(Editor’s Note: I few weeks ago, I sat down with Chuck Reiling to discuss an MIT Enterprise Forum he is helping to organize that will feature leaders from some of the top real estate technology firms. His excitement at the idea of bring people from Zillow, Redfin and HouseValues together to discuss the future of real estate was obvious and contagious. Hence, I asked him if he would be willing to give some background on the project, which led directly to this post. Interestingly he’s not the only one who is excited about this forum as he the story was already picked up by both Robert Gray Smith and John Cook. Chuck and his wife are local RE/MAX agents.)
There’s been lots of local and national press lately about new online real estate offerings like Zillow and Redfin. With lots of investor money moving into the arena, we know there is change afoot. The question is, how much change, and for whom? Change for the consumer? Agents? Both?
As Ardell described recently in her “History of Real Estate” articles (Part 1, Part 2 and Part 3), the residential real estate business is always in a state of change. Ten years ago the online MLS systems caused a lot of change. The listing books got thrown away, and a few agents who couldn’t adapt went with them. Then the MLS derivative sites started appearing, with MLS download data becoming available to the public. People could start doing their own online searches without having to call an agent, or cruise the streets on Sunday afternoon looking for open houses. So change is ongoing, and maybe there are only a few real (no pun intended) points of stability.
My daddy and my uncle were both brokers years ago. The only points we still have in common with their businesses seem to be clients, agency law, and the For Sale sign in the yard; almost everything else has changed. For a long time, ‘public’ records in boxes in warehouses were not very publicly accessible for most of us, but government agencies (state, local and federal) are rapidly putting their public records information online to support their operations, and incidentally help us too. And new services like Redfin, Zillow and House Values make that data even easier to use in support of their own business models. As we see locally, the big four real estate companies, Windermere, Coldwell Banker, John L. Scott and RE/MAX are also exploiting that data in conjunction with MLS data on their sites. None of this has changed the basic business model of professionally assisted transactions with buyer and seller agent commissions. While the traditional model has been a subject of debate for a long time, and a lot of creative alternative business models and offerings have been tried, the industry is still seems to be running on business as usual.
However, there is also a lot of technology-driven change right now. Someone with a background in the high-tech industry might observe that real estate looks like just one more industry about to be disrupted by the Internet – changes caused by dramatically improved information availability, rapid communications and online business models. But residential real estate is still dominated by local interests, its product is both expensive (understatement) and unique, and there are a lot of local and national consumer protection laws on the books – some good, some bad, and more coming. So who is right, and what will happen next?
To try to pull together a picture of the impact of these changes, and where they might lead, a local organization called MIT Enterprise Forum is focusing one of its dinner programs on the topic of Online Real Estate (clever title). The Forum focuses on highlighting business issues and opportunities for tech-driven companies and entrepreneurs. The Online Real Estate program will be on Wednesday, March 15, at the Bellevue Hyatt Hotel. See www.mitwa.org for program details and reservations.
These MIT Forum events typically draw 200 to 400 attendees, and this one will probably be on the larger side. For better or worse, it seems like everyone is interested in real estate these days. The program will be panel-based, with a traditional real estate broker, a top online agent and execs from Redfin, Zillow and House Values, with an open Q&A session at the end. I’m on the program team that is pulling the program together, and I’d have to say I expect a very lively conversation on the stage that evening. 🙂
The biggest issue is in between the traditional companies and the “hot” companies. It has more to do with: Why does a traditional broker care if an agent wants to “discount” a commission, if they have no monetary stake in the matter?
If an agent is paying the broker a desk fee and not a % of the commission, then why does that broker have a policy stating that the agent is “not allowed” to take a listing for less than X %? Why does that broker care, if he is getting paid the same regardless? Why isn’t the “independent contractor” free to charge a “fair” price as determined by him and his client as in “all commissions are negotiable”?
These are the questions no one is asking or answering except the agents and the brokers. This is also the key to the consumer’s best answer, that being the answer that gives the consumer the option to get a reduced commission and a top agent at the same time.
