Home : Blogs : Coeur d'Alene Real Estate - Come Live the Life Style - Christina Ethridge : North Idaho Real Estate and Homes for Sale - Coeur d'Alene, Post Falls, Hayden Lake & Rathdrum

I'm running a business, not a charity - but apparently, all too many agents think the opposite.

Just take a look at the plethora of comments Marianna Wagners post is getting on this very topic. Well actually, her topic was on educating her sellers on the advantages of offering a higher buyer agent co-op - but the comments turned into a diatribe on the ethics and morals of doing so (from the buyers side) and then... into some blather about how "we must look after our clients interests no matter what"... blah blah blah.

Ok, let's get a couple of things straight. First and foremost - I do not work for free. I'm running a business, not a charity. Therefore, everything I do will ultimately support that business. That does not mean I will be unethical or immoral, what it does mean is that I will not work for free.

I will not list properties without charging what I have determined is my rate of pay for my services. I will not show buyers properties without agreeing, in writing, what I have determined is my rate of pay for my services.

It's pretty simple really.

If my desired rate of pay means that I will only work with homes above the $500,000 price range at X%, then that is what I will do. (Sellers - this is an example only and don't worry, I don't limit myself to the $500+ price range).

If my desired rate of pay means that I will only work with buyers who pay an upfront fee of $$$, then that is what I will do. (Buyers - I won't actually be working with you but my husband will and he does not charge an upfront fee for his services, this is just an example).

I have no ethical or moral duty to list all homes or to show buyers all homes even if there is no compensation. No, this does not mean I charge for all services, but it does mean that the services I do charge for are in writing and have the capability of supporting me.

All too many agents get a pious, holier than thou attitude about "fiduciary" responsibility to our clients. Unfortunately, 99% of that is just plain wrong and more of an affectation than a reality. Those same agents are often the ones that get themselves in legal hot water as well. Prospective clients - be very careful when dealing with an agent that doesn't have any business sense... if they don't run their business professionally, why on earth are you letting them represent you in, mostly likely, the largest purchase of your life??

The reality is, sellers offering higher buyer co-ops sell their homes closer to list price, with a shorter time on the market. This is proven in my market and it appears it's proven in other markets.

Anyone that attempts to be in this business with the mindset that they will serve their customers without bothering to factor in the bottom line (aka, payment for services rendered) will find themselves quickly booted out of the business AKA bankrupt and in need of employment.

Posted by Coeur d'Alene Real Estate - Come Live the Life Style - Christina Ethridge on 11/26/2008 12:54 PM

Comments (64)

COMMISSIONS in the Sales Strategies / Tactics Channel

64 Comments on I'm running a business, not a charity - but apparently, all too many agents think the opposite.

NOV

2008

I'm with you all the way on this one - Great post!

Christina - This is just common sense and while a higher co op will not sell a house that is a dog and over priced, if the house is priced well for its condition, then it will usually sell faster with a higher co op.

Good point. I told that once to a buyer who wanted me to show him a house but said he was working with another agent. I told him "If I show you the house, you're buying from me. I want to get paid. I do a lot of charity in town but this is not one of them." He said he'll wait for his agent to come back from vacation.

I wrote a blog about working for free recently but only because the buyers have landed on my pipeline. I cannot help them right now.

It's amazing how many people believe most of the services we offer should be for free. Your post is dead on the money.

Absolutely right -- if any of us are in the non-profit business pretty soon we will be out of business. All the best.

It looks from my bottom line, like I am running a "non profit"! It is just a matter of time for everything to improve!

Anon - that one had me laughing out loud!

"I lose money on every deal, but I make it up in volume" Sadly, as long as more people with that mentality continue to populate any profession, it will be more difficult for the real pros to do their job.

"The reality is, sellers offering higher buyer co-ops sell their homes closer to list price, with a shorter time on the market. " Fact or not, this is exactly why consumers are fed up with the real estate industry. Nothing against you personally as you're just restating the obvious, but doesn't it really sound corrupt?

