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PRICE FIXING AND REAL ESTATE COMMISSIONS

By ARDELL DellaLoggia

Real Estate Agent with Better Properties Seattle

April 25, 2007 06:07 AM

THE ONLY DIFFERENCE BETWEEN PRICE FIXING AND REAL ESTATE COMMISSION NEGOTIATIONS IN THE SPIRIT OF FAIR TRADE, IS WHOSE HANDS THOSE ARE!!

IF THAT IS AN AGENT AND THE AGENT'S CLIENT SHAKING HANDS AT THE END OF TALKS REGARDING REAL ESTATE COMMISSIONS, then that is Fair Trade.

An agreement between a Consumer and a Professional regarding the cost of service BASED ON THIS CLIENT'S NEEDS as determined by a joint, and not one sided, communicaton.

IF THOSE HANDS REPRESENT AN AGENT AND HIS BROKER, OR AN AGENT AND ANOTHER AGENT, OR A SKAZILLION AGENTS ALL INDEPENDENTLY THINKING THE SAME FREAKIN' PERCENTAGE ALL OVER THE COUNTRY!! THAT IS PRICE FIXING!! THAT IS A MONOPOLY! Can anyone really, honestly pretend that this is not what has been happening in the real estate industry for 50 years? Seriously people. You think anyone's buying that?

WAKE UP AND SMELL THE COFFEE, PEOPLE!! NOT TALKING ABOUT COMMISSIONS IS HOW THE CONSUMER GOT STUCK WITH THE SAME PERCENTAGE FOR SO MANY YEARS!

UNTIL AND UNLESS THE ONLY ANSWER TO THE QUESTION OF REAL ESTATE COMMISSIONS IS:

"WHATEVER THE CLIENT AND AGENT AGREE TO, AFTER DETERMINING THIS CLIENT'S NEEDS AND OBJECTIVES", WE HAVE PRICE FIXING.

WE HAVE PRICE FIXING IN THIS COUNTRY, ONE AGENT AT A TIME, AGAINST ONE CONSUMER AT A TIME.

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Marty Van Diest

Valley Market Real Estate - Wasilla, AK

Your Alaskan Realtor

How is it price fixing if an agent says my commission are all over the board or even fixed fee?

Just because you fix your own price based on what you feel your services are worth, doesn't mean the consumer can't go down the street to find someone else with a different price.

How is that price fixing? I don't get it.

Apr 25, 2007 06:49 AM

ARDELL DellaLoggia

Better Properties Seattle - Kirkland, WA

Here's my question for you Marty.

Client John walks in and wants to buy his next door neighbor's house that went on market two seconds ago. He is buying it cash. You are the listing agent. He knows the house and neighborhood better than ANY agent. He just wants you to write it up right now at full price, no negotiating skills required. No looking at property needed. He doesn't want your opinion, he just wants you to write the offer.

Client Bob walks in and doesn't know what he wants or what he can afford. Six months later and 50 house showings later he decides to buy one of your listings that has been on market for six months.

Both houses are priced at $300,000. Tell me what each SELLER pays and ALSO what each BUYER pays. If they ALL FOUR pay the same price, that is price fixing, because it doesn't take into consideration the difference in the work needed, and skill set needed, for the difference between the two consumers.

Clue...it ain't about you...it's about them.

Apr 25, 2007 07:08 AM

ARDELL DellaLoggia

Better Properties Seattle - Kirkland, WA

Sandra,

I've worked in five states for at least twice as many offices. I've worked 8 years on the East Coast and 8 years on the West Coast. I've worked for Coldwell Banker, RE/MAX and a few strong independent firms. How much more research do you think I need?

Did you ever learn the phrase "all commissions are negotiable"????

Time to make that reality and not just rhetoric. When the MAJORITY of Brokers independently SET the same fee, without first determining the client's needs before doing so, that is price fixing.

Apr 25, 2007 07:13 AM

ARDELL DellaLoggia

Better Properties Seattle - Kirkland, WA

Sandra, there is no such thing as taking "a listing at 4%". So re-phrase the question. A seller offers out a Buyer Agent Fee of X and agrees to pay X for Seller Agent Services. Let's call that 2% and 2% for the sake of answering your question (or is it a 3 plus 1?)

