Compensation or performance? Which one will it be?

Mark, (and thank you Bryant for letting me jump in your post to answer these questions).

Let me first tell you that I appreciate your comment about your 3 year old.  I also have a 2 year old who is very needy and requires lots of attention.  I'll address each of your questions separately.  Do you realize we could have a blog for each one of these answers?

Your first point, "The homeowner generally seeks multiple estimates and chooses one based on a combination of the price offered and the reputation for quality of the provider".  That would be in Realtor Utopia - sellers usually seek which Realtor will recommend the highest list price, not always having to do with the quality of service or experience - those listings end up sitting on the market for months and don't sell (we have almost 2 years worth of inventory in my immediate Miami Shores market).

Next, regarding marketing costs:  I promise not to take offense to your opinions and will correct you as I seem fit.  The market we deal with is higher priced compared to Broker Bryant's market, but cannot be considered, by any means "higher end or luxury" - although we also deal with luxury, but understand we are not refering to that market now.  The market we deal with can be considered the community average.  Staging is not something that is popular in my market, so we can skip that discussion.  I recommend staging for empty properties because people have a difficult time visualizing space without furniture.  I also need to explain to you that as an architect, I offer complimentary architectural design consulting to our customers - that's one of those "priceless" services we don't need to mention, and don't charge extra for.

In my market, and that's why your thesis is so difficult, because it gerneralizes all real estate markets as being the same or similar, placing a listing in the MLS and other websites you mention, is just not enough, and not acceptable.  Although 85% of buyers start their search on the Internet, I can assure you that when the inventory is so high, everything becomes a big blurr and they need to depend on a Realtor to show them properties.  Locally, sellers request all of these services and that's the only thing that sets you apart from your competition.  Locally, a sign infront of your home and an MLS appearance does not sell your home.  Locally, the average home needs to flood the market in every which way possible for it to sell.  The average agent, having 8-10 listings will obviously push their own listings first.  The average agent will not know the inventory.  If a seller is competing against 50 other similar homes, it is the agent's responsibility to expose that home to as many people as possible.  To go into detail.  The just listed cards are one of the most effective marketing pieces we put out.  People in the nearby vicinity receive these and although they may not be looking to buy a home, they may have a friend or family member that does.  You have to realize that those that are shopping usually visit the Internet, but those cards serve as word-of-mouth marketing, which is the most effective marketing around.  So I will disagree with your statement  "then there is no particular value to an individual seller to do more" - and tell you that if that's all you do, your home will just sit and not sell.

Although you may be somewhat correct about magazine ads - I can tell you that I have sold plenty of properties from those ads.  I have sold directly to buyers with no agents inquiring about that particular property in an ad and I have also sold to buyer's agents that call us because their customer saw the add in a publication.  You also need to understand the perception of a buyer.  A buyer may not always know what he/she wants.  A buyer's agent may be doing an incredible job showing buyers properties that fit their criteria in the area that they want, but many times, they end up buying things that are completely different in another area.  I wish real estate was as "black-and-white" as you paint it, and thank you for understanding that identifying the correct search profile is not easy. 

Hope that answered some of your questions,

Ines

Bryant,

I use to own a Help U Sell Fanchise great idea, menu driven, low set fee and only x% to the co-operating broker if sold thru MLS.  Yet in my market the sellers wanted full service,(even though I was giving it to them at the reduced fee, as I, like you know no other way) they did not want to be bothered and were willing to pay the full fee.   This was back in 91 and Help -U-Sell's parent company went into resevership and I moved onto ReMax. 

The beauty of ReMax was that if you list a home and a buyer calls the office it is directed to you.  Nothing wrong with both sides.  It does take more work.  I also let the seller know at the listing time, that if I do get a direct deal I will reduce my fee (not to the point that you have upfront)  I have never let a fee stand in the way of a transaction

I have always believed in "Facilitation" bringing two people together, giving them both all the information avaialble and letting the market speak for itself.  This was before what is now called buyer brokerage.  The reason I say that is when I practiced Commercial real estate, I was a buyers broker much of the time and my buyers compensatated me on top of the purchase price (as dealing with institutions it is difficult enough to get their committees to agree on a price, let alone my fee)

You talk about buyers brokers and steering, not showing a property for $500  I believe that you are right that they don't have to show them that property, but as a buyers broker they can be sued if they don't.  In fact if they don't show them homes not on the market that meet their clients criteria or FSBO they are open for liabiltiy.   Answer a buyers agency agreement. Spelling out compensation and services offered.  I have issues with buyer agency agreements as well, do to agents lack of knowledge outside their immediate market.  But we'll leave that for later.