NOV

2008

Christina: I very much agree with you. I just read Marianna's post first... and then commented before coming back to your post. Offering a higher co-op split is something I have done for my sellers many times. It really brings in extra traffic... especially when times are tight... and the listing supply is so large. Is it unethical ? Heck no. It is called Marketing.

There have even been times when a buyer has purchased a home through me, and then I market their existing home with a 4.5% split to the buyer's agent... with 1.5% staying with me. Now, that is only when I have a client who both buys and sells with me... but the client really seems to appreciate my going the extra mile. For me, though... if the market demands it... I think it is only fair. And... the referrals I get after everything closes from those clients is remarkable. Great post... thanks for putting up with the grief. Take care...

Hi Christina,

I commented on Marianna's post before coming back here.

I see the problem through the eyes of a buyer's agent....so here's my question:
What gives listing agents the right to scarf up the lions share of some of these coops all for themselves? Many of them do around here - while kicking the buyer's agent to the curb. This is a big mistake in a down market. But what about THEIR fiduciary duty to THEIR sellers? It works both ways....

Though it might work, it's a sad comment on our business practices. ANY TIME you place your interests in front of those of your client, I consider it wrong and a conflict. In fact, clients to whom I've posed this very question all said that they might have doubts about whether they were shown all of the properties that best fit their criteria if they found that the agent received a bonus. That said, I put all bonus properties at the VERY TOP OF THE LIST TO SHOW! I also give my clients a document stating that any bonuses or increased coop over the average of all properties (or over that stated in a buyer representation agreement) will result in a purchase agreement stipulation that it be credited to my client. First, I'm doing them a service, in that increased coop can indicate motivation that may result in a better deal for them. Second, they'll get the difference, so I'm working "in their best interests."

Rosalinda - My hubby runs into that a lot and ALWAYS sends the buyer back to the agent. It's not worth his time or energy.

Sharon - definitely.

Darla - thanks!

Mike - yeah, that doesn't make a whole lot of sense, but I believe it's a joke on the whole "clients interest even if I don't get paid" blather that is going on.

Bob & Caroline - thank you!

Trunda - I like the pun.

Angelica - I'll check out the post.

Karen - Marketing it is... agents seem to feel disdain for successful, ethical market techniques, like they couldn't do it themselves too?!?!?

Kelly - What's corrupt about it? It's called a free market. Until buyers are willing to pay up front retainers and pay a fee out of their own pocket and until sellers are willing to pay non-refundable, up-front fees for listing their homes (no matter the outcome), then commissions it will continue to be. When sales are few and far between for most agents, then higher commission offerings are going to run the show. The best thing I can do is serve my clients and take advantage of this opportunity for them.

Ruthmarie - Since the way both Marianna and I market is the opposite of what you bring up, I have no real comment. You are talking about an entirely opposite issue, one that I will bring up in another post later on. Additionally, it appears you are talking about something that is going on in your market - it's currently a rare occurance here. My fee to list is X%, in the current market I strongly encourage my sellers to offer X+Y% to buyers agents. That is not an equal split, it favors the BA.

Jim said: "Though it might work, it's a sad comment on our business practices. ANY TIME you place your interests in front of those of your client, I consider it wrong and a conflict."

That's interesting. No attorney that I know of will take a case, no matter how much it is in the best of the prospective client, without first negotiating and confirming, in writing, compensation. My local grocery store does not let people walk out with grocery carts full of food without paying, no matter how much they need the food to survive.

It's not a sad commentary on business practices - it's a sad commentary on agents who do not work with written contracts - period.

Christina--Your wit and straightforward talk is back! Higher payouts means a listing will get shown more often but won't get it sold if it is an overpriced dog. I take my fiduciary duties seriously but they do coincide with being profitable too. Your comment regarding buyers and sellers needing to realize if their agent doesn't have business sense, they can't be of much service is very true!