The best agents are not “allowed” to negotiate the fee below X per company policy, the discount companies can’t attract the best agents. Seems the answer lies with the best agent who is also free to negotiate with their client. To do that now, one has to have their own small, independent brokerage.
Traditional Company Policies that “set” the commission, when the broker has absolutely nothing to gain from that policy, is what the DOJ should be looking into IMHO.
Thanks for your comments, Ardell, and thanks too for your witty and excellent short
‘History of Real Estate’. Maybe we are the oldest profession after all 🙂
I think what the broker has to gain by holding the line on commissions is
that it supports their big agents by not allowing any significant internal
rate competition, and continues their image of big-company success – and
aids in filling ‘desks’ (or virtual desks) for good fees. After all, their
business model is to make money selling real-estate-related services, not
doing real estate transaction. They have to be visibly supportive of their
clients (the agents) success.
In any industry undergoing change, there is a clear economic benefit to the
incumbent leaders in delaying that change as much as possible. One might
ask why AT&T hired Michael Armstrong from IBM to be their CEO a few years
back. It was unlikely that he could ‘turn it around’ in that context of
change, but his ability to soften and delay the inevitable was probably
worth $billions/yr to AT&T and its stockholders. Keeping the Titanic afloat
10 more hours would have been pretty worthwhile too.
A key point is that any profession has to pay enough to make it worthwhile
for smart people to choose that profession and reward them for staying in it
and delivering its worthwhile services. An interesting point that I heard
Spencer Rascoff, Zillow CFO, make was that they expected to create an
environment in which agents could spend less time trying to attract leads
and more time delivering services. A larger number of transactions at a
lower yield per transaction could still be a very attractive proposition to
an agent. That sounds to me like a fairly direct pointer to price
competition, and if they can deliver in substance, they might drive us into
a different, more differentiated, world of real estate services.
Thank you for that perspective, Chuck. It would seem to me, however, that keeping the “Titanic” afloat is more about dollars than percentages.
The problem with “a larger number of transactions at a lower yield”, is that it leaves the consumer with less in service, by design. More transactions equals less time per client.
As it stands right now, the buyer in the lowest price range has the greatest opportunity to receive full or greater value for their dollars paid, in the current business model. In a volume driven business model, they lose.
Someone purchasing at a price of $160,000 should be looking for value and not a discount. Someone purchasing at $2,000,000 should be looking for a discount as opposed to value. The “break even” point is somewhere around $350,000. No one existing model suits all price ranges, under the current % method.
Ardell, I beg to differ by way of an over-simplified scenario: Lets say there are 100 agents in my city and those agents spend 50% of their time actually helping clients and 50% of their time trying to find new clients. Now lets say that margins on sales drop, causing 25% of the agents to drop out of the market (probably some of the worst agents, or those who barely survived on a few sales a year, and possibly a few of the best, who weren’t doing much marketing and liked their fat salaries). Because there are less agents, there are more clients to go around, meaning that each agent can spend less time on marketing, so let’s say the ratio of work to marketing is now 75 to 25. The hypothetical result: 75% of the original number of agents have more clients and spend 50% more time on client-related work, which means there are actually more agent-hours spent with clients.
Admittedly you could make a scenario where clients get more time or where clients get less, but my point is, lower margins don’t absolutely mean less service. It is people asking themselves “how much is each incremental increase in service worth to me?” and subsequently deciding that they really don’t need full service that will affect the level of service.
Well Galen, by your logic we should all work for Zip Realty. They give the agents the clients 🙂 I don’t know any agents who spend 50% of their time looking for clients…where’d you get that ratio?
Timewarp – here it is the 13th already; tch, tch. Good comments, Ardell, and a fun debate. And thanks for joining in, Galen. I agree, my ‘keeping the Titanic afloat’ comment about AT&T was about preserving $ for AT&T, and it is about preserving $ for the big brokerages and their big agents. But the question of fair fees/fair compensation is a Gordian Knot if there ever was one, and we all seem to sense that the times they are a-changing . Seems to me there are the seeds of three threads in these conversations:
1. What level of service does the client want? And how should it be priced? And what is a practical way of differentiating that market of clients?