Louis Wolfson ReMax First Realty Newton, MA

Mark:

Brian and Mark - I think Bryant and I agree on this topic - I offer the best possible service to each one of my customers, and extra incentive will NOT make me to a better job, I would find that unethical because it means I was not doing my best to begin with.

Now to the rest of the topic.  I'll start with your second point:  If buyer agents are not doing their job, it means that I, as a seller's agent need to do extra work and make sure the listing is out there in people's faces.  As much as I can control the quality of my services, I rely on other agents, who may not be doing their job, to sell my listings.  I do think we can go on forever her and not go anywhere.  I see your point Mark, I don't see it in my market.

Next.  Assuming I totally agree with your new rate proposal including all 3 rate elements.  How do you suggest we "sell" this better system?  All discount broker models have failed in my market, people are willing to pay more money with in our current market.  I have to add that some of this "discount" brokers did not offer "discount" services like a lot of other Realtors claimed.

Now to my last point.  One of the reasons I don't like your fee structure is very selfish.  It is the fact that my husband and I have been in this business for only 4 years.  Although we are both professionals, he is an accountant, I am an architect and we both have over 13 years of Commercial property Mangagement experience, we would be competing against agents that have been in the business for 20+ years.  Those agents are the "top dogs", those agents certainly have more experience, but I can assure you that with our professional backgrounds and our own real estate experiece, we are offering superior service than many.  We are stirring some controversy in our local market and it would not benefit us to put a price on our short years as actual REALTORS.  There are a lot of new agents that have unbelievable potential and are better than their experienced counterparts.  I don't believe experience makes you a better Realtor, that's just my opinion and there are always the exceptions like Broker Bryant.

I don't know if I'll be able to check in until the new year, I will try to see were the discussion is going, but have a Great New Year if I don't check back.

Ines

Hello again Mark - hope you had a wonderful new Year and best wishes for you and your family.

1.  Rick and I go above-and-beyond-the-norm with every single transaction, we would not have it any other way - that's why we have so much repeat business.

2.  The reason we are successful at what we do is because we have total control of every single aspect of a transaction.  If we leave some of the work to our customers, it would probably mean more work for us because we would have to double check that the work was performed.  i.e. they show their house and they "forget to leave" since buyers feel uncomfortable about having the seller present when viewing homes.  Then I call to get feedback and the buyer's agent tells me they were present.  Another example:  They want to call agents to get feedback and talk "too much" and now our negotiating strategies are out the window. 

3.  Thank you for clearing number 3.  I feel confident about our level of service and the fact that by being an accountant and architect, can offer so much more than the "typical agent".  But in our market, our compention keeps telling the consumer that "20 years+" is so much more important.  It's very similar to a seller hiring an agent not for what they offer, but for what they want to list their home for - these agents "buy their listings". 

Mark - I agree that there are major problems with the Real Estate Industry, and a lot of us agree that it has to do with better education and better standards, not just a one week course with only a highschool degree.  There are several good blogs here in Active Rain where we have discussed great ideas of improving our industry.  Thank you for all your effort and good luck.

Ines

WOW!  Now this is an ARTICLE!!  Thanks to Mary for bringing it up.  I've bookmarked it to read more thoroughly later and to read each and every comment.

I'm surprised Broker Bryant...pleasantly so!  I'll have more to say on one of my blogs on this topic after I read it more thoroughly.  It deserves more than a cursory glance, but I've added it to my "stash".

