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Co-op Commissions and the Seller's best interest.

By Armando Rodriguez

Real Estate Agent with QUEST REALTY SERVICES

September 25, 2007 04:57 AM

As we all know the market is currently in a valley after being and coming down from a lofty peak. During this peak I saw co-op commissions as low as 1.5%. With buyers plentiful, in many cases the listing agent had multiple offers within a few days. Some from his/her own buyers. So in that scenerio it seems that offering a low co-op didn't adversly affect the seller's interest.

Today it's a different ball game. Buyers have just about disappeared. And the few that are out there looking, need to be very well qualified to be able to obtain financing. I remember it seemed that as long as the buyer had a pulse, there would be a mortgage program for them. Not so today.

So why is it that some listing agents are still offering 2% co-ops when the majority are offering 3% and higher?

Is this in the best interest of the seller?

Article 1 of the COE says in part, "...REALTORS^® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary"

Now we know that we're supposed to show our buyers properties regardless of the co-op being offered. But how many of us don't peek at the co-op before selecting which homes to show? That's human nature. And how does or how can anyone enforce this issue? With so many homes on the market you can basically pick the creme of the co-ops and you'd still be able to act in the best interest of the buyer.

I let my clients know that their co-op offer should be competitive, otherwise they may suffer from the effects of human nature.

So knowing how human nature works, does offering a non-competitive co-op in this vast inventory ocean of homes "promote the interest of the seller"?

Comments(7)

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Allen C. Wright

RealtyU - Aliso Viejo, CA

NS, AHS, REPS

To all agents ... If the DOJ ever caught agents purposely not showing homes that had smaller commissions than I will guarantee that this industry will become heavily sructunized and regulated ... just like the securities industry. That ultimately means less money in your pocket.

Would not be surprised to see sting operations with this concept in mind. Personally I saw this while working in a small community ... it stopped in my office immediately.

If you will not show the best possible homes to your client regardless of the % of co-op (that does not mean free) than you should leave this industry.

Sep 25, 2007 05:11 AM

Armando Rodriguez

QUEST REALTY SERVICES - Orlando, FL

Orlando Homes 4 Sale, Real Estate Broker-GRI

Brett- If that's what it takes to sell the home, 2% is better than ZERO!

Allen- I know our own COE addresses this issue. But it's like jay-walking, you'd have to have a cop on every corner. I think it would be very difficult to enforce. And they may have bigger fish to fry!

Thank you both for your comments!

Sep 25, 2007 05:26 AM

Bryant Tutas

Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL

Selling Florida one home at a time

Armando, You certainly need to offer competitive co-brokes in this market. Especially now that builders are offering such great incentives and bonuses.

BTW we do NOT have to show homes that are offering less than what we are willing to work for. This is a huge misconception in our industry. BUT we do have to discuss this with our potential customer/clients up front. This is where a buyers Broker Agreement comes in. We can negotiate our commission up front and then it is no longer an issue. It is then the buyers choice of whether or not he wants to look at homes offering less knowing he will have to make up the difference. Our jobs need to be dictated by written agreements NOT human nature.

Sep 25, 2007 06:53 AM

Bryant- Very good point about the Buyer's Broker agreement.

The only thing is that with so few buyers and sooo many agents looking for them, buyers aren't willing to sign any agreements having them pay you anything. As soon as you mention it, that's how fast they're out of your office.

Absent that, and to be in sync with Art 1 of COE we must show any home that meets their needs regardless of the co-op. That's when human nature comes into the picture. For many 4% will make you feel so much better than 2.5%!

Having said that, I'm not saying every agent out there does that. I personally know many that don't and many that do!

Thanks for your comment ;-)

Sep 25, 2007 07:30 AM

Andrew Trevino

ADT Real Estate - Wilkes Barre, PA

Wilkes-Barre Homes For Sale

Armando,

For me, it like this...if the house fits the needs of my client, I show it to them. Of course I look at the commission to see how much I'll make if they like the house, but I just can't bring myself to refuse to show them the house. I also have a hard time telling anyone that I will only work for a set amount of dollars then having them sign the BBA to commit to paying me if the co-op is too low.
With all of this in mind, I think that sellers have this mindset that we should be grateful to list their home for whatever they are willing to pay. They aren't thinking of how their low commission rate is really affecting their likelihood of getting showings. Thanks for pointing this out. Hopefully someone will listen.

Sep 25, 2007 02:49 PM

Sharon Filbig

Prudential California Realty - Escondido, CA

San Diego County Real Estate

Hello, Armando. Thanks for your post. One thing I've observed on some short sale listings is a high co-op posting (4% or 5% is high around here), along with remarks that explain that "commissions are subject to lender approval". That's a bait and switch game, of course. The high co-op is supposed to tempt a selling agent to bring a deal and then, of course, after it's too late, the selling agent might end up working a deal for little or no commission.

Sep 25, 2007 04:56 PM

Andrew- Thank God for you and those that will do the right thing!

Sharon- Yes, be on the look-out , for there are deceivers everywhere.

Thank you both for your comments ;-)

Sep 26, 2007 01:14 AM

Co-op Commissions and the Seller's best interest.

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Armando Rodriguez

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