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I'm in need of a friends policy!

By
Real Estate Agent with RE/MAX Midlands Realty

I am in serious need of a policy to help friends buy and sell real estate.  It seems every time I help a friend something goes wrong and it's my fault or it's expected that I will reduce my commission.

Last week I had dinner with a friend and his wife and we talked real estate.  I mentioned a home I sold in their neighborhood and the price and to look for a just sold postcard.  Well the next day I get a call and an invitation to come out look at their home.  I agree thinking nothing of it.  So we are walking through the house and I am pointing out things to work on such as mulch, paint and things to be cleaned etc and all is well.  We sit and talk about price and expectations with the current market and still everything is good.  My friend is an insurance adjustor and does not make hasty decisions.  I can tell they have been thinking about this for sometime.  They pick my brain every week but I always dismissed it as casual conversation.  They know they will have to offer something to sell their home and fortunately they are smart with money.  They put money down, have been in the property for 6 years and updated the home throughout.  I am starting to get excited about the possibilities.  I start walking through my visual tour process and talk about things to point out including the great schools and community amenities.  I told them with some hard work and patience we can make this happen.

The best part is they also want me to help them find a home.  So my friend's wife starts talking about her dream home and what she wants.  My buddy pulls out a general letter of approval from Bank of America and specifically the contact at Bank of America I prefer.  In the back of my head this seems like a concrete deal and then it happens.  The twist I thought I would avoid this time.

My friend asked me about selling cost and how much it would cost him.  So I pull out my trusty seller's net sheet.  I am adding everything up such as deed stamps, closing cost, taxes etc. and then I get to commission.  So I put the number down at the percent I charge sellers to sell their home.  He replies "well that's what you charge everyone else but not us, right?"  There is a moment of awkward silence and I explain that any reductions have to be run through my broker.  So I continue with everything but all I can think about is how it is assumed by friends that I will cut them a break.  I finish up and leave and really do talk to my broker.  He tells me that this is my decision and that he is okay with what every makes me comfortable.  I asked what he would do and he told me he has a policy in place for friends and after 20 plus years they know that.  He refers them to his agents and explains that with the duties of being a BIC and in charge of the MLS he just does not have the time to needed to properly serve them and sell their home.  I have actually been the referred agent and it is great.  I love personal referrals from my BIC.

My dilemma is I stand to lose around $12,000-15,000.  I do not want to lose his business and the business he could possible refer me.  But it burns me up how they assume I will cut them a break.  I have never called him and said I would like insurance but I want the "friends" rate.  My BIC said I need to type up and outline how to deal with friends including commission etc and give that to them before we meet.  That way they know what I charge and will not assume anything.

So basically I am meeting them on Tuesday to sign paperwork but I have not decided on the rate yet.  Although I must confess I am leaning towards lowering my rate.  I want the business for several reasons.  One, the home is in a great neighborhood where I have had success selling homes. Two, the money made from selling their current home and finding their next home is still great.  Finally, I would probably cut them a break on commission anyway.  It's just how it is assumed that I will do this.  I have only helped one other friend sell a home I and I cut him a break because he was so upside down and in real financial trouble.  Any feed back advice or "friend policies" are greatly appreciated.

 

Show All Comments Sort:
Melody Botting
Broker Associate PenFed Realty - San Antonio, TX
You Deserve The Best

You two know each other very well.  I would give him a break.  Explain to him you cannot do it for everyone.  Ask for referrals to cover your loss.  My insurance agent has sent me five referrals thus far this year.

May 24, 2008 02:40 AM
Anonymous
Anonymous

Mike~  I guess it is because some of us "expect" our friends to use us in their transactions, those friends expect us to discount for them because we are friends.  There is no hard fast rule, but do what you feel in your heart is the right thing to do.  Maybe you should suggest that because they are going to buy through you also, you may lower your rate.  I think it is wrong for us to "assume" they will use us just as much as it is wrong for friends to "assume" we will lowere our rate for them.  Also, tell your friend you in turn will expect the same amount in discount with your insurance......