I'm thinking of several scenarios for Stan of what I call negotiating for my buyer.  Because I was an exclusive buyers agent (our company did no listings) for several years and in our market, the coop fee offered is usually less than 50% of the listing fee, my choice to be an EBA automatically put me on the "less commission" side of the table.  My commission is not what motivated me.  What motivated me was getting the best deal for my buyer.  By implication when I got a discounted price I was also discounting my commission because they went hand in hand.  What was a few hundred dollars (my share of the discount) compared to the good PR and referral base I was building by doing my job?  That's the cheapest advertising I know of.  Secondly, I negotiated many times when the listing agent was the stonewall.  I present my offers in person because sometimes what the LA has said is not what the sellers really want.  For example I had an offer to make on a duplex which refused FHA financing, but my buyers preferred to go FHA because they wanted the minimum down payment.  Since my research showed there was an FHA loan on the property currently, it made no sense that the sellers would decline FHA financing unless they were worried about work orders or something else.  By presenting the offer in person I was able to ask the sellers what their concern was.  It was work orders.  The agents sent me away with insulting remarks regarding wasting their time, etc.  I knew the sellers were engaged based of body language, etc., so went back to my buyers with the sellers' concern about work orders.  The listing agents (team) had not had the required city point of sale inspection (this suburb was known for being tough on required repairs in order to sell) nor the rental inspection for the year.  We rewrote the offer still with FHA financing, discounting the price but with the agreement that my clients would pay up to the amount of the discount toward any work orders on the FHA appraisal that were NOT called on the point of sale or rental inspection.  Again I presented in person and the sellers accepted the offer.  Ironically the sellers did not disclose that the FHA lending would have to be appealed because there was a railroad track within 40 feet of the unit which warranted an automatic rejection by FHA.  I did the research, got the info required for the appeal and managed to get the appeal and approval done in two weeks in order to close the following week.  The sellers had to get their two inspections done.  The final cost to the buyers for FHA work orders was zero.  The cost to the sellers for the repairs they had to do for the inspections was over $4000 because they had to replace a large picture window with safety glass, a furnace, kitchen floor, and some plumbing.  My clients' offer was accepted for less than the original offer because the sellers were so afraid of the FHA work orders and the sellers did not do their jobs of getting the inspections done prior to listing.  I more than earned my commission that time and many others as a buyer's agent.

Oops, I hoodwinked Broker Bryant's blog.  I've got other examples that show my buyer's agent expertise.  I take negotiating on my clients' behalf very seriously on both sides (I never do both on one transaction, though.).  The ultimate goal for all is to sell/buy the house.  Sometimes saving $4.36 gets in the way of completing the transaction and it's our job to keep the client engaged and see how insignificant some things can be to the larger picture.  It's not just negotiating, it 's the whole process of due diligence, creative problem solving, social work, etc., that we get paid for!  EVERY transaction is different and presents a challenge of some kind.

Stan, Thank you for your compliment.  Coming with your history of poor representation I hold the compliment in higher regard.  It's hard to toot your own horn, but regrettably my experience in the "field" has encountered a lot of the same thing you have.  There are some really good agents, more than I realized from my field experience.  Once I joined a couple of real estate networks (RealTalk and Active Rain) and saw the level of professionalism that serious agents have, I once again became proud to be an agent.  Many of my scenarios are frought with agents on the other side disclosing what seemed like nebulous info to them but was an opportunity for my buyer client to get a free bathroom installed, buy a custom pool table with the house, etc.  Now that I do listings, I find it more frustrating because my goal has always been to serve my clients.  Listing in this market is a week by week process in price changing, etc.  Keeping the sellers abreast of falling prices is emotionally tough.  Trying to get a buyer with the glut of inventory is even harder.  Seeing the listing expire because the client wouldn't reduce the price felt like true failure on my part.  The failure is harder for me to deal with than the loss of commission.  Money can't buy me satisfaction.  It can buy clothes, improve my house, stuff for my grandkids, but not fulfillment and satisfaction in a job well done.  I HATE that part of my job.

Nothing irks me more than attending a closing with one of the top producers in the area and having that agent spend all buy 2 minutes of his time in the hallway on the phone.  His clients were left at the table with me, my buyers, and the two closers.  Who do they ask their questions?  I'm not THEIR agent!  Who did they send their son to when it was time for him to buy?  Me.  Why?  Because I got a good deal for my buyers (Remember they were the sellers.) in price, negotiated inspection repairs without overreacting, was wholly present through the entire transaction, etc.  When his son called, I didn't recognize the name of the person referring me (remember not my client) and I got the whole story.  I don't know how the top producers become the big mongers that they are but a couple of them in our town don't deserve the commission they get.  They've been good business machine managers, but I question the agent part of the deal! 

The problem is the public often doesn't care or know about representation.  When I've tried to explain it now that I'm no longer an EBA, most clients have little interest.  They only want the house.  It's a shame, because representation is our highest value that we bring to the table!

BB, I'm sorry to hijack your blog again!  You and I  . . .  can you imagine what a smooth transaction that negotiation would be?  Or maybe it would be the toughest in our careers!?  Oh my, the joy of working with a true professional.  Hey, it's 9 degrees Fahrenheit today.  "Wanna" move?  Of course, we have 16,000+ agents competing for very few sales in my market, so you might have to send TLW to the thrift stores to shop!