Is More Always Better?

By
Real Estate Broker/Owner with Beth Butler - Big Mouth Consulting
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In this market of excess inventory and slow moving listings, it is not uncommon for brokers to offer a higher than usual cooperating commission to entice other agents to come and show their listings. While I certain appreciate the lure of the higher commissions, I can't help but think... who does this really benefit?

Here in Miami, as I believe the entire world must know by now, we are staring down on the delivery of about 20,000 new condos coming into an already saturated real estate market. Back a few years ago, in the height of the pre-construction speculation fever, many of these same condo buildings enticed brokers with high commissions. Unlike today, the inventory was short and many of the resale listings came at a discounted commission so broker's flocked to new construction and the big payout.

Not only would some brokers boycott projects which offered a typical commission, but they had websites showcasing only those buildings that offered the higher commissions. Now, I am all about making a living in this business, but it seems to me that maybe some of the better broker instincts, like which was actually the best building, got thrown by the wayside in a rush for the bigger bucks.

Now let me clarify, many of the agents that made money in pre-construction sales are no longer in the business. Many of them had a license and saw an opportunity - it was never really a career with many having full time jobs outside of real estate. Seeing that you could make a commission just by sending a buyer over to the sales center, there was no need to quit the day job.

With so many options, how much did the commission come into play in the buying decision? Did real estate agents actually steer buyers into an inferior purchase decision just to make an extra commission point or two?

Last week I attended the first big real estate auction of 20 developer held units of one of the first condo buildings to deliver in Miami. Eight of the units were sold in an absolute auction at prices considerably less than the units originally sold for 3 years ago. This was one of those buildings where the prices were always too high for the location and building amenities, selling at the same price as better buildings in better locations. One of the differences was the higher than usual cooperating commissions.

This may be mere coincidence, but it is certainly a correlation I will be watching as the rest of the buildings come on line.

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Rainer
94,575
Bob Carney
Taylor-Made Deep Creek Vacations & Sales - Mc Henry, MD
Licensed MD/PA Real Estate Agent
Crap like this ticks me off...this is why REALTORs are one of the least trusted profession.  Fast money...forget the rest. 
Sep 24, 2007 03:32 PM #1
Rainer
32,950
Beth Butler
Beth Butler - Big Mouth Consulting - Miami, FL
I agree with you Bob and I wonder f the Day of Reckoning may just be right around the corner.
Sep 24, 2007 03:34 PM #2
Rainer
100,192
Kaushik Sirkar
Call Realty, Inc. - Chandler, AZ
I stick to a simple mantra...show my clients ANYTHING and EVERYTHING on the market that fits their specifics - irregardless of the commission offered....
Sep 24, 2007 03:38 PM #3
Rainer
32,950
Beth Butler
Beth Butler - Big Mouth Consulting - Miami, FL
Kaushik - I think those are words to liveby.
Sep 24, 2007 03:41 PM #4
Rainer
94,575
Bob Carney
Taylor-Made Deep Creek Vacations & Sales - Mc Henry, MD
Licensed MD/PA Real Estate Agent
I think the commission shouldn't be known until after making an offer. Ethically we have to show our clients everything (like mentioned above) regardless of commission but how many times has occurred? Hard to prove, but it happens.
Sep 24, 2007 10:54 PM #5
Rainmaker
150,060
Janie Coffey
First Coast Sotheby’s International Realty - Ponte Vedra, FL
Uniting Extraordinary Homes w/ Extraordinary Lives
the most unfortunate thing about the "lower" commissions being offered by some Agents and Brokers is often the level of service matches right up until closing. when you represent your buyers, you end up doing double the work for half the fee b/c the other agent takes care of diddly squat.  (Enough about my rant!) Greed on everyone's part; the developers, the bankers, the nouveau investors, local governments and the Realtors all contributed to the current chaos swirling around us, with developers and bankers holding the biggest share in my humble opinion. 
Sep 24, 2007 11:10 PM #6
Rainmaker
559,162
Maggie Dokic | Miami, FL | 888.883.8509 X101
eXp Realty LLC - Miami, FL
GREEN, CDPE, SFR, Pinecrest | Palmetto Bay |

Unfortunately, those same agents will be back when the tides turn again.  A few months ago I had the good fortune of having a buyer fall in love with a condo where they were offering 10% commission.  I gave her 6% to help her buy the unit.  I tried to give her 7 but they wouldn't let me.

Sep 24, 2007 11:12 PM #7
Ambassador
920,701
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate
Unfortunatley there are some Realtors who will show properties offering higher commissions. I think we will see more of this in our market as it slows down for winter. The builders are the worst.
Sep 24, 2007 11:29 PM #8
Rainer
32,950
Beth Butler
Beth Butler - Big Mouth Consulting - Miami, FL

Bob- interesting idea.  Ethics... I think those are gone around here.

Janie - Greed is a powerful motivator.  We would not have the overbuilding without greed!

Maggie - now there is an idea of what to do with the commission.  I am sure there was a bit of that going on as well, although not as well intentioned as you.

Missy - I can understand it now when things are slow and owners are willing to pay 1% or so more to make there listing stand out.  But the pre -construction commissions were upwards of 11% coop some with bonuses of $30,000 - crazy!  

Sep 25, 2007 12:27 AM #9
Rainmaker
61,402
Kevin Tomlinson
One Sotheby's International Realty- Miami Beach Real Estate - Miami Beach, FL
Miami Beach Real Estate
I love big commission.
Sep 25, 2007 03:03 PM #10
Rainer
64,716
Jasen Edwards
Creator, Good Selling Formula™ - Santa Barbara, CA

Hi Beth

 Tripped onto your blog through Real Estate Tomato and found this post very interesting.  I sold for over 10 years in Austin, TX and builders and agents used higher commissions with great success at times to grab more attention and get properties sold.  It benefited everyone involved when used properly...although we never saw anything close to 11% coops + a $30,000 bonus!

It's interesting to ponder where the line is, especially when part of my job now as a trainer for Floyd Wickman is to teach agents how to protect their full commissions.  Interestingly, I just graduated a group in Orlando (my first Florida group!) and learning to bring in listings at the right price for full commission plus learning to manage a larger inventory (since their market had an 18 month supply) was their biggest challenge.   

Fantastic job on the company blog BTW!

PS.  I like your question With so many options, how much did the commission come into play in the buying decision?.  One thing we can be sure of...it came into play in the "showing" decision, didn't it?  If it didn't increase showings, builders/developers would stop offering it.

Oct 30, 2007 07:38 AM #11
Rainmaker
338,442
Gary Bolen
McCall Realty - South Lake Tahoe, CA
CRS - Lake Tahoe Real Estate Information

Beth - It's been too long since we've heard from you. You must be really swamped, and we all hope it's productive and fruitful.

cheers 

Oct 30, 2007 11:54 AM #12
Rainer
32,950
Beth Butler
Beth Butler - Big Mouth Consulting - Miami, FL

Jason - thanks for stopping by.  I am a sweathog graduate - imagine that!  The increased commission certainly does generate showings... I just wonder about the ethical issues.  Nice to meet you.

 

Gary- thanks for your sentiments.  I have been swamped but will be back to being Active in the Rain soon.

Oct 30, 2007 02:03 PM #13
Rainmaker
338,442
Gary Bolen
McCall Realty - South Lake Tahoe, CA
CRS - Lake Tahoe Real Estate Information

The next time you come up for air, let us know. Without adding pressure, you're notably missed.

best 

Dec 06, 2007 01:20 PM #14
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