2. How do agents spend their time? And what is a practical way of differentiating between classes of agents?
3. What are the costs of being an agent, and how are they changing?
I’ll take a short pass at some thoughts on the first two, and leave the third for later.
On level of service, I think our perceptions of what is valuable and worth paying for is colored by what kind of market we are in. Right now, in a seller’s market, the sellers might be forgiven is they think all they have to do is get their house on the MLS and people will jump on it. So I think we are seeing quite a bit of pressure on the listing part of the commission, and MLS4owners is having a good year with flat listing fees. The buyer’s agent side of the commission, as offered by the seller and listing agent, seems to be holding up pretty well – few sellers want to take the risk that buyer’s agents might shy away from showing a lower commission offering. They are not supposed to, but would you be surprised? But then the buyers themselves may put some pressure on for a cut of that commission, especially if they feel that they are doing most of the work – extreme case: the Redfin Direct buyer who has selected the house, gotten the tour, and decided the offering price. Call him the ‘Do It Yourself’ client. Contrast that to the busy client who is looking for a fairly unique property (like a rambler built since 1990 in Magnolia – fond memories of that one…), call him the ‘Do-It-For-Me’ client, and wants you to do all the searching and previewing, and only show him the likely ones, with a price opinion. For that client, your typical 3% commission might work out to about $10/hr. So, is there a middle range between the DIY and the DIFM? As a buyer, perhaps one who knows what he wants, is prepared to buy, and what he wants is readily available. Against these tiers of clients, one might expect a tiering of services and fees to appear. Ardells comment about the value of a percent on different price homes is certainly valid, and we do see some 2% or 3/1.5% commissions offered on the high end, but we sure don’t see any 5% buyer’s agent commissions offered on the low end. So maybe the $200,000 condo buyer is getting a deal on a full service search – I’m pretty sure a couple of my buyers are
A few notes:
“What level of service does the client want?”
I am one of the lucky agents whose clients do not feel as if I have been overpaid by the end. But I do not think anyone knows what “the service” really IS at the beginning. I just spent 16 or more hours on Friday, Saturday and Sunday getting a clients property ready to sell. I will not be listing it until I find them a place to purchase. I can safely say that they had no idea when they chose me that I would be transforming their home as I have. Nor did they expect they I would actively seek out property not for sale to find them exactly what they want. Nor did they expect me to time it so that they do not have to move into temporary housing in between. Everyone “wants” this level of service when I give it, but I don’t think they would know to “ask” for it at the beginning.
“extreme case: the Redfin Direct buyer who has selected the house, gotten the tour, and decided the offering price.”
Where did they “get the tour”, since Redfin doesn’t show property? Did they use an agent to see homes who then educated them about what to offer? Did the buyer then turn around and go to Redfin to buy the property they arrived at via “the chain of events” of another agent’s work? I think we will be seeing stronger enforcement of the “rules” due to the Redfin model. I myself am in a dispute regarding this very issue, though it was a consumer and agent who “pulled a Redfin”., and not Redfin itself. Can a buyer actually “choose” this option, or do mls rules and REALTOR CODE prevent that model from existing? Historically and in most of the country, the listing broker will be the one to suffer by having to pay the “chain of events” agent after close of escrow.
Well, we are all changing our spellcheckers to add “He Was Zillowed” and “He Pulled a Redfin”. That’s change in and of itself!
BTW…What’s for dinner?
