Agents and Consumers – A Perplexing Business Model

Seems to me that misinformation fuels many of the conversations regarding relationships between agents and consumers in today’s real estate marketplace. So let’s take a crack at one of Craig’s comments in #48 of Dustin’s post.

“If the mls were “open” – i.e. anyone could list – then agents will have an even harder time justifying the 3%/3% commission.”

Last I looked, every option known to man was available to sellers, with very few “having to pay” 3% to their listing agent, at least in the Seattle area. Many if not most agents do not charge 3% on the listing side, if the seller buys their next home from the same agent. There are many flat fee options available for limited service. High end often pays 1% for full service, especially on new construction homes. 2% is fast becoming the norm for the average Joe. 3% is more typical in the lowest of price ranges where 3% doesn’t amount to much and is a bargain for full service on a $120,000 condo. I have to wonder why people keep pretending that sellers by and large pay 3% to the listing agent? As this figure is not published, there must be some “hidden agenda” to the purveying of misinformation, I think.

As to why sellers offer 3% to convince more and many agents to come and show their home, I guess because it must make sense for them to do that, or they wouldn’t be doing it. That doesn’t mean the Buyer’s Agent GETS 3%, that only means that there is an allowance in the List Price, up to that amount, as far as the SELLER is concerned. Then it is up to the buyer and his agent to determine the actual fee, as they negotiate it within the target amount set by the seller.

Clearly all commissions are negotiable and always have been. Anyone who believes an agent, or attorney in this case, who pretends otherwise is mistaken. All commissions are and always have been negotiable. You just have to understand the structure, and the reasons for it, to maneuver within the system to your best advantage. If you don’t understand the system in place, you leave yourself open for someone to take advantage of your lack of knowledge, by exploiting that weakness. Know that you can, for sure, and in fact, negotiate any fee you want AND participate in the mls system in place while doing so. This is true for both buyers and for sellers, as long as the seller negotiates his side, and the buyer negotiates the other side. There is absolutely nothing in the system, as it exists, that prevents you from negotiating commissions, other than the misinformation which is keeping you from understanding the system.

As to using an attorney instead of an agent in a real estate transaction, it’s apples and oranges. No attorney purports to do, or even tries to do, what an agent does in a transaction. A great attorney is no replacement for a good agent in a real estate transaction. A monkey is a sufficient replacement to both, if they are not good, and monkeys may be more pleasant to deal with 🙂

94 thoughts on “Agents and Consumers – A Perplexing Business Model

  1. Wow, Ardell — I guess I touched a nerve. From your excessive use of emphasis throughout the post (there is a general consensus that a writer should “make judicious use of . . . bolding”), to your accusation that I am intentionally spreading misinformation to promote my “hidden agenda” (which isn’t hidden at all — did you read the last line of my comment?) to concluding your post with what could be constured as sophisticated name-calling (I can produce character references demonstrating that I am more pleasant than a monkey — but not quite as funny, particularly if the monkey is wearing a suit) — your post is over the top. A few points in response.

    First, let me preface the remainder of this comment by noting that you are not like other agents. You’ve already lectured me at length on this issue, and I’ve conceded the point (see comment #37 of that post). So when I talk about agents, please note that I am specifically NOT referring to you.

    Although my friends often question it, I am a believer in capitalism, as I believe people are largely motivated by their own self-interest. If an agent is able to get a client to sign a listing agreement for a 6% commission, the agent stands to make a tidy sum on the transaction (your “120k condo” — is that in Minot, ND?). Maybe you’ll dispute this as well, but it is my understanding that, historically, a 6% commission was the norm. Therefore, when an agent discusses the terms of the representation, I think they’ll probably quote 6%. We don’t live in a “haggle” culture (Life of Brian notwithstanding), and given the historical standard of 6%, I suspect most people just go with the flow and sign the listing agreement. So, in reality, while the commission paid by the seller may be open to negotiation, it often remains at 6%. Or am I wrong about that? Other readers, please weigh in.

    Am I really trying to “monkey” the system by referencing 6% in a discussion of the usual commissions paid? It sure seems like I’ve seen reference to 6% in other places, like the Seattle Times (FSBO sellers savied about $45,000, “the 6 percent commission they would have had to pay real-estate agents”). Perhaps I’m being used like all those real estate bloggers at the P-I…

    As for your discussion of the amount paid to a buyer’s agent, that’s irrelevant. The MLS commission is paid by the seller. The buyer’s agent gets a portion of it pursuant to MLS rules. Conceivably, the buyer could negotiate with her agent, but wouldn’t the result of that negotiation be that the buyer would get some portion of the commission that the seller has already agreed to pay by participating in the MLS? If so, then the seller pays the full 3% (or whatever else seller agreed to pay in listing) regardless of any negotiations between buyer and buyer’s agent. Accordingly, from the MLS consumer’s perspective (i.e. the seller, who pays for the commissions inherent to the MLS), there is no negotiation of one half of the commission. She will pay what she agrees to pay when she lists on the MLS — maybe it will all go to the buyer’s agent, and maybe not, but it’s coming out of her proceeds at closing.

    Finally, I need to address your final paragraph (although, for the life of me, I don’t see how it relates either to my quote or the rest of your post). I agree that the agent/attorney comparison is apples to oranges. Accordingly, I think you should use BOTH, as you can’t get legal counsel from an agent, although you’re engaging in a legal transaction worth hundreds of thousands of dollars. (Uh oh, I’m getting a sense of deja vu here — teach me another lesson, Ardell!) Unfortunately, however, consumers don’t agree. Accordingly, I’m part of the internet-based real estate revolution (FSBO being one aspect) that is attempting to change the system away from being focused on agents/brokers who are paid a 6% commission.