Have a great Thanksgiving1

I agree and I am not working for free. We just went over this as well in a Code of Ethics class, the agent teaching the class could not express enough about getting paid for your services and that it is not against the code of ethics to not show a home that has a lower SOC than you work for. Using a buyers agency agreement up front spells it out. Using that tool, that shows that buyer this is your fee (whatever it is) and if they contract on a home where the seller is offering a lower fee than you would work for, the difference is coming from them- it is set in the buyers agency agreement. Would you rather show 10 clients homes without an agreement and possibly them running off to another agent because they haven't made a commitment?( ones that won't commit to you generally do if you don't happen to be standing right there when they call to see a home) or 5 solid ones with a buyer agency and a contract stating what is expected. How commited to you are the ones that won't sign a BA? Why should we be ashamed to ask for what we are worth? How many business out there survive with the basis of not having their fee stated what they work for up front and a contract signed to it? Why do you not have a buyer presentation just as you do a seller presentation? Geesh now you got me going.... What I just wrote probably made no sense -you spun up me up so good! Have a happy Thanskgiving!

I am so glad I ran across this post, great topic.

Thank you!

Hi Teri - Happy Thanksgiving to you too!

Valerie - it's ok - get all worked up!

Mary - Thanks.

Hi Christina, Excellent overview on how important it is to run our businesses like a business ! Have a terrific Thanksgiving !

Christina, Great Post. I believe many agents do not get this. They forget this is a business. They want to help out there friends or family, but you have to know that this is a business and if you are spending your time on something that is making you no money then you need to look for something that is. Great post.

Isn't amazing how if you asked your client, "do you work for free?" they would say "of course not!!" But they certainly don't mind asking you to! Love the post!

Christina, Great Article. Too many times agents will step up and speak out against up making a living. We must take care of the client. I too believe in taking care of the client without a doubt. But if I can't put gas in my tank I can't take care of them. This is how I make my living, so guess what, I have to charge for my services.

WOW! Someone in this business that wants to make money instead of doing it for that warm and fuzzy feeling you get when you see a couple find the home of their dreams. How shameful. My suggestion is you stop dealing in reality and get back to the make believe world of real estate that so many live in. I am sure you will sleep better at night. You may be sleeping in your car, but hey, you got the satisfaction of putting a smile on someones face and knowing you helped put it there.

Higher buyer co-ops selling houses faster appears to be a (unfortunate) reality. Unfortunate is thrown in there because there are some agents in the Boston market who will not show or alert their clients of homes without the co-broke percentage being at a certain level.

Christina-

I just wrote a post on her and Broker Bryant's article as wel. I hope your readers will read some of the comments you have made. They are great and goes to show that the sooner you get the money part out of the way, the sooner you get to work for your clients.

Hi Christina. I went over to Marianas blog first to read and comment. WOW! Some people seemed to have entirely missed the point of her post and I completely agree with you. Subscribed. :)

Hi Christina,

Great post.

I don't deal much with listings, but there are certainly plenty of buyer's agents that walk into this same trap with being asked to give some of their commission back.

The way I see it, there are always gonig to be a small percentage of the population that is always gonig to want the best deal.

When you meet this people, and you know very quick who they are, you run away as fast as you can.

There is no loyalty, they are only loyal to "the best deal" - this is not how you grow your business.

Christina,

First and foremost to all on this thread Happy Thanksgiving, I sincerely hope you will all be blessed this holiday season.

I agree with you 100%. I have a partner and we do not sway from our policy. When we take a listing we give our sellers a choice 6,7,8 or 9%, and lately 7-9%. The higher they choose, we may deduct one, or assist with some of the fees that is included; of course depends on price of the property, and on the lower end we will not deduct any fees. This is disclosed up front with our sellers. We will offer more to the co-op to ensure our property receives more traffic than those in the area.

In regards to buyers, I am very picky and I "WILL NOT", take anyone to any property or properties without a signed Buyer Agency, Consumer Notice and Finacial Information, to include any of our listings. I will make one exception though, if you do not want to sign any paperwork, my charge is $150 an hour in two hour blocks, cash or money order, and recieved prior to any viewiings. For those low co-op commisions, I call the agent and have them increase the co-op prior to viewing. I will also inform my buyer of the low co-op and need to have the difference paid, either from them or the selling broker. Typically the listing broker will increase the co-op, with a little grief of course; but daddy needs to get paid to keep mommy happy.