Ardell wrote: “Everyone “wants
Ardell, you tagged me on the Redfin Direct client who has ‘gotten the tour’. Well, that buyer might scam another agent into showing it to him, and we might get into some very sticky ‘procuring cause’ issues with that. More likely he might go through it on a an open-house day, or he might simply walk up to the door and knock and ask if he can see the place. Where we might get some interesting issues is that the listing contract specifies the commission to be paid to the listing broker for the successful sale of the home. The listing broker usually specifies what portion of that commission will be split to a buyer’s agent under the cooperating broker agreement. Right now there is no minimum-service definition that I know of for a ‘cooperating broker’, so it appears that Redfin can claim that buyer’s side commission and rebate some of it to the buyer. Wonder what issues we might see in this area.
Dinner may be pizza tonight. Tomorrow night at the Hyatt for the MIT Forum program on ‘Online Real Estate’ it should be much better 🙂
Interesting tidbit. Of the 6 SFR properties sold in King County in the last six months with Redfin as the Buyer’s Agent, 4 of them were also Redfin listings. 4 out of 6 Redfin buyers picked Redfin listings of all of the properties available in the mls…seems odd.
Hey Chuck,
What about ala carte buyer’s agents? Do you have those in Seattle? The buyer pays a licensed real estate agent by the hour for various tasks (show you a house, help prepare an offer, etc). After you close on the home, you pay the agent and he/she gives you the “buyer’s half” of the comission. Of course if you don’t find anything you like, you still pay the agent for however many hours of work they’ve done.
I do wish the escrow and attorney types here would comment on the legalities involved in “under the table” cash backs to buyers. We all know it is illegal, at least we in the industry, to pay monies to a buyer “off the sheet”. But it would appear that buyer consumers do not know this. It would appear that maybe Redfin does not know this.
Maybe these laws will change, but we all know escrow will not show much of this on the sheet, and doing it off the sheet is like paying people “under the table” and lender fraud. Plus the agent would still be responsible for paying taxes on the amount recieved, regardless of how they “spent” it after the fact. Deductible gifts are limited to something like $25, not 2% of the sale price.
In any classes involving educating buyers on reduced commissions, it is clear that the reduction must be taken against the closing costs or the sale price, and to do either one, you need the seller’s signature and consent. It is not a decision between a buyer agent and a buyer. It is a decision between the listing agent and the seller, and if the fee is reduced from a total of 6% to 4%, the seller gets the 2%, not the buyer. So the buyer needs to somehow get the SELLER to give it to him, not the agent.
There are no commission expenses in the buyer’s closing costs to negotiate. They are all seller costs.
Ardell,
Maybe the better approach is to get rid of the “buyer’s agent” half of the commission? Instead, have sellers negotiate fees based on percentage or fixed rate with their agent, and buyers do the same. Each side pays what they feel is the appropriate amount for the level of service they desire. It also eliminates problems with dual agency.
In addition, sellers and their agents could negotiate incentives to maximize the sale price. The way deals are currently structured, there is an incentive for dealers to unload properties quickly instead of waiting a bit longer to get a higher price for the seller. An increase in selling price of $10K is a big deal for the homeowner, but the extra $300 bucks for the agent is not worth an additional month’s time. Maybe the selling agent gets a 2% commission for everything up to a “base price”, then they collect 10% for what they can get above the base price. For references on this topic, consult the book “Freakonomics” by Steven Levitt.
Ardell, notice those Redfin sales were in 2005. They’ve posted no sales yet for 2006. None. No sales, that I could find. Anyone else seen any Redfin sales? I searched single-family homes, condo’s and multi-family properties. There was one duplex pending, but it disappeared, so perhaps flipped. I noticed another house in the South end pending, but not closed either. Why are they hiring more agents?
Getting rid of the buyer agent half of the commission in the listing contract has been discussed and pushed by some NAEBA members. But then no agent would show homes without a buyer agency agreement. Are we truly ready for that?
The offering of compensation by the seller via the listing contract and mls system is what allows the buyer to view homes without a compensation agreement with the agent who shows homes.
Would there be an mls without the underlying compensation offering?