May 24, 2008 02:46 AM
#2
Kim Tavares
Legend Residential Sales LLC - Dix Hills, NY
e-PRO - Long Island, NY

i'd give him a break...you don't want to lose a friend and great source for future referrals.  although, it's case by case, i usually offer friends who are buying and selling with me - a discount on the listing side (i give them a break if I'm also the selling agent on the deal).

 

May 24, 2008 02:53 AM
Cheryl Willis
RE/MAX Solutions- OZARK MISSOURI - Mount Vernon, MO
MO Broker - Mt Vernon, Monett, Aurora, Barry & Law

There are so many different ways to go about this, in our office the broker has final say but the agent has control of how it is run past the broker so it really is in the agents court.

I love working with family/friends, I work for double b/c I have going to have to babysit them twice as much.       --good luck  cheryl

May 24, 2008 02:54 AM
Chad Baird
Re/Max Spirit - Dayton, OH

I agree with Melody.  I will give a discount to a friend.  I generally eat the discount on the listing side and not discount the buyers agent compensation.  I explain it is a special rate and ask for referrals to cover my loss. 

May 24, 2008 02:54 AM
Michael Shankman
Award Realty - Las Vegas, NV
Selling Las Vegas 702-498-3383

good post...give them a break on the listing commission..you are still making good money- it also depends on your commission split with your broker...you can tell your friends this and how much you actually make..depends how close you are with them,..

May 24, 2008 02:56 AM
Anonymous
Anonymous

The friends business issue is always difficult, but I believe that as long as the rules are set between the 2 parties then all the expectations are already set.

May 24, 2008 03:01 AM
#7
Jerry LaRose - Orlando Fl Real Estate Expert
Orlando Realty Partners, Orlando Short Sale Specialists - Orlando, FL
Orlando Fl Real Estate Expert, Short Sale Expert

Mike, I would simply ask them, How would you feel if I ask you to cut me a breal on an Insurance policy? after all he is commissioned as well. I would not cut the rate. I've sold 4 homes for a good friend and I never reduced the commission. Good Luck

May 24, 2008 03:28 AM
Bart Whitmore
Keller Williams- Louisville - Louisville, KY
Real Estate Agent

I guess that is a question most of us has or will have to answer sometime. I believe as a friend who is going to buy and sell through me, I would cut my percent if allowed.

May 25, 2008 01:20 PM
Edwin Gerace
The State Paper - Lexington, SC

Mike, been there don that and got the shirt.  I would suggest a couple of options depending on your comfort level and relationship.  Some work, some don't.  It depends on your confidence and your situation. 

  • I try to explain that I am a professional and I would not ask you (seller) to discount your professional services because I value the quality of your services.
  • I understand wanting a great deal and a great value.  But I hope you would respect that I must charge my commission based on company policy and cost in selling home.  I budget to spend x amount per listing.  If I discount it I would have to cut services and marketing.  That is not fair to you is it?
  • I take 7 one dollar bills out, I explain that if we pay a co-broker agent he will get 3 /1/2 ( I rip one dollar in half and take away.  Then I take the 3 1/2 and say my brokerage firm gets 1 1/2  so that leaves 2.  I spend 1 dollar toward marketing.  That leaves 1 dollar for profit and taxes and other expenses and " You want to take my last dollar"?
  • I respect you want a deal but If I am able to get you what you want in profit and sell your home in a time frame that you can live with, shouldn't you pay me for doing that goal?
  • Are you looking for a deal or is bottom line profit the problem?  If bottom line is an issue and you need to net more and I can justify raising the price $2,000, would that be OK?  If a deal is the issue, I struggle with you judging me, since I can not protect my commission how can I protect your largest investment.

I have used all of them at least once and as the Great Gary Sisson says from Sweat Hogs said " They all will work some of the time, None of them will work All the time".

Edwin Gerace

www.EdwinGeracesRealestateblog.com or www.EdwinGerace.com

Jan 27, 2009 12:32 AM