    I believe a great attorney is a PARTIAL replacement for a good agent, in that the attorney can complete a contract and provide assistance with the legal aspects of the transaction. In fact, I’d argue that a great attorney (or even a competent one) is a significant improvement over an agent, as the agent can only practice a very limited form of law (by filling in blanks on preprinted forms) and cannot provide counsel or explanation. On the other hand, the seller most certainly will have to market the home on her own, rather than relying on someone else, as the attorney will not assist in this regard (besides a few tips, like the importance of listing on craigslist). So, what if we phrase the question this way: If a seller decides to forego an agent (for whatever reason), don’t you agree that the seller should hire an attorney?

    I look forward to many other posts from you — and all other agents dedicated to customer service — educating consumers that 6% (or really 3%, as explained above) is open to negotiation. Indeed, I can only assume that, when you meet with a new client, you begin by noting that your fee is negotiable (in case they didn’t know already).

    Craig

    p.s. You should be careful equating attorneys with monkeys, as you may be subjected to a libel suit — BY THE MONKEYS! HA HA HA HA!

  2. Wow, Ardell — I guess I touched a nerve. From your excessive use of emphasis throughout the post (there is a general consensus that a writer should “make judicious use of . . . bolding”), to your accusation that I am intentionally spreading misinformation to promote my “hidden agenda” (which isn’t hidden at all — did you read the last line of my comment?) to concluding your post with what could be constured as sophisticated name-calling (I can produce character references demonstrating that I am more pleasant than a monkey — but not quite as funny, particularly if the monkey is wearing a suit) — your post is over the top. A few points in response.

    First, let me preface the remainder of this comment by noting that you are not like other agents. You’ve already lectured me at length on this issue, and I’ve conceded the point (see comment #37 of that post). So when I talk about agents, please note that I am specifically NOT referring to you.

    Although my friends often question it, I am a believer in capitalism, as I believe people are largely motivated by their own self-interest. If an agent is able to get a client to sign a listing agreement for a 6% commission, the agent stands to make a tidy sum on the transaction (your “120k condo” — is that in Minot, ND?). Maybe you’ll dispute this as well, but it is my understanding that, historically, a 6% commission was the norm. Therefore, when an agent discusses the terms of the representation, I think they’ll probably quote 6%. We don’t live in a “haggle” culture (Life of Brian notwithstanding), and given the historical standard of 6%, I suspect most people just go with the flow and sign the listing agreement. So, in reality, while the commission paid by the seller may be open to negotiation, it often remains at 6%. Or am I wrong about that? Other readers, please weigh in.

    Am I really trying to “monkey” the system by referencing 6% in a discussion of the usual commissions paid? It sure seems like I’ve seen reference to 6% in other places, like the Seattle Times (FSBO sellers savied about $45,000, “the 6 percent commission they would have had to pay real-estate agents”). Perhaps I’m being used like all those real estate bloggers at the P-I…

    As for your discussion of the amount paid to a buyer’s agent, that’s irrelevant. The MLS commission is paid by the seller. The buyer’s agent gets a portion of it pursuant to MLS rules. Conceivably, the buyer could negotiate with her agent, but wouldn’t the result of that negotiation be that the buyer would get some portion of the commission that the seller has already agreed to pay by participating in the MLS? If so, then the seller pays the full 3% (or whatever else seller agreed to pay in listing) regardless of any negotiations between buyer and buyer’s agent. Accordingly, from the MLS consumer’s perspective (i.e. the seller, who pays for the commissions inherent to the MLS), there is no negotiation of one half of the commission. She will pay what she agrees to pay when she lists on the MLS — maybe it will all go to the buyer’s agent, and maybe not, but it’s coming out of her proceeds at closing.

    Finally, I need to address your final paragraph (although, for the life of me, I don’t see how it relates either to my quote or the rest of your post). I agree that the agent/attorney comparison is apples to oranges. Accordingly, I think you should use BOTH, as you can’t get legal counsel from an agent, although you’re engaging in a legal transaction worth hundreds of thousands of dollars. (Uh oh, I’m getting a sense of deja vu here — teach me another lesson, Ardell!) Unfortunately, however, consumers don’t agree. Accordingly, I’m part of the internet-based real estate revolution (FSBO being one aspect) that is attempting to change the system away from being focused on agents/brokers who are paid a 6% commission.

    I believe a great attorney is a PARTIAL replacement for a good agent, in that the attorney can complete a contract and provide assistance with the legal aspects of the transaction. In fact, I’d argue that a great attorney (or even a competent one) is a significant improvement over an agent, as the agent can only practice a very limited form of law (by filling in blanks on preprinted forms) and cannot provide counsel or explanation. On the other hand, the seller most certainly will have to market the home on her own, rather than relying on someone else, as the attorney will not assist in this regard (besides a few tips, like the importance of listing on craigslist). So, what if we phrase the question this way: If a seller decides to forego an agent (for whatever reason), don’t you agree that the seller should hire an attorney?

    I look forward to many other posts from you — and all other agents dedicated to customer service — educating consumers that 6% (or really 3%, as explained above) is open to negotiation. Indeed, I can only assume that, when you meet with a new client, you begin by noting that your fee is negotiable (in case they didn’t know already).

    Craig

    p.s. You should be careful equating attorneys with monkeys, as you may be subjected to a libel suit — BY THE MONKEYS! HA HA HA HA!

  3. Pingback: Northern Virginia Real Estate Guide

  4. Now Craig, I was just bouncing off your one liner. Clearly you are not the only one acting like the industry is some 3/3 model everywhere. THAT part wasn’t personal AT ALL!