As to unloading properties quickly, that has more to do with total commission than the difference in commission based on sale price. If the listing fee were reduced to $1,000 flat vs. $10,000 total, one would be less inclined at a fee of $1,000 to work hard to get the seller an extra $10,000. Logic is if you want to pay ME $9,000 less then why should I work hard at $1,000 to get you $9,000 more? Makes sense, doesn’t it? Does someone who pays $500 listing fee for a sign and a lock box, really expect the agent to get them more money at that price? I hope not.
Also getting more for the seller is not about slow vs. quick. I get more for a seller by spending many hours before it gets to the mls, not by having it sit on market for a long time…which gets them less. Highest price paid is usually something we do by generating multiple offers or full price offers, not negotiation at all. That’s why hourly couldn’t work on the seller side. More hours equals less money. Creating a frenzy or perceived frenzy out the gate is what gets the highest sale price. No buyer offers $10,000 over asking price if they are the only offer and the house has been on market three months. Quick is better. Spending many hours before it lists to insure quick and multiple is how a seller’s agent gets the most money for their seller.
Interest points there, Steve.
Ardell,
“Getting rid of the buyer agent half of the commission in the listing contract has been discussed and pushed by some NAEBA members. But then no agent would show homes without a buyer agency agreement. Are we truly ready for that?”
Marlow posted on March 8:
“Our office uses NWMLS Form 41A, the Buyer’s Agency Agreement. In that, it spells out the Buyer’s and Agent’s obligations and responsibilities. Item #6 addresses compensation. There is a blank for the agent to fill out with the dollar amount or percentage that they require for their services. Our office, for instance, requires that we charge 3%. If the Seller of a house is not offering compensation or is only offering 1 or 2%, the Buyer is required to make up the difference.
This is a required form in our office. If we do not collect this amount, the agent is required to make up the difference.”
Marlow works for what I believe is the largest single CB franchise in the country. Seems like the industry is very ready for this.
Russ
Marlow, I see four pending sales. 25175967,26005490, 26023826 and 26012707
You have to put them in as the Selling Office and then separately as the Listing Office to get accurate data. This “glitch” has always been a problem with the mls and continues to be a problem in the new upgrade. Also, you have to watch the stupid new “tabs” or you miss a lot.
Marlow, is it true that there are no transactions at CB where the buyer did not sign a buyer agency agreement? Do you sometimes get it signed when they are signing the purchase and sale agreement?
I find it hard to believe that every buyer who views a property signs a buyer agency agreement before entering a home with a CB agent. In fact I’d lay odds on it not being the case.
Ardell,
Yes, I saw that Redfin has a few pending of their own listings held over from last year, but no separate closed sales yet for 2006.
And as far as CBBA and Buyer Agency Agreements, I can’t speak for everyone, but it is suggested that we use them and they are now included with our Purchase and Sales Agreement “packets” so we make sure we have one signed.
Our office does not do “floor time”, so many of us work by referral only and do not show homes to strangers. My policy is, when working with someone new, the first showing is “free”, then if they want to continue working with me, they must sign a Buyer Agency Agreement.
Ardell,
I tend to agree with you that industry-wide, agents do not get BAAs signed, and many that do, do so at the time an offer is presented (which is too late). Marlow clearly is one of a growing number of agents that can get BAAs signed well before a PSA is drafted. It takes the willingness to sit down with a buyer and explain 1) the agent does not work for free and 2) the agent needs to make sure the buyer is really committed to working with that agent and will make sure that if the agent does their job, they will get paid (identical to the interests of a listing agent vis a vis the seller). The risk is that the buyer walks and finds another agent who won’t demand such commitment.
I believe Marlow’s is more respectful of the services that good agent’s deliver to their buyers.
As an aside, one of the duties of a buyer’s agent under the Washington Agency Law is;
“Unless otherwise agreed to in writing after the buyer’s agent has complied with RCW 18.86.030(1)(f), to make a good faith and continuous effort to find a property for the buyer; except that a buyer’s agent is not obligated to: (i) Seek additional properties to purchase while the buyer is a party to an existing contract to purchase; or (ii) show properties as to which there is no written agreement to pay compensation to the buyer’s agent.”
