Marianna Wagner started quite the discussion earlier this week with her post, "How to Take Advantage of Struggling Real Estate Agents, as a Seller". I was going to write a post to address many of the comments about "I'll show any listing regardless of commission" and "I always put my client's interest first" but then I realized I had already written that post. So here it is.
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Are you being honest with yourself?
First posted 2-24-2008
Here's a little scenario for you.
"Hi Broker Bryant. We saw your ad in the paper and would like to list our property with you."
- Excellent!! I'll be right over.
So, I head over and give them my little spiel and they want to list with me.
- OK folks sign here and here and I will get your property up and running on the market.
"But Broker Bryant.....how much do you charge?"
- Folks, I am bound by the REALTOR® Code of Ethics that states:
"When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary"
- Since your best interest is getting the property sold with the least costs to you I will leave the commission up to you. If I didn't do this I would be putting my interest and lively hood ahead of yours and would be in violation of our CoE. So just pay me whatever you want.
"Well that sounds great Broker Bryant!! You're the bomb!!"
- Yes, I am. Commission does not matter to me at all. I'll gladly work for free if it is in your best interest. That why I'm a REALTOR®. Make sure and tell your friends too.
"But Broker Bryant....don't we have to offer the other agent some money to show and sell our property."
- Yes I'm afraid you do. Our MLS will not allow a property to go into the system unless we offer the selling broker compensation.
"How much do we need to offer?"
- Well folks remember the other broker will be a REALTOR® too and is bound by the same CoE that I am:
"When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary"
- So why don't we just offer them $1. Most REALTORS® don't look at the commission anyway. They just want to get the best deal for their Buyers. The co-broke doesn't really matter. In fact, if they don't show your property we can bring them up on Ethics charges.
"Broker Bryant....we are soooooo glad we called you. You have far exceeded our expectations. No one has ever explained your ethical duties like this before. We'll be sure to send you lots of referrals!"
- Thank you folks!! It sounds like my job here is done!!. Before I leave can I borrow a fiver to pay for my gas home? THE END.
Sounds foolish doesn't it? Well if you feel we have to show every property regardless of the co-broke then this is exactly what you are implying. Or does your incorrect interpretation of the CoE only apply to Buyer Brokers?
If you are telling your Sellers that Buyer Brokers must show their property regardless of the co-broke you are harming them and in fact may be in violation of the CoE. And if you are telling them that Buyer Brokers, who do not show their property, are acting unethical and illegally then you are wrong and may very well find yourself in front of an Ethics Committee.
But, by all means, if you CHOOSE to show all listings, regardless of the co-broke, you are free to do so. Personally, I think you are fooling yourselves. It is your business though. Just know that you do not have to do so. Of course, you do need to have this conversation with your Buyer.
Food for thought?
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136 Comments on List with me and just pay me whatever you feel like!!!
AMEN... Broker Bryant! Who doesn't realize that SIZE MATTERS? RIGHT?
BB...
My feelings on this subject are well known, it is contrary to the interests of the MLS. If there is enough of this crap, the MLS's will go away on their own from lack of members!
The whole concept of "buyer's agency" is nothing more than window dressing thrown up to make sub-agency look more appealing to the public. It has very little to do with protecting the consumer and everything to do with shielding liability away from the listing brokerage by no longer having a sub-agent (at least not in name) in on the transaction.
So, Joe Blow seller pays the listing agent to pay the buyer's agent to betray their sellers' best interest by getting their buyer the best deal (lowest price & best terms)? Is that insane or what?
The buyer thinks they are getting representation "for free" when in reality their agent is being paid by the seller with the hopes that they will get top dollar from their clients when buying their home. Where is the sense in that?
Then we also have the super-secret selling bonuses that the buyer's agent gets (again offered by the seller) and the buyer isn't even made aware of their agent collecting them? And, this buyer will finance it for years to come with every mortage payment they make...
This is nothing but sub-agency hidden behind a new name and once again protecting the broker over the consumer.