This is the best business practice, happy wife, happy life.

Christina,

First and foremost to all on this thread Happy Thanksgiving, I sincerely hope you will all be blessed this holiday season.

This is the best business practice, happy wife, happy life.

Good Post. it's time we educate the public. Buyers and Sellers have a terrible opinion about agents and we let it go on. Rich Charlotte NC

I'm not FREE and if someone tries to get me for FREE, I won't even be available.

Our clients are by referral and are will stay with us often for years on many deals. I will tell them when discussing our fees, "the best thing I can do for you is stay in business." Those that run businesses get that immediately. Those only shopping on price (or lowest fee) are welcome to use the folks down the road that won't be there next time. And if it works for them, cool. But finding new trusted advisors sure takes time and runs many risks.

Granted, we want to be as agressive in our fees as possible but only to the point it allows us to be successful for the client time and time again.

I do see some folks that boast of their fees and margins (sometimes even over the client service aspect). That is not us either. We want to offer great, smart, experienced service at a fair and reasonable fee that is respectful of us and the clients.

Thanks! G

Christina: - Great post! Now if we could only get BROKERS to understand this, they would quickly start purging the non-productive agents from their company ranks. Many agents work for free because they see their BROKERS work for free. Their role model is someone who doesn't set standards of performance, doesn't hold them accountable to perform and continues to pump their money out the window - on non-producers.

We often like to take the consumer to task for asking us to work for "less/free" but really, the first step is to get company owners to realize this themselves. After that, NO agents would be working for free, because they know the contributions they had to make to the COMPANY bottom line - and be accountable for it - and therefore couldn't afford to work for free themselves.

Ah, the big circle of real estate insanity! Glad you could break out of it!

- matthew

The reality is that in this market you have to market the property to other agents.Forget about the public, the marketing is out there for that.If your home is like every other home on the market you better do something different to get it sold.

Q:How do you market a home to an Agent?

A: $$$$$$

Never mind the free tickets to a broadway show or a $500 gift certificate to Home Depot or $5000. towards the buyer closing costs.It cracks me up everytime I see an agent allow a seller to do this.You'd be better off reducing the price 5K.

Agents have bills to pay and they have to eat too..The higher the payout the more traffic the home will see.

How do find a qualified buyer? Well thats related in direct proportion to the amount of people that see the home.Let the people who want to see your home see it because they want to, but increase the amount of people who see the home because an agent wants to show it.

This is dialogue I use to get full a Commission and I always do a 50 / 50 split with the buyer agent..

Alot of agents in my area dont have the backbone to stand up for themselves and would rather buy a listing by discounting their commission and work for free. At the first sign of an objection the first thing to go is a full commission We see miserable payouts to buyer's agents around my area, I see 1% and 1.5% payouts... it's crazy I thought that the Foxton's business model was proven to be a failure.I know it is and that's why they're out of business today but someone better tell alot of people in our profession.

Clients think we work for free and when it comes down to it, it's because our industry all to often tells them we do!

As a buyer, this is what I'm thinking after I read your post.

"You will show me homes, starting with the ones that pay you the most. If the perfect home for me comes on the market but offers you a low commission, you probably won't tell me about it. You'll probably think that one of the high commission homes will suit me just fine. So I'll have to be on my toes for these other homes and do my own searching. This is supposed to show me that you are a shrewd business person who will be able to negotiate a good deal for me. No offense, but I really don't care how much money you want to make. I'm really only concerned about finding my dream home and getting it at a good price.

Thanks for being so open about this with me. I think I'll continue looking for an agent who will show me homes based on my needs and not their needs."

I don't get hung up on the specific amount of any particular listing. I know that if I sell enough homes, the average commission will work out to be where I need it to be.