Therefore, without a BAA, the buyer’s agent MUST show properties to the buyer for which they will receive ANY compensation – SOCs of 2%., 1% or even $100. As long as comp is offered, the law requires the agent to seek out the property if it meets the buyer’s requirements.
-Russ
I can honestly say that I do not look at the selling office commission at all until after the property is in escrow. I am licking 100 envelopes right not to find a property for a buyer client of mine. For all I know, the right house will be found and no commission will be offered. Of course it doesn’t work out that way for me so far.
I just found a property for a buyer I have had since May. I ended up with $2,550 for ten month’s work, which was 2/3rd of 2.5% in the end. But I finally found what he wanted, which wasn’t for sale! Whew!
Gotta get ready for the MIT dinner meeting.
Ardell,
From “Freakonomics”:
“ Using the data from the sales of 100,000 Chicago homes, and controlling for any number of variables — location, age and quality of the house, aesthetics, and so on — it turns out that a real-estate agent keeps her own home on the market an average of ten days longer and sells it for an extra 3-plus percent, or $10,000 on a $300,000 house. When she sells her own house, an agent holds out for the best offer; when she sells yours, she pushes you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer — $150 — is too puny an incentive to encourage her to do otherwise.”
As for buyer’s agents: why should they be paid more than the time which they worked for me? It’s much more straightforward than the selling side. I know how many hours they are working on my behalf. In most cases, 3 percent of the selling price is way too much compensation.
I have no comment on the Freakonomics except can you change she and her to he and him 🙂
As to the buyer agent issue. Hourly doesn’t make much sense. Usually my buyer clients rely on the fact that I see a lot of houses and already know which ones to see, cutting down both my hours and theirs. I can’t charge them for having seen all of the properties in advance.
Example: Client emails me a listing fromt the mls. I say no way Jose, that property backs up to a huge utility junction that you can’t see in the photos. I know this because I went there before he emailed it to me. Saved him the trip. Should I take him and point that out to him, to count the hours? Should I charge him for having gone there in advance so as to have known that? Or should I just charge a higher hourly rate for having known that, the way lawyers do.
Lawyers who know more, and so work less hours researching, have a much higher hourly amount. If you hire the one with the lowest hourly fee, you get the one that spends the most hours doing some nominal task.
I spent all day contacting people who own homes that are like the one my buyer wants. If I take that buyer to one house that is exactly what he wants, should I make less than if I drive him all over town opening doors of all the wrong houses?
I don’t see hourly working for these reasons.
If I call the buyer 10 minutes after the “right” property hits the market and meet him there in an hour (dropping everything else) and he buys it and is amazed and thrilled to get exactly what he wanted, should I make less than if I drive him to all of the “available” overpriced dogs first? I don’t think so.
Ardell,
You can make fun of the Freakonmics data all you want, but the example rings true with a lot of people who’ve sold their homes.
In the first buyer’s agent example: If a house is on an MLS and the address is listed, I can go drive out myself and find out that it’s near a utility line. I don’t need to pay you for that. I can even find out from satellite data that it’s near something undesireable and save myself the trip.
If all of the listings on the MLS have lots of photos, I can narrow down the ones I’m interested in to a small set. I pay you to show me three houses and that’s that. I don’t need any more of your time, and there’s no “hidden labor” behind it (except for that of the listing agent, and those fees were negotiated between him/her and the seller).
I agree that if you’re dealing with someone from out of town who’s on a tight schedule and needs a lot of your labor, then you should be compensated more for those customers. But if I am willing and able to do a lot of the legwork myself, I don’t see why you and your agency should receive 3 percent of the sales price..
As for your “ten minute service” scenario, all I can say that the seller’s agent should be listing the property at a higher price and wait for multiple offers to maximize the selling price for his/her client (as you pointed out in a previous post). Your “ten minute service” should not be needed in an open, efficient marketplace (especially when services like Redfin can send listing announcements to my cellphone).