    If I wanted to get PERSONAL I would have come after you for this one: “Let’s get those consumers flocking in droves (t0)…a less agent reliant medium” . I can’t believe I’m hearing that an attorney would espouse the abolishment of Buyer Agency after it took this Country Soooo long to get it. That ticked me off to the point where I called Robert, Craig, because “you were on my mind”.

    The point of my post is that the New Business Models (not you) pretend that there is some carved in stone 3/3 model that they are crusading against. As if THEY (the new models) are the only place where a consumer can negotiate their commission. When in fact, the consumer is trading off way more than they are gaining by doing so.

    I side stepped the heavy stuff. You are certainly thin skinned for an attorney type who likes to dish it out, but apparently can’t take it. Always thinking my passion is aimed at you, when it isn’t. If you want me to, I’d be happy to do one aimed at you 🙂 Just let me know. In the meantime, trust me, if I were coming after you personally, you’d know it.

    Those who know me well, know that I always get a little extra feisty around my birthday. It helps me get past the year older part of life. It’s catharctic, and it seems to work. Just put up your shield for a couple more days and lay low, and you should be fine until next June. I usually pick on the Master of NAEBA, Tom Early. But after eight years of it, he learned to take his vacation the first two weeks in June. Hi Tom! You got away easy this year my friend.

  5. Now Craig, I was just bouncing off your one liner. Clearly you are not the only one acting like the industry is some 3/3 model everywhere. THAT part wasn’t personal AT ALL!

    If I wanted to get PERSONAL I would have come after you for this one: “Let’s get those consumers flocking in droves (t0)…a less agent reliant medium” . I can’t believe I’m hearing that an attorney would espouse the abolishment of Buyer Agency after it took this Country Soooo long to get it. That ticked me off to the point where I called Robert, Craig, because “you were on my mind”.

    The point of my post is that the New Business Models (not you) pretend that there is some carved in stone 3/3 model that they are crusading against. As if THEY (the new models) are the only place where a consumer can negotiate their commission. When in fact, the consumer is trading off way more than they are gaining by doing so.

    I side stepped the heavy stuff. You are certainly thin skinned for an attorney type who likes to dish it out, but apparently can’t take it. Always thinking my passion is aimed at you, when it isn’t. If you want me to, I’d be happy to do one aimed at you 🙂 Just let me know. In the meantime, trust me, if I were coming after you personally, you’d know it.

    Those who know me well, know that I always get a little extra feisty around my birthday. It helps me get past the year older part of life. It’s catharctic, and it seems to work. Just put up your shield for a couple more days and lay low, and you should be fine until next June. I usually pick on the Master of NAEBA, Tom Early. But after eight years of it, he learned to take his vacation the first two weeks in June. Hi Tom! You got away easy this year my friend.

  6. Craig,

    There are plenty of $120,000 condos within walking distance to microsoft and in Juanita and Kingsgate…you should take a little trip over the 520 sometime.

    As to the “monkey” reference, I said a bad agent or a bad lawyer are both replaceable by monkeys. Funny you apparently agreed with the agent part of my sentence, but not the lawyer part.

    As to others spouting 6% model, you made my point…I was NOT singling you out in that regard.

    I think it is much better to educate the consumer on how to negotiate the commission, then to pretend they can’t have representation unless they pay full freight. It is time to empower the consumer, not pull the rug out from under them and give them 90% less representation.

    Buyer Agency is still in its infancy, and clearly not matured yet into what buyers need and deserve. Is this all just an attempt to get rid of buyer agency? I know many have hated its coming into existence, but are we truly going to kill it off, rather than perfect it? That’s a shame…a damn shame.

  7. Craig,

    There are plenty of $120,000 condos within walking distance to microsoft and in Juanita and Kingsgate…you should take a little trip over the 520 sometime.

    As to the “monkey” reference, I said a bad agent or a bad lawyer are both replaceable by monkeys. Funny you apparently agreed with the agent part of my sentence, but not the lawyer part.

    As to others spouting 6% model, you made my point…I was NOT singling you out in that regard.

    I think it is much better to educate the consumer on how to negotiate the commission, then to pretend they can’t have representation unless they pay full freight. It is time to empower the consumer, not pull the rug out from under them and give them 90% less representation.

    Buyer Agency is still in its infancy, and clearly not matured yet into what buyers need and deserve. Is this all just an attempt to get rid of buyer agency? I know many have hated its coming into existence, but are we truly going to kill it off, rather than perfect it? That’s a shame…a damn shame.

  8. And a question, Craig. Are you telling me that a consumer just can’t deal with negotiating the commission with an agent, so he should have NO agent and negotiate the sale price by himself instead?? I can’t be reading that right. He has a whole lot more to lose negotiating with the seller than the agent…maybe he should practice on the agent first 🙂

  9. Actually a 3/3% commission IS set in stone, at least in our office (under a $1 million). While different brokerages cannot agree that a certain commission rate is the “standard” rate, separate offices can certainly require a certain commission rate for their office or company. Coldwell Banker Bain has certain commission requirements and so did Windermere when I worked there. Actually, I think the “misinformation” comes in when Buyers and Sellers actually think they can negotiate with me, as that is usually something I’m not willing nor able to do. As my broker makes clear to us, we do not sell “discount” homes, nor are we “discount” brokers who discount our commission. She often likens it to someone who chooses to shop at Kmart v.s. Nordstrom. And it may be an apt metaphor, as the nicest and most expensive homes do seem to be listed by Coldwell Banker Bain, Windermere and J.L. Scott, traditional, full-service agencies. I rarely see luxury homes listed by a discount firm.

    So, for Buyers or Sellers out there who might be reading this, please don’t ask me to discount my standard listing fee of 3/3%, and please do not ask me to rebate my companies selling side commission to you. If I like you, you may get a lovely gift basket at closing, but please don’t ask. That’s rude. Thank you.