ABSOLUTELY YES, if the basis of the negotiation changes, whether it is a buyer client or a seller client, the fee is renegotiated. If you and your client have a good business relationship, this is not a problem. I have done it many times. But usually it is something UNFORESEEN at the time of the original fee negotiation.

BUT you should never list a property BEFORE the repairs agreed to are made, without first making a price adjustment. You would know BEFORE the property goes on market that there is a breach in the "agreement" between you and your client. WHY DID 30 DAYS HAVE TO PASS?

The IMPORTANT factor in YOUR example is that the client is not acting appropriately to THEIR best interests (it ain't aboutcommission at all). You should look your client in the eye and tell them point blank that THIS price does not match THIS CONDITION BEFORE it goes into the MLS.

You are allowing your client to shoot themselves in the foot IF you knew at the time you entered it in the MLS that the price did not match the condition. We don't always know that in advance, but in your example you did know that.

That's not about condition. That's about expert advices, so if you allow the seller to go out without his best clothes on, for 30 days, your commission should be LESS and not MORE, because the seller may ultimately pay the price for that mistake, by getting a less than optimal sale price, being "stale" on market.

Bad advices equals lower fee,not higher fee. Longer on market can often equal lower fee, not higher fee.

Did you re-price the house given the exact condition at the time it went into the mls? Did you advise the client what the "new price" should be, given it was not "in showing condition"? Did you explain how much less they might get by putting the property on market at a price that did not match the home's condition?

Not saying you didn't. Just saying that it is hard to get paid MORE for helping the seller get less, isn't it?

Apr 25, 2007 07:45 AM

Theresa Cavanaugh

Global Realty Marketing - Appleton, WI

Ardell, IMHO you are taking the words price fixing to a different level. I set my commissions and have even re-negotiated with the sellers depending on the situations. I have worked for several independents, Century 21 and now Global Realty Marketing and even though the contact belongs to the broker, none of my brokers have ever questioned or had a problem with the agreements I have made. To me price fixing would be if a group of brokers in my town got together and decided collectively to charge XX% for listing and XX% for buyer agency. That is not happening here.

Apr 25, 2007 08:56 AM

Neal Bloom

Brokered by eXp Realty LLC - Weston, FL

Realtor CRS-Weston FL Real Estate

I cannot even comment based on what I am reading in this post.

No way for me to defend what I believe.

Apr 25, 2007 09:24 AM

Christina Ethridge

The North Idaho Dream Team powered by SKE Realty Group - Coeur d'Alene, ID

Ardell - You have taken the definition of price fixing beyond what it really means. There is a significant difference between pricing of services based upon market demand and price fixing and many other people have pointed this out in various ways.

Additionally, you are completely ignoring how prices are determined. Prices are often based upon averages. When a hospital agrees to a negotiated insurance rate with an insurance provider, they consider every possible scenario for each procedure they are negotiating. In other words, a procedure may cost as low as $25,000 for one person and as high as $45,000 for another person. The hospital determines their AVERAGES and their needed costs to do business. If that insurance negotiated rates becomes $35,000, the hospital is not going to charge the actual $25,000 surgery LESS, nor the $45,000 surgery more. They rely on the averages.

This is exactly the same thing with real estate commissions. We know that we need a minimum of X% based upon our average price range of X to X. If someone buyers at a lower price, we get less. If someone buys at a higher price, we get more. If someone takes more of our time, we get less per hour, if someone takes less of our time we get more per hour. That is how averages work. Taking out averages will literally make it more expensive for the lower end market AND, if all was factored in, we would never work with buyers without an upfront fee and a full contract, period.

There's a whole lot more to this aspect than just lowering a commission on a higher priced home.

Oh, also, in answer to your question to Marty: Client John isn't entitled to any discount in the commission, that commission discount should go to the seller (if the LA and seller negotiated this), not John. As for Client Bob, in our office, we will accept the MLS offering, we do not charge more for services rendered regardless of time involvement.