Steve,
There is no reason why you personally can’t do whatever you want, if you can find an agent who will meet you on your terms. I have no problem with, and have agreed to, a flat fee of $2,500 vs. a 3% commission of $15,000 for a client like you. I take no responsibility for property selection and the client “holds me harmless” for not providing “full service”. As long as a client doesn’t hold me to the same standard at the flat fee as I would be held to at full price, I have no problem with that.
So, Steve, if you agree to “represent yourself” and hold the agent harmless with regard to fully representing you, at $2,500 vs. $15,000…we can agree here. If you want all of the protections the State and Courts have to offer you at $10 an hour, then good luck finding an agent who agrees with you.
In the industry we call that “a customer” vs. “a client”. If you want to proceed on a customer basis at a reduced rate for the lower standard of care, that is your option. If you have a problem with the house after you move in or the neighbor puts on a second story blocking your view, and you take full responsiblity without calling me to “help” you or to blame me in that scenario, you’ve got a deal.
Are you willing to sign a “hold harmless” letter to the agent, in exchange for getting one willing to sit around with his thumb up his butt watching you shoot yourself in the foot and opening doors for you for X $ an hour?
I do think your tone comes from the fact that, unfortunately, there are many agents out there who perform at this level and collect 3% for their lesser efforts. I am not one of them. And when my services turn out to be worth less than 3%, I am the first to say so, and find a way to provide “fairness”. Problem is, that takes a level of trust in the Agent/Client relationship, as there is no way to determine “value” until you get closer to the closing table.
Ardell
Nice to meet you in person last night. 🙂
Not sure I get your point about the hold harmless. Since most agency duties are not waiveable by the consumer, I am not sure what your hold harmless will do. The Washington Agency Law (and the corresponding agency duties) were written (for the most part) without regard to the amount of comp that the agent receives.
Russ
Aha! There’s the key, Russ. In the consumer’s quest for lower fees, and we all agree that someone should fill that void, technology alone cannot produce the final and best answer. In most cases, State Law or subsequent Court decisions have eliminated the cheap option from the consumer’s grasp.
Steve’s desire, Redfin, MLS4Owners….the cheapest options that the consumer “wants”, do not consider the obstacles that the Agency Laws of each state impose on the agent and consumer. In fact, there are many seller consumers who simply want a sign, a keybox and mls access. There are many buyer consumers who simply want someone to open the door and write it up. Why should state laws continue to prevent the ultimate choice of the consumer under the “guise” of protecting said consumer? Should not the consumer have the option of not wanting the state to protect them, nor the cost of same?
Where is the “no frills” version of service in the Agency Law? Why does each state conveniently omit that option? Could it be NAR lobbyists who keep that option off of the 7 to 8 page pamphlet of consumer options in each state?
Where in Steve’s questions does he acknowledge the legal standard to which we are held? The secret to that high commission is in the Agency Law. The preservation of that Standard is in fact what makes the “no frills” hourly fee not an option.
So Russ, if you personally were buying a home and needed me to open three doors for you, is there any reason why you, personally, would need to retain the right to be able to sue me if YOU make a wrong choice? Is there any reason why you, personally, need to retain the right to sue me if the contract has not been adequate to your needs? Why isn’t there an option that says “Russ Cofano is a Big Boy and can fend for himself and only needs to pay $50 an hour for someone who will open a few doors for him at a total cost of $500 bucks?” Are you actually saying that the State of Washington precludes you and I from coming up with an agreement on those terms?
If so, then we have found the answer to why an hourly fee doesn’t work. If you pick a dog on the worst lot in town and I am held responsible for your choice, then it doesn’t matter if it took you ten minutes of my time to get there. I better not be walking off with $100 and still be responsibile for all of the problems YOUR CHOICE property gives you in the weeks and months ahead.
If you want to pick a property that is priced at 20% over value, and tell me what price to put on the contract, but still retain the right to sue me and blame me when you finally figure out that you bought an overpriced dog, then you can’t pay me an hourly fee for the time it took me to “follow your instructions”.