  10. Actually a 3/3% commission IS set in stone, at least in our office (under a $1 million). While different brokerages cannot agree that a certain commission rate is the “standard” rate, separate offices can certainly require a certain commission rate for their office or company. Coldwell Banker Bain has certain commission requirements and so did Windermere when I worked there. Actually, I think the “misinformation” comes in when Buyers and Sellers actually think they can negotiate with me, as that is usually something I’m not willing nor able to do. As my broker makes clear to us, we do not sell “discount” homes, nor are we “discount” brokers who discount our commission. She often likens it to someone who chooses to shop at Kmart v.s. Nordstrom. And it may be an apt metaphor, as the nicest and most expensive homes do seem to be listed by Coldwell Banker Bain, Windermere and J.L. Scott, traditional, full-service agencies. I rarely see luxury homes listed by a discount firm.

    So, for Buyers or Sellers out there who might be reading this, please don’t ask me to discount my standard listing fee of 3/3%, and please do not ask me to rebate my companies selling side commission to you. If I like you, you may get a lovely gift basket at closing, but please don’t ask. That’s rude. Thank you.

  11. That’s amazing Marlow. Are you saying that if someone came in to buy five houses at one time as investments, thay would HAVE TO pay full boat on all five? That’s steep.

    As I said, I don’t know beans about bain, but that clearly is not Coldwell Banker’s policy nationwide. I am sure I have heard that the big W agents have at least SOME ability to abide by the law that says “all commissions are negotiable”.

    Maybe it IS time for the DOJ to win this one.

  12. May I say somethin’?

    Not that anyone would care, but since everyone’s got their gloves off and Ardell just had her birthday, I assure readers that from an escrow perspective, there are just as many poor “full service” agents in large brokerages (full service, what does that mean specifically?) companies as the large brokers like to coin, “discount brokerages.” The reality though, is that the service level and competence is agent specific. So, I would never say all the agents in Marlow’s office are strange and all Windermere agents are goofy. But, it seems to be a pervasive element of the real estate culture to bash a nut in one company and associate that entire company as nutty. Or, bash one business model,because if successful, it could put me out of business.
    ————–

    It’s time now for “Sunday True Stories” from the trenches:

    For example, how does an agent (from a big big big big brokerage) not get paid at closing? It’s vewy vewy easy. Drum roll please. Do this: Don’t put your brokerage or name or anything on the P& S agreement— but do call escrow screaming like a child (with choice words) that “we’ve never been in contact throughout the transaction.” Hmmm, so wha’d Chief Errand Boy do? Called their managing broker to see if they had the first page of the P & S WITH any brokerage name or agent or anything. “ummm nope, there’s nothing.”- say’s the managing broker. Aside from the other questions this raises about the Broker, we didn’t even get a Commission Disbursement form from the agent, which I imagine is 2nd on the list to get to escrow after the P & S agreement. This broker was literally hours away from having to go after the seller for the commission OUTSIDE of closing. And, I guarantee we would be named in a complaint sorting this all out. Total incompetence. I could tell lots of stories but it would probably bore you all.

    Craig & Russ would get a kick out of these: how about writing language for addendums (ain’t that practicing law?)…here’s a couple VERY recent one’s…..

    1) Buyer to walk through house three days prior to closing. (oooookkkk, and then will they walk through the yard?)
    2) Seller to pay 3% of buyer’s closing costs. (So we did. It amounted to around $100. Evidently they are still fighting over that.)

    And these are seasoned agents drafting this stuff.

    Oh, and another: My wife cut a rather large commission check to a broker for six figures…..the agent berated us and wanted us to pay $40.00 to hire a “courier” to personally deliver the check; the brokers office was only about 15 minutes away. (obviously we were not going to mail it). How many of you would be R-U-N-N-I-N-G to the escrow office to pick that bad boy up. I know I would. In fact, I’d be in the office waiting for recording numbers. The arrogance was off the charts.

    What I’m trying to illustrate here is, can’t we all just get along? 🙂

    Marlow, before I forget, I do think that companies that forbid agents from negotiating a commission is a dangerous and “slippery slope.” And statements such as yours, whether indended or not, gives much more ammunition to the Men In Black over at the DOJ.

    Russ “Elliot Spitzer” Cofano may be able to disect this as to whether it clearly violates Anti-Trust law, among other things.

  13. May I say somethin’?

    Not that anyone would care, but since everyone’s got their gloves off and Ardell just had her birthday, I assure readers that from an escrow perspective, there are just as many poor “full service” agents in large brokerages (full service, what does that mean specifically?) companies as the large brokers like to coin, “discount brokerages.” The reality though, is that the service level and competence is agent specific. So, I would never say all the agents in Marlow’s office are strange and all Windermere agents are goofy. But, it seems to be a pervasive element of the real estate culture to bash a nut in one company and associate that entire company as nutty. Or, bash one business model,because if successful, it could put me out of business.
    ————–

    It’s time now for “Sunday True Stories” from the trenches:

    For example, how does an agent (from a big big big big brokerage) not get paid at closing? It’s vewy vewy easy. Drum roll please. Do this: Don’t put your brokerage or name or anything on the P& S agreement— but do call escrow screaming like a child (with choice words) that “we’ve never been in contact throughout the transaction.” Hmmm, so wha’d Chief Errand Boy do? Called their managing broker to see if they had the first page of the P & S WITH any brokerage name or agent or anything. “ummm nope, there’s nothing.”- say’s the managing broker. Aside from the other questions this raises about the Broker, we didn’t even get a Commission Disbursement form from the agent, which I imagine is 2nd on the list to get to escrow after the P & S agreement. This broker was literally hours away from having to go after the seller for the commission OUTSIDE of closing. And, I guarantee we would be named in a complaint sorting this all out. Total incompetence. I could tell lots of stories but it would probably bore you all.