Then we have agents on here that want to cry because another brokerage doesn't want to pay them what they think they are worth. They want to try and dictate policy to other brokerages about what their commission rates should or shouldn't be - or, GASP! they won't show the listings. Kind of like the million dollar club rules - encouragement to fix prices on commissions without coming out and saying so. Very thin ice to be walking on in this day and age. I'm waiting for some agent to sue a board on that one...
If you're worth everything you say you are - get your buyer to pay for it. Surely, you can demonstrate your value as a buyer's agent and get your client to agree to pay it up front or wrap it into their mortgage for the next 15 or 30 years. Surely, the lender will turn a blind eye on the actual value of the home and finance what you think you're worth on top - they've been doing it for years with closing costs.
I offer what I believe to be a fair co-op in MLS, but I love it when some agent won't show it and their buyer calls me up and I write up both sides. It happens a lot more than ya might think. ;)
Buyer's agents you can't have it both ways. You either be big boys and girls and step up and go out and get all the listings or you get your buyer to pay you what you think you're worth.
Give me a bird in the hand and lots of repeat business and referrals any day over two to three more in the bush.
Richard, there is no need to throw out the offer of cooperation. There is a need from many standpoints, including ethics, to throw out the offer of compensation because mose listing agents aren't educated enough to explain to a seller that a selling broker is not obligated to accept it. Further, neither is the selling broker's client, the buyer. The buyer is free to put any conditions on their offer that they want , including the condition that the seller pay their agent. Indeed, my buyer broker contract obligates them to do just that.
The MLS will change but it will not go away any time soon.
Jessica, I think you spent too much time in the 80s and 90s and never left.
Paul Howard
Hi BB,What a hilarious post. Both you and my husband like to take something to the ridiculous, to make a point. It's actually very effective! When a potential client asks if I'll take less commission. I just say No! If broker from XYZ real estate will.... that just shows if he can't even negotiate his OWN paycheck how is he going to negotiate for you?
Paul, I call them like I see them. That's exactly what buyers agency is: Sub-agency with some make-up caked on. Sure, there is some benefit for the consumer, but it was created to protect the broker.
A few changes made to the HUD-1 accounting and the problem is solved. Except, BA's would have to demonstrate their value and get their client to agree to pay what they are worth instead of relying on the seller.
Take a long hard look at a standard buyer's agency agreement - It's all about protecting the REALTOR(R) and making sure they get paid. People can rationalize all they want, but it has very little to do with protecting the consumer. It has everything to do with making sure the REALTOR(r) is taken care of.
I'd be interested in taking a look at what, Jessica, calls a "standard Buyer's Agency Agreement". The one the board has here I considered worthless so I wrote my own (as a sole propriator I can do that). I'm not surprised if a standard agreement, as you call it, is written to protect the Realtor and not the buyer.
Buyer agency is definitely not any version of sub-agency. Heck, there is even an association of buyer agents. The National Association of Exclusive Buyer Agents is made up of member companies that don't take listings. They take buyer agency very seriously and just as seriously they see themselves as ADVOCATEs for the buyer in every transaction. (I am a member.)
This industry has far too many members, the ironic result is that it keeps commission rates much higher than they need to be. Even at the level they are, the average Realtor struggles - and I'm not counting the far too common part timer. More change in this industry would be good.
As to protecting the Realtor, that is what the COE is designed to do - not to protect the public.
I can only speak for the states that I am licensed in and I would agree that they aren't worth the paper they are written on. That's why our attorney drafted one up for us.
I'm very much aware of the fact that there are organizations of Buyer's Agents. One of them is called REBAC and they once invited me to be a guest speaker on buyer representation at NAR - which I was quite honored by and gladly accepted. We had a blast.
Brokers didn't like being responsible (and in some cases liable) for the actions of sub-agents as well as their own agents - thus buyer representation came into play. It is trumpeted as being about protecting the consumer, but it is just as much, if not more so, about protecting the Realtor(r). We can dress up and make it look all pretty all day long, but it is still what it is. And, that's fine. Just call it what it really is.