Excellent issue, Russ. Do you really think the average consumer knows what you have just revealed here? We can’t give them what they truly want because the State Laws do not “allow” us to work at that reduced level of care. Where does Freakonmics hone in on that point. That part I’d love to read.
Ardell
You asked:
“So Russ, if you personally were buying a home and needed me to open three doors for you, is there any reason why you, personally, would need to retain the right to be able to sue me if YOU make a wrong choice? Is there any reason why you, personally, need to retain the right to sue me if the contract has not been adequate to your needs? Why isn’t there an option that says “Russ Cofano is a Big Boy and can fend for himself and only needs to pay $50 an hour for someone who will open a few doors for him at a total cost of $500 bucks?
Ardell,
I just reviewed Washington State’s Agency Law on buyer’s agents (an entire half-page), and it provides little protection to the buyer, apart from gross fraud on your part. The current owner of the house could be a drug dealing child molestor who went on a shooting rampage and killed several of his neighbors, but you aren’t even obligated to tell me that little fact! You ARE required to refer me to a profesional for anything outside your area of expertise. If the home inspector (which I pay for out of my pocket) doesnt find the massive termite damage in my house, you’re off the hook. And where does it say that you’re obligated to come up with an accurate offer price? You’re just making up a bunch of straw men.
Steve
you need to read the specific duties of a buyer’s agent in tandem with the duties of a licensee genererally.
18.86.030 Duties of licensee.
(1) Regardless of whether the licensee is an agent, a licensee owes to all parties to whom the licensee renders real estate brokerage services the following duties, which may not be waived:
(a) To exercise reasonable skill and care;
(b) To deal honestly and in good faith;
(c) To present all written offers, written notices and other written communications to and from either party in a timely manner, regardless of whether the property is subject to an existing contract for sale or the buyer is already a party to an existing contract to purchase;
(d) To disclose all existing material facts known by the licensee and not apparent or readily ascertainable to a party; provided that this subsection shall not be construed to imply any duty to investigate matters that the licensee has not agreed to investigate;
(e) To account in a timely manner for all money and property received from or on behalf of either party;
(f) To provide a pamphlet on the law of real estate agency in the form prescribed in RCW 18.86.120 to all parties to whom the licensee renders real estate brokerage services, before the party signs an agency agreement with the licensee, signs an offer in a real estate transaction handled by the licensee, consents to dual agency, or waives any rights, under RCW 18.86.020(1)(e), 18.86.040(1)(e), 18.86.050(1)(e), or 18.86.060(2) (e) or (f), whichever occurs earliest; and
(g) To disclose in writing to all parties to whom the licensee renders real estate brokerage services, before the party signs an offer in a real estate transaction handled by the licensee, whether the licensee represents the buyer, the seller, both parties, or neither party. The disclosure shall be set forth in a separate paragraph entitled “Agency Disclosure” in the agreement between the buyer and seller or in a separate writing entitled “Agency Disclosure.”
(2) Unless otherwise agreed, a licensee owes no duty to conduct an independent inspection of the property or to conduct an independent investigation of either party’s financial condition, and owes no duty to independently verify the accuracy or completeness of any statement made by either party or by any source reasonably believed by the licensee to be reliable.
Russ,
Are you saying the duties and liability are exactly the same if on line 15. we check “Selling Lincesee represents ‘neither party’ as when it says Selling Lincensee represents “buyer”? That can’t be.
Steve,
How much per hour did you have in mind. Let’s see if the minimum liability that Russ can come up with matches your hourly rate. I think a no agency option could be the ticket, if permitted by law. Let’s assume you just want an agent who opens doors and hands you comps, without advices, and you agree to “represent” yourself. I’m assuming that is fairly close to what you have in mind.
Ardell,
If the agent represents neither party, they have the duties of a licensee generally (see my post to Steve above). There is a difference between a non-agent and a buyer’s agent but practically, it is just not that significant (except for the duty of finding the buyer a property which can be waived).
Russ
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