I live by the motto of "Do the right thing and the money will follow." If you chase the money, it always seems to just be out of reach. I guess we all do what feels right for us.

Complaining about buyers agents not showing homes because of lower Co-Ops is like a seller complaining that no one is buying their house when the price is to high. In a free market, you have to stay competitive, especially in a buyers market. If you want to sell your house in this market, you have to sell it twice; once to the Realtor and once to buyer. That is why new home construction is giving away the farm in most areas with both agent and buyer incentives. Offer the normal Co-Op (we all know what it is) and don't give anyone a reason not to show you sellers house.

Christina, Yep I agree. Not sure why folks don't get this stuff. Right or worng, money is a motivator. Always has been.

Christina, rock on !! Very good point. We certainly do not want a bunch of discount agents out there !!! Then we would all be in trouble.

The great news though in the big picture is that sellers NEED a more experienced realtor in todays market. And the more experienced realtor will typically know that it is important to offer at least the average if not more to the co-op and handle the seller with professional communication to help get the property sold ! The value to that in this market is invaluable.

The agents that are saying any different than this won't be around very long. First and foremost our job is to take care of ourselves and our family. Yes we have to put our customers first, but not to our own detriment.

I dont know why more sellers do not understand this concept. I think you are right on. Most buyers out there will provide the agent a short list of the homes they want to see anyway. Then your job is to take them out and represent! My two cents.

Christina, Wait a minute... Did I write this post? You hit the nail on the head! This is a business. That being said, one can decide how much to charge & for what.

You are so right!

Very well said! How many people go into their dentist/attorney/doctor and say, "Well, such and such will do it for less, can you match that price?" I don't know any (thankfully) and don't know why they expect professional real estate agents to do it!

If we don't know and value our worth no one else will.

Wonderful information and tahnks for sharing with us. I read and commented on the other blog as well. I work off a fee for services bases whether the home sells or not. I let the seller choose a commission that they are willing to pay to the buyers agent. My commission is alightly higher than 3% on a transaction and I get paid regardless however we do sell 91% of the homes we list and when my agreement is over the clients let us refer them about 75 % of the time. It's not for everyne but it works forme.

How true Christina! I know agents who will undercut the commission...and end up busting the deal...I wonder are they in this business for health? lol... the latest one here is House of a 1% listing!!!!! I wonder where they find their profit...

Happy Thanksgiving!

Christina this is a Great Post and very informative and so right. I agree we are running a business not a charity. Don't get me wrong I like to do some charity but when it comes to running my business that is different. I enjoyed reading the post and looking forward to reading your post again. Have a Happy Thanksgiving.

Christina, I have only been in this business two years and I am always fascinated with discussions over compensation, "full commission", and related issues. The great thing about the real estate business in its current state is that there are a lot of options for consumers to choose from in terms of service and cost (which seem oddly related) , and for agents to choose in terms of income.

Call me crazy, but it makes sense to me to operate in a way that produces more income, and sells homes faster.

You said,

"The reality is, sellers offering higher buyer co-ops sell their homes closer to list price, with a shorter time on the market. This is proven in my market and it appears it's proven in other markets."

I wonder if there is a study somewhere that I could use with my sellers to support this idea.

I can't count how many times I have heard the mantra about the fiduciary duty to the client used as an excuse to avoid decision making. And I won't even start ranting about agents who don't believe in their own value.

We all are in this business to make a living! I don't like to work for FREE, but sometimes I will help someone out at no charge. But keep in mind, Buyers and Sellers will pay (gladly) what your normal commission rate is, if you actually earn it! We ALL need to take care or your clients best interest, no matter what the commission is, or if a selling bonus is available!

WoW.. this is a very intersting post.. I have never refused to show a buyer a home if it has a 2% fee VS a 3% fee. Now you can always put in your buyers rep agreement that you are getting say 3% and if the seller does not pay this, then they are responsible to pay the 1% difference. As we all know comissions are negotiable and the seller does set this.

