realize is that this can easily become the NORM and it can go so low that it is unsustainable particularly at the entry level. Each agent has to determine at what point they have to say "NO! I can't sustain myself on this money." Saying that "fiduciary duty" requires that you be willing to go broke makes no sense.

On the flip side, the points made regarding higher coops are also revealing. Linking coops with fiduciary obligation is rather sticky...whether they be high or low.

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