    Craig & Russ would get a kick out of these: how about writing language for addendums (ain’t that practicing law?)…here’s a couple VERY recent one’s…..

    1) Buyer to walk through house three days prior to closing. (oooookkkk, and then will they walk through the yard?)
    2) Seller to pay 3% of buyer’s closing costs. (So we did. It amounted to around $100. Evidently they are still fighting over that.)

    And these are seasoned agents drafting this stuff.

    Oh, and another: My wife cut a rather large commission check to a broker for six figures…..the agent berated us and wanted us to pay $40.00 to hire a “courier” to personally deliver the check; the brokers office was only about 15 minutes away. (obviously we were not going to mail it). How many of you would be R-U-N-N-I-N-G to the escrow office to pick that bad boy up. I know I would. In fact, I’d be in the office waiting for recording numbers. The arrogance was off the charts.

    What I’m trying to illustrate here is, can’t we all just get along? 🙂

    Marlow, before I forget, I do think that companies that forbid agents from negotiating a commission is a dangerous and “slippery slope.” And statements such as yours, whether indended or not, gives much more ammunition to the Men In Black over at the DOJ.

    Russ “Elliot Spitzer” Cofano may be able to disect this as to whether it clearly violates Anti-Trust law, among other things.

  14. Has anyone ever played the game “Fact or Crap” It is quite fun, especially when you have pre-teens who love to say Crap! Heck, even I like to say Crap!

    Real Estate Crap #43 – All commissions are negotiable.

    Real Estate Fact #43 – The “real estate industry” cannot set commissions as doing so would generally be deemed a violation of federal anti-trust laws. Individual real estate brokerage companies may, however, through independent decision-making, determine how much they wish to charge for their services.

    I can’t believe how many times I hear agents spout off this “negotiability” issue. If you own a company, you can determine how much you want to charge and mandate that your agents must quote the party line. If your agents don’t like it, they can go elsewhere. If your prospects don’t like it, they can go elsewhere.

    Negotiability of fees is an industry issue, not an individual broker/agent issue.

    -Russ

  15. Has anyone ever played the game “Fact or Crap” It is quite fun, especially when you have pre-teens who love to say Crap! Heck, even I like to say Crap!

    Real Estate Crap #43 – All commissions are negotiable.

    Real Estate Fact #43 – The “real estate industry” cannot set commissions as doing so would generally be deemed a violation of federal anti-trust laws. Individual real estate brokerage companies may, however, through independent decision-making, determine how much they wish to charge for their services.

    I can’t believe how many times I hear agents spout off this “negotiability” issue. If you own a company, you can determine how much you want to charge and mandate that your agents must quote the party line. If your agents don’t like it, they can go elsewhere. If your prospects don’t like it, they can go elsewhere.

    Negotiability of fees is an industry issue, not an individual broker/agent issue.

    -Russ

  16. Ok, just to be clear here, I am not discussing agent commissions with a real estate agent from a different company than I work for. I am making a comment on a post on a blog created by a transportation engineer named Dustin. He is NOT a licensed real estate agent in the State of Washington.

    My company has a Terms of Service contract with minimum commissions we charge for our services. They start at 3% and go UP from there. Ok? So, they ARE negotiable.
    Upwards.

    We CAN charge less than 3%, but then we’re asked to make up the difference to the company ourselves, because we’ve given away their money. The commissions are paid to the broker, not the agent.

    Happy?

  17. Ok, just to be clear here, I am not discussing agent commissions with a real estate agent from a different company than I work for. I am making a comment on a post on a blog created by a transportation engineer named Dustin. He is NOT a licensed real estate agent in the State of Washington.

    My company has a Terms of Service contract with minimum commissions we charge for our services. They start at 3% and go UP from there. Ok? So, they ARE negotiable.
    Upwards.

    We CAN charge less than 3%, but then we’re asked to make up the difference to the company ourselves, because we’ve given away their money. The commissions are paid to the broker, not the agent.

    Happy?

  18. And just so everyone knows, this is actually a private forum as the entire site is password protected… Although at the moment, password pretection is temporarily (perminantly?) turned off. 😉

  19. Marlow: So once the Broker has his cap for the year and has no stake in the individual transaction at hand, the agent is fully free to negotiate, right? It’s just an easy out to say “my broker won’t let me”?

    Russ, it really isn’t crap. I think the crap part is acting like not talking about it helps. Heck, that’s how commissions have remained basically unchanged for so long by saying “Oh, we can’t talk about THAT, it’s against the law.” Keep the whole topic under wraps and pretend it is illegal or impossible to negotiate a fee with a buyer, helps maintain the status quo.

    Every time an agent buys a warranty for a buyer, as many have done for many years, they take a piece of the commission and expend it on behalf of the buyer. So much for not able or allowed to take a piece of the commission and move it to the buyer’s side of the equation. Agents have been doing it for years. Refrigerators, because they screwed up and forgot to write it in the contract. Repairs to hold the “deal” together.

    Tim, how often do you see a charge against the buyer agent fee going to the buyer side of the transaction? More than never, I’m sure.

    All I’m saying is if you are willing to give money to a bottom feeder to BUY a Buyer, be willing to give that same amount TO the buyer. Agents have been paying thousands of dollars in referral fees to each other for years, why not give it righ to the client?

    CBB will pay 35% of the commission to a Company for a relocation client, but not a cent to the client himself…now that’s is CRAP for sure.

    And for the record, I don’t shop at Nortstrom’s, I shop at Nortstrom’s Rack. Same shoes; lower price.

  20. Marlow: So once the Broker has his cap for the year and has no stake in the individual transaction at hand, the agent is fully free to negotiate, right? It’s just an easy out to say “my broker won’t let me”?