NOV

2008

We have kissed both buyers and sellers good bye who don't know what they don't know...we don't buy listings...and we always tell them that if they want to list their home for $X, I will give them a list of realtors who will do it...our names won't be on that list. Likewise,...if you want to look at homes that are not at all what you wanted for a variety of reasons...price, location, style etc....I can give you another list....some of the sam names will likely appear...We don't miss the ones that we don't keep....can't always say the same for them...Happy holidays.

These are not times to be a hard ball. Every situation is different and I believe that in what I sometimes give up in commissions that God makes up three fold. We are not warriors and yes we are trying to make a living but no a killing. I am so hurt when I hear of Realtors that are so ruthless with buyers and sellers. If someone calls me to see one of my listings then I show them. What else did your seller hire you for???Even if they have another agent its an opportunity to tell them what you know about the house right? You may not get that sell but I bet they tell somebody how great and professional you were. This is very old school and buyers and sellers LOVE to be talked to like friends not cattle. Good luck with your "business" and Happy Thanksgiving:)

OUTSTANDING -- thank you -- could not have said it better -- Have a Great Thanksgiving! JE

Christina: Good for you! I know I'm going to lose the occasional deal because I'd rather stick to my guns and charge my price. But I think it's more importatnt for one to define their business and then stick to it. Ultimately our business is built on relationships and not one time transactions.

I have a philosophy that folks who severely discount or give away their services in most cases are overpriced.

Actually, I thought of it as relevant. The poor coops for the selling side might indeed be strictly a local issue. I assumed that it was a more widespread tactic to retain high commissions by listing agents while at the same time offering a small discount to the seller.

The reason I thought the topic was relevant is that you brought up the fact that many posters on Marianna's post were questioning the ethics of buyer's agents who were influenced by coops in their showing patterns. The buyer's agents were being slammed as scum for not showing EVERY SINGLE PROPERTY regardless of the coop. But no one seemed to question the ethics of low balling the cost of a listing through lower coops without the listing agent taking a hit as well. When listing agents do this - are they honest about it? I find that they often aren't. The seller may well be tempted by a lower priced listing. So the listing agent "wins" the listing - but at what cost to the seller who may well have to bear the overhead of a longer listing period?

Certain discount borkers in our area used this tactic during the boom. They trumpted a ridiculous listing commission, but when you looked on the MLS the selling side commission was so pathetic - it was insane. The "discounter" kept the lions share. Then they whined on and on that buyer's agents were not fulfilling their "fiduciary duty" in showing these listings. They got a lot of press in the media. But NONE OF THEM were up-front about what they were offering the selling side. Few listings were expiring in those days...but these did! When you spoke to these sellers, after their listings expired - they didn't know! These folks often signed year-long contracts that the brokerages wouldn't let them out of. This created a lot of financial strife when the sellers found themselves owning two homes with two mortgages. The seller's simply assumed that this brokerage had created a "better mousetrap" that could magically accomplish the same thing a retail brokerage could - but for much, much less. How ethical is that?

NOV

2008

Lots of points to ponder here, thanks for getting us all thinking and talking about this.

NOV

2008

I have never discounted my service or fees in order to get a deal to work, although I have been asked to many times by the cooperative agent to do so. I also have never had a deal not go through because I have held firm. I provide exceptional service and great value for the services I provide, and my clients recognize it. I'm the first one to tell them that if they want an agent who will work cheaper, they can have 100 agents lined up to pick from. Most people realize they get what they pay for, if not sooner, unfortunately the realize it later!

Unfortunately we are in an industry of 99% bozos that should not be in business....and in time will be out of business. If the industry would requrire agents to have a bachelor's degree with a masters in Real Estate, the public would see us much differnet than glorified used car sales people.

I 100% agree with you. If you make a deal for one.......seller's talk to neighbors and you are toast. For relocations, I don't take less than the fee I normally charge. I put the loss on the buyer's side and it works. I am here to make money..... i would physically lose money on a deal from an relocation company if I took the hit. So I don't take the hit.......

DEC

The best line i have read in a while "I'm running business not a charity"...well said and agreed

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