Yes, some good has come from it, but it's just window dressing until the buyer pays for their own agent and the seller continues to pay for their own. Solving this problem isn't complicated, but it would mean using a bit of common sense and agents having to do more in order to demonstrate value - which would decrease our numbers and lower our lobbying force and contributions. Which is what it's all about...
"If they won't pay me what I think I'm worth then I just won't show it."
How is a buyer's agent worth more per hour to handle a $300,000 transaction than when selling a $150,000 home a week later? Roughly the same amount of time. Roughly the same amount of effort. What's changed? Why are they all the sudden more valuable per hour? Why should the buyer of the $300,000 have to finance more to cover the cost of their agent than the guy or gal buying a home for half the price?
COE? If every brokerage gave a flip about the COE our numbers would drop dramatically, our image would improve and their would be plenty of business to go round. But, we are more concerned about profits as an industry than we are people. That's why we won't show homes that don't pay us X%, X+1% or X+2% commission. It's all about our needs. It's all about greed.
When you put people first - the profits will come, but when you keep trying to force feed somebody they are bound to take and take and take - then spit it back up.
There are real American families out there that are struggling to get by. Not knowing if they will be foreclosed on before they can sell - if they can sell. No, I'm not a charity, but you're damn right I will bend over backwards and help them and put their needs first. Sunnier days will come again and they will think of me.
Really great discussion you guys have going on. Jessica, Paul H and Paul S, thank you for taking this discussion to another level.
Jessica, the buyer is paying their agent. In fact the buyer is paying every body since they are the ones bringing the money to the transaction. The problem is not how we are getting paid the problem is that agents are not educating their customer/clients AND they are not properly representing their side of the transaction. BUT having said that, I truly feel these agents are the minority. The ones that do the bulk of the business are like you, Paul, Paul and myself. We ARE looking out for our customer/clients.
And when you talk about BAs being more about looking after themselves I have to disagree. Lenn Harley is a perfect example of a BA who takes who job very serious. And there are many more just like her.
I feel that a large number of the less than professional agents will be out of business by the end of the year. It's time to pay our dues again. I wouldn't be surprised to see our ranks far by as much as 30%.
I hope everyone has a great Thanksgiving!!
Jessica wrote in part: How is a buyer's agent worth more per hour to handle a $300,000 transaction than when selling a $150,000 home a week later? Roughly the same amount of time. Roughly the same amount of effort. What's changed? Why are they all the sudden more valuable per hour? Why should the buyer of the $300,000 have to finance more to cover the cost of their agent than the guy or gal buying a home for half the price?
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I suppose we should ask the same question of listing agents, no?
On this holiday, what is good for the goose is good for the gander...
And just to stir the mess a bit... why not argue that it is in fact the buyer who is paying for both sides of the commission now? Since the price he pays includes enough to cover the ocst of the agents... I understand that technically the money comes from the seller, but that is nearly a semantic issue, and I understand those intimately... but it could be argued either way... the technicalities can be sorted out in the contracts, but as it stands today, the buyer would have to pay for the house, and then pay additional on top of that, cash out of pocket, fo rrepresentation, where as the seller does not have to do that, putting th ebuyer at a significant disadvantage.
HAPPY THANKSGIVING BB AND THE REST OF YOU...
Paul:
I don't know if other agents will ask that question, but I asked it to myself and will be rolling out a whole new model for doing business (at least in my area) at the first of the year. My attorney is finalizing the contracts and our programmer is finishing up the billing system.
I will charge by the hour (billed in 10 minute increments) with a 15 hour minimum and retainer paid up front. Compensation will be paid at closing (minus the retainer) and I will also ask my clients for a tip at the end.
The tip will be completely at their discretion and will be based on how much I saved them and their experience with me as their agent. So, they will truly pay me for the work actually performed and directly related to selling their home and based on the quality of service they receive. In addition, they will pay out of pocket for upgraded services such a video production, tabloid flyers and any print media they want to appear in (they know my stance on print media).
If I don't sell the home then I failed. ME. Plain and simple. I failed to:
1. Properly price their home or I gave into their unfounded expectations
2. Properly prepare their home or have their willingness to cooperate in doing so
3. Properly educate them about the market and a realistic time frame
4. Properly pick clients that I enjoy working with and they enjoy working with me
There are probably a few other reasons, but these come to mind right off the top of my head.