I also forgot to bring up the 'intangibles'. In other words, the higher the price of a home, the more one is financially liable. In otherwords, you are taking a higher financial risk (as far as E&O) is concerned. This is an intangible that can't possibly put as a dollar figure into the equation. That's yet another reason why determining averages and using averages is so effective.

Now, I believe your actual point is that commissions are negotiable?! And I completely agree with you.

Apr 25, 2007 11:02 AM

ARDELL DellaLoggia

Better Properties Seattle - Kirkland, WA

My actual point is that for some reason I was contacted by the local news station and 60 minutes. WHY do these people think that there IS a set commission of the X% that they quote to me, if it doesn't exist? Why are there articles upon articles saying there IS a set fee of X%. Why do news stations call and ask me to come (which I do not do) to defend the x% commission?

I tell them it isn't true. Then we get agents who exacerbate the perception by stating ON A BLOG comment that it IS true. Neal you need to be part of the solution and not part of the problem. If you indeed believe that the number you can't say can NEVER be less, than - well, you just can't feel that way.

My point is that while WE cannot discuss this with other agents, we must address the issue in our blogs IF the blogger firmly believes that there is no fixed commission.

Agents have to stop charging all the same amount and then pretend it isn't a National Fixed Price. Everyone cannot possibly come up with the same number all on their own, and they can't ALL be worth it all the time either. It is just silly to suggest that is the case.

As to one client paying more so another can pay less, next time you're going out for coffee let me know so I can order steak and split the bill with you.

Apr 25, 2007 01:25 PM

Rick & Ines - Miami Beach Real Estate

Majestic Properties - Miami Beach, FL

Ardell - "everything is negotiable" and we should be flexible....I do see your point and things should change and I think WILL change. I think agents in general get defensive when you touch their commissions because they imagine those WORK-YOUR-BUTT-OFF selling deals where the seller also wants to negotiate your commission down even if when you do the math you've only made $5/hour.

BTW - you inspired my last post. (thank you)

Apr 25, 2007 01:33 PM

ARDELL DellaLoggia

Better Properties Seattle - Kirkland, WA

Hi Ines,

I'll have to read that...going now.

Apr 25, 2007 01:35 PM

Marty Van Diest

Valley Market Real Estate - Wasilla, AK

Your Alaskan Realtor

Ardelle....things are changing...it's time to change with the times. If your broker won't allow you flexibility it's time to change brokers.

I am very flexible with my commissions. I am very flexible with my listings. If a seller want's to pay up front for my services, the price is lower.

In addition, I will sit down with a buyer and seller that walk in to my office and write their deal up from scratch for a fixed fee. Depending on what they want me to do this can be very low. I write into their contract a very strongly worded limitation of liabilty for yours truly.

I will also work by the hour.

I know quite a few other agents who work the same way.

Perhaps things aren't changing in your world...but they will.

Apr 25, 2007 07:03 PM

ARDELL DellaLoggia

Better Properties Seattle - Kirkland, WA

Marty..."Are you talkin' ta me?" LOL...I own the Company. I can do it any way I want.

Apr 26, 2007 06:33 PM

Marty Van Diest

Valley Market Real Estate - Wasilla, AK

Your Alaskan Realtor

So...Ardell, I didn't know you owned the company. Now that I know...what do YOU do?

Apr 27, 2007 06:09 PM

ARDELL DellaLoggia

Better Properties Seattle - Kirkland, WA

Marty,

We're not allowed to show numbers here in Active rain. Got a call about that. You need you to take the numbers out of your comment. Try to show variables and different methods without actual numbers.

The listing side is so been there done that. It's the buyer's side that is where innovation and creativity is at work.

Apr 27, 2007 08:22 PM

Anonymous

Margaret A Seme

If a Broker sets thru company policy that the commission be 5-6-7% then that is the commission the office charges unless the Broker approves. Yes all commissions otherwise are negotiable yet the Broker can for his and only his company thru policy state a commission.
Price Fixing took place at a Country Club in Atlanta when Brokers from several offices got together and set the commission up from 6 to 7% and agreed not to show properties from any Broker not raising the commission.
Stating that "We Charge 6%" if company policy is ok but the standard commission is 6% is not.

Jun 23, 2014 09:59 AM

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