    Russ, it really isn’t crap. I think the crap part is acting like not talking about it helps. Heck, that’s how commissions have remained basically unchanged for so long by saying “Oh, we can’t talk about THAT, it’s against the law.” Keep the whole topic under wraps and pretend it is illegal or impossible to negotiate a fee with a buyer, helps maintain the status quo.

    Every time an agent buys a warranty for a buyer, as many have done for many years, they take a piece of the commission and expend it on behalf of the buyer. So much for not able or allowed to take a piece of the commission and move it to the buyer’s side of the equation. Agents have been doing it for years. Refrigerators, because they screwed up and forgot to write it in the contract. Repairs to hold the “deal” together.

    Tim, how often do you see a charge against the buyer agent fee going to the buyer side of the transaction? More than never, I’m sure.

    All I’m saying is if you are willing to give money to a bottom feeder to BUY a Buyer, be willing to give that same amount TO the buyer. Agents have been paying thousands of dollars in referral fees to each other for years, why not give it righ to the client?

    CBB will pay 35% of the commission to a Company for a relocation client, but not a cent to the client himself…now that’s is CRAP for sure.

    And for the record, I don’t shop at Nortstrom’s, I shop at Nortstrom’s Rack. Same shoes; lower price.

  21. Uh oh, Dad’s home. Craig started it Dad/Dustin. I swear he did. Goodnight. Thanks everyone. I had a “crappy” birthday this year, but this weekend hooha made up for it.

  22. I have been in the business for 20 years I just sold my house and paid a 6% commission. She sold my house in 2 weeks for 99% of asking price. I didn’t have to worry about 1 detail being missed because I hired the best. Her communication was incredible every step of the way. (I would have been embarrassed to ask her to discount)

    If I was to hire an agent that was willing to do what my agent did for a 30 – 40% discount I know I wouldn’t have slept as well as i did each night. And I need my sleep :).

    People tell me I pay too much for my attorney too. Well he is 3 and 0 and don’t tell him but I would probably pay him double.

    PS. My agent double ended the sale of my house and that was a nice check. Congrats to Her.

  23. I have been in the business for 20 years I just sold my house and paid a 6% commission. She sold my house in 2 weeks for 99% of asking price. I didn’t have to worry about 1 detail being missed because I hired the best. Her communication was incredible every step of the way. (I would have been embarrassed to ask her to discount)

    If I was to hire an agent that was willing to do what my agent did for a 30 – 40% discount I know I wouldn’t have slept as well as i did each night. And I need my sleep :).

    People tell me I pay too much for my attorney too. Well he is 3 and 0 and don’t tell him but I would probably pay him double.

    PS. My agent double ended the sale of my house and that was a nice check. Congrats to Her.

  24. We frequently have home warranties paid by an agent and even more frequently agents (and a lot of loan officers fall under this too)will give the buyer a credit towards their closing costs. Roughly 20-25% of the time (maybe a little high) the agents are giving away a portion of their commission. And this happens with agents from many of the brokerages big and small. We have closed some CBB transactions, so I was not aware that the CBB agents are required to make up the difference to their brokers, if I understand Marlow correctly.

    And, we also hear a lot of times that agents give clients appliances etc… handled outside of closing.

  25. Ardell — the classic instigator…

    So the 6% commission is largely a “hard” number, at least in regards to “full service” brokerages. Moreover, commissions generally are protected by the MLS system, for if you want to list, you have to pay (even if you use a “bottom feeder,” you still pay some fee to your agent and 2.5-3% to the buyer’s agent). So, as long as the MLS remains the primary marketplace for homes, agents will continue to lock in 3% commissions. For those of us hoping to “get a piece of the action,” the surest way to do so is to hope for/work towards an alternative to the MLS.

    Ironically (at least in regards to this thread), if there was an MLS alternative, then each agent/broker really would have to negotiate his/her own commission with each client, thus truly empowering the consumer. POWER TO THE PEOPLE!

  26. Ardell — the classic instigator…

    So the 6% commission is largely a “hard” number, at least in regards to “full service” brokerages. Moreover, commissions generally are protected by the MLS system, for if you want to list, you have to pay (even if you use a “bottom feeder,” you still pay some fee to your agent and 2.5-3% to the buyer’s agent). So, as long as the MLS remains the primary marketplace for homes, agents will continue to lock in 3% commissions. For those of us hoping to “get a piece of the action,” the surest way to do so is to hope for/work towards an alternative to the MLS.

    Ironically (at least in regards to this thread), if there was an MLS alternative, then each agent/broker really would have to negotiate his/her own commission with each client, thus truly empowering the consumer. POWER TO THE PEOPLE!

  27. marlow,

    agreed- all commissions are negotiable.

    re: discussing real estate commissions – my comment pointed to how “some people” might interpret when a group of brokers/agents get together & discuss the commission fees they charge buyers/sellers. see sherman antitrust act.

    that’s all.

  28. Rudolph

    I don’t think Marlow said that. I think (correct me Marlow) she implied with tongue firmly planted in cheek that someone can choose to pay her more if they want but there will be no downward negotiation on the fee.

    This is legal and is certainly not negotiating.

    Russ

  29. Rudolph

    I don’t think Marlow said that. I think (correct me Marlow) she implied with tongue firmly planted in cheek that someone can choose to pay her more if they want but there will be no downward negotiation on the fee.

    This is legal and is certainly not negotiating.

    Russ

  30. Seems to me that the fix is already in.

    Somewhere back in real estate broker history the commission was set at 6%.

    The only negotiation I see is how much lower than the fixed price will we go to get a listing.

  31. Seems to me that the fix is already in.

    Somewhere back in real estate broker history the commission was set at 6%.