I absorb the cost and it will either make me better or force me out of the business. My money is on better...
My clients will pay for what they get and the costs directly related to selling THEIR home. They won't be paying for my previous mistakes. They won't be paying for homes that I didn't sell and have to make up the costs for. They won't be paying for homes that did sell, but I didn't quite make what I really should have because of a stupid lopsided percentage. They won't be paying for unproductive agents that sit around the office consuming coffee and pastries and driving up the cost of business. They won't be paying for advertising dollars for future business that I may or may not sell and may or may not make enough money on. They pay their way and for nobody else.
I've spoken to about dozen or so potential sellers since getting back to Georgia about this new program and they are waiting for me to get everything finalized before putting their homes back on the market at the first of the year.
I am not a discounter. I provide full service and sell real estate like a capitalist. I don't spread the cost of doing business around from one home to the next. My time is dollarized and it doesn't change from one home to the next.
When the seller is actually educated about what they are being asked to pay for (the whole truth) - they like my way a lot better. Mark my words, my way is the way of the future.
Jessica, I hope you are right about that wave. I've given what you describe some thought in the past but I guess I haven't had the guts to put it into practice. That may, in part, be because it appears to be easier to implement on the listing side. I hope you let us know how your model works.
Paul Howard
BB - Really good post that cuts through the clutter. We want to serve our clients, but there is a balance to be achieved. We have to earn a living. I've had clients sign buyer agency agreements agreeing to pay my firm a certain percentage if we are unable to collect from the seller and I may have to go back to doing that again given the increasing number of short sales and the ruthlessness of the banks in dealing with agent commissions.
This is hilarious. Whenever I see listings in my area that exceed 180 DOM, they are typically listed by an out-of-area broker or discount broker that offers less than the standard rate of commission.
BB,
Hah, I would just have to copy and past the same comment I made from a post of yours a few days ago, but the bottom line is. REALTORS run a professional service and should not back down from charging accordingly. At some point, you have to question some of the clients who come your way expecting less than that....might be a good time to refer them to a lesser service.
Have you ever known serial bad tippers. Same kind of thing. If you can't afford the full service you are getting, go to a more do it yourself, drive thru style kind of place. And you know what stinks with associating with those kind of people, when they chose the full service, but are stingy, some one else always ends up paying for them.
No thanks.
This is where the buyer-broker agreement comes in. Then the cliant can decide if they would like to see homes where they would have to pay the remainder of the commission out of pocket. As far as sellers go, when I explain that the advertising for their home comes out of the commission and with a lower commission they will not get as much advertising, they usually do not want to discount the comission.
Holy Crap...
And to think it only took me an hour to read all of that.
I guess I shouldn't take a time out to clean, cook and make ya Happy on Thanksgiving? :)
TLW...ROAR!
And for your info...
I almost want to respond to Debbie Summers :)
TLW...ROAR!
We address the issue with the buyers using minimums (ie. if cooperating agent commission is less than X%, there is a fee paid by the buyer). Similarly, we have the "talk" with sellers explaining that deeply discounted commissions or low commission to cooperating agents results in less showings. We let our buyers choose whether they want to take a look at FSBOs, low coop commissions, etc. Almost all have said they don't want to pay a fee because it should be paid by the seller and choose homes that only meet our minimum commission to view. I think the key is disclosure and communication. I know that there are agents that search on coop commission and look for bonuses. When it isn't disclosed to the buyer that the search is limited by these considerations or when it isn't disclosed that a house pushed by the agent has an agent bonus, there is a problem and it seems that this is where the agent has put his or her interests in front of the interests of the buyer. Disclose, explain and communicate - no foul in my book if you have done that. There is no free lunch - we work to get paid commissions.
Well said my friend and I couldn't agree more! We are in this business to make money, sometimes I have been forced to give up a little to save a deal, but it was my choice! If I am asked, then it is always, sorry, can't do that.
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