    The only negotiation I see is how much lower than the fixed price will we go to get a listing.

  32. If commissions are truly negotiable we should all start at 0 and work up- not start at a fixed price of 6%.and work down

    in fact the % is a fixed method as well. Why is that? Why dont we use a model that’s hourly or a fixed amount thats a dollar amount?

    So you see, we are all working with an industry fixed % rate of 6%.

  33. russ,

    just wouldnt want brokers/agents to get into any trouble, so i thought i would just point out how “others” may interpret this thread.

    the portion of marlow’s comment i was referring to was:

    “Ok, just to be clear here, I am not discussing agent commissions with a real estate agent from a different company than I work for. I am making a comment on a post on a blog created by a transportation engineer named Dustin. He is NOT a licensed real estate agent in the State of Washington.”

    presumably, there are other brokers from competing firms viewing & participating in this discussion and “some people”, not me, might frown upon competing brokers discussing their commission structure. maybe, this particular venue, an online blog/ forum, may not apply to sherman since it is an open forum where all types of people engage in the conversation.

  34. Craig, since you pointed out that your motivation is “to get a piece of the action”, then I am NOT an “instigator” to suggest your suggesting that there is some 6% carved in stone somewhere is due to a “hidden” or apparent objective. You have now stated that I was, in fact, correct.

    There truly is NO 6% carved in stone! Zip Realty’s business model is full service and NOT a 6% model. When I worked in FL, the “going rate” was 7% 3.5/3.5, when I worked in the South Bay, CA the “going rate” was 5% 2.5/2.5. Some brokers do 2/2 here. Some do $600 plus buyer agent fee. Some do free listings if you buy your new house from them. We have the Redfin model. Zip is 20% less on each side at minimum.

    Large Traditional brokerages, though they won’t advertise a rate at all, of any kind, clearly negotiate on a regular basis. It is just not common knowledge, nor do they want it to be common knowledge. That is, and has always been, the case.

    So yes, I am instigating a discussion that lets consumers know that all commissions are negotiable, all the time, and have always been so. It is the law, and it is the case. I have worked for Coldwell Banker (not Seattle), RE/MAX and Independents for 16 years and NEVER ONCE had a Broker tell me what I can and cannot negotiate as to fee. I have heard many agents USE “I can’t, my Broker won’t let me” as an excuse to “hold the line” on what they want to receive.

    As to you, both personally and as an attorney, I do not think it is appropriate for anyone in the legal profession to “instigate” consumers being unrepresented. The State of Washington offers many protections to consumers via its Agency Laws. For you to make it your business model to draw them away from those protections in place, is something you should think about. Better you should team up with a deeply discounted agent, than to suggest none at all is some kind of WIN for the consumer. People need representation that involves being in the house prior to offer, who knows about houses.

    I fault Redfin as well on a business model that does not afford consumers the opportunity to review the house and neighborhood and value, in person, with a knowledgeable representative who represents them, prior to offer. That is not a good trade off for most people, and no one in the industry should be encouraging that method of purchase.

    I sincerely do not care if they pay $500 or $40,000 for that service. I do care that industry professionals are promoting their business model in a way that causes people to have no one with them, in the house, prior to making an offer. The consumer has much more to lose than to gain, in that scenario. Clearly, unrepresented people are not better off in most cases. And a real estate transaction is not about a bunch of boilplate paperwork. The paperwork is the LEAST of it, for sure. So helping them with “that part” is in most cases an insufficent trade off.

  35. Craig, since you pointed out that your motivation is “to get a piece of the action”, then I am NOT an “instigator” to suggest your suggesting that there is some 6% carved in stone somewhere is due to a “hidden” or apparent objective. You have now stated that I was, in fact, correct.

    There truly is NO 6% carved in stone! Zip Realty’s business model is full service and NOT a 6% model. When I worked in FL, the “going rate” was 7% 3.5/3.5, when I worked in the South Bay, CA the “going rate” was 5% 2.5/2.5. Some brokers do 2/2 here. Some do $600 plus buyer agent fee. Some do free listings if you buy your new house from them. We have the Redfin model. Zip is 20% less on each side at minimum.

    Large Traditional brokerages, though they won’t advertise a rate at all, of any kind, clearly negotiate on a regular basis. It is just not common knowledge, nor do they want it to be common knowledge. That is, and has always been, the case.

    So yes, I am instigating a discussion that lets consumers know that all commissions are negotiable, all the time, and have always been so. It is the law, and it is the case. I have worked for Coldwell Banker (not Seattle), RE/MAX and Independents for 16 years and NEVER ONCE had a Broker tell me what I can and cannot negotiate as to fee. I have heard many agents USE “I can’t, my Broker won’t let me” as an excuse to “hold the line” on what they want to receive.

    As to you, both personally and as an attorney, I do not think it is appropriate for anyone in the legal profession to “instigate” consumers being unrepresented. The State of Washington offers many protections to consumers via its Agency Laws. For you to make it your business model to draw them away from those protections in place, is something you should think about. Better you should team up with a deeply discounted agent, than to suggest none at all is some kind of WIN for the consumer. People need representation that involves being in the house prior to offer, who knows about houses.

    I fault Redfin as well on a business model that does not afford consumers the opportunity to review the house and neighborhood and value, in person, with a knowledgeable representative who represents them, prior to offer. That is not a good trade off for most people, and no one in the industry should be encouraging that method of purchase.

    I sincerely do not care if they pay $500 or $40,000 for that service. I do care that industry professionals are promoting their business model in a way that causes people to have no one with them, in the house, prior to making an offer. The consumer has much more to lose than to gain, in that scenario. Clearly, unrepresented people are not better off in most cases. And a real estate transaction is not about a bunch of boilplate paperwork. The paperwork is the LEAST of it, for sure. So helping them with “that part” is in most cases an insufficent trade off.

  36. 3 cents. The reason you start up and work backwards on commissions is due to the financing issues. To the best of my knowledge, the max allowable in the price for most lenders is 7% total, so you have to work some number into the offer price and work backward. This is true for all but cash transactions, and by and large, residential transactions are financed. If you leave the commissions out as zero when you list a house, it is harder to get the financing if you stack everything on top of the offer price.

    Because there is no difference in appraisal techniques, the system in place works better right now if you put an “allowance” for commission in the asking price and then work backward. FSBO sales are even harder to appraise, because the bank is more suspect of sale price if the price is not tested by the market first. I did a full FSBO, unmarketed property and practically had to give the lender a pint of blood down to the last minute before closing to prove I was not related to either the buyer nor the seller.

    Maybe the lenders can comment on that 7% max cap for commissions in a transaction with zero down or 10% down? I know for fact it can go up to 7%. Not sure if over 7 is possible. Would love to hear from some lender types on that. Land purchases excluded, of course. Straight, residential, owner occupied financing.

  37. Ardell

    You said;

    “So yes, I am instigating a discussion that lets consumers know that all commissions are negotiable, all the time, and have always been so. It is the law, and it is the case.’

    I respect that fact that you say this with so much conviction but I thought my earlier post would have cleared this up. It is NOT the law!

    I don’t want consumers who might read this very interesting dialogue to conclude that they can make an agent negotiate their fee. They simply cannot. You may, if you so choose, tell a consumer that your fee is X and you are unwilling to negotiate your fee.

    While (practically speaking) you might let Econ 101 enter the picture and choose to negotiate a lower fee, you are NOT legally required to do so. If I am ‘full of beans’, please educate me on the legal underpinnings to your remarks.

    -Russ

  38. Ardell

    You said;

    “So yes, I am instigating a discussion that lets consumers know that all commissions are negotiable, all the time, and have always been so. It is the law, and it is the case.’

    I respect that fact that you say this with so much conviction but I thought my earlier post would have cleared this up. It is NOT the law!

    I don’t want consumers who might read this very interesting dialogue to conclude that they can make an agent negotiate their fee. They simply cannot. You may, if you so choose, tell a consumer that your fee is X and you are unwilling to negotiate your fee.

    While (practically speaking) you might let Econ 101 enter the picture and choose to negotiate a lower fee, you are NOT legally required to do so. If I am ‘full of beans’, please educate me on the legal underpinnings to your remarks.

    -Russ

  39. To the extent that I won’t negotiate a $50 fee for a $5,000 service, you are correct. Being able to negotiate does not mean the consumer can SET their commission, always, at what THEY want. That is not negotiation. That still makes all fees negotiable. That I am not willing to provide a $5,000 service for $50 is part of the negotiation process. But clearly they can get an mls only plus sign and lockbox for a nominal flat fee, yes?? I’m not recommending that but we all know many who are doing that without twisting any agent’s arms for it.

    I’ll go look for the legal references to the fact that 6% cannot, by law be carved in stone industry-wide, though I don’t think you are saying I am incorrect in that regard. Or you can save me the trouble and acquiesce in that regard.

    While many brokerages may say they won’t negotiate in general, many do in fact in specific, though they don’t necessarily want that news to get out. One of the top listers in this area charges 1% on the seller side. It is a known fact. To pretend that all agents who do a lot of transactions always charge a certain amount and do not negotiate is erroneous, based on the facts. Not what they say…but what they actually do.

    A Broker can say that the agent, has to pay the amount in their contract with one another, as Marlow pointed out is the case. The Broker can also prohibit the advertisement of fees. The agent can always negotiate their portion, if not the broker portion. But we all know the broker portion, by and large these days, is the smaller and sometimes nominal and sometimes zero part of the equation.

    You yourself, Russ, said you receivd at your home a piece of mail from a large national brokerage quoting a fee of 1%, so why are you now acting like that is not possible?

  40. I’ve been reading this post and thinking about it. Here is my question: Why does there have to be an offer for compensation on the selling side of a listed real estate transaction? Excluding the MLS rule that says there has to be.

    Why shouldn’t the buyer find their own representation and pay for it. Have the seller pay to sell the home and the buyer pay to buy the home. Get ride of all this rebate stuff, cash back stuff and bla bla bla. Let the buyer choose how much they are willing to pay.

    If this was the case do you think we would see law firms start setting up showing services and offering buyer representation? Russ do you think the attorneys would do that? On the buying side would I feel better being represented by a law firm or a real estate agent? Or would I just go to my local financial institution and have them write it up in exchange for free checking :).

  41. I’ve been reading this post and thinking about it. Here is my question: Why does there have to be an offer for compensation on the selling side of a listed real estate transaction? Excluding the MLS rule that says there has to be.

    Why shouldn’t the buyer find their own representation and pay for it. Have the seller pay to sell the home and the buyer pay to buy the home. Get ride of all this rebate stuff, cash back stuff and bla bla bla. Let the buyer choose how much they are willing to pay.

    If this was the case do you think we would see law firms start setting up showing services and offering buyer representation? Russ do you think the attorneys would do that? On the buying side would I feel better being represented by a law firm or a real estate agent? Or would I just go to my local financial institution and have them write it up in exchange for free checking :).

  42. My friend, a buyer agent attorney in the Bay Area of CA has considered that at length and for years, Allen. And has come to the conclusion that leaving the fee in the mls is the preference, all things considered. The question is does the consumer understand the difference between “writing it up” and being represented in the transaction enough to make an informed choice?

  43. Allen — my point exactly. However, until there is some alternative to the broker/agent controlled MLS, there will always be a selling side commission.

    Ardell, my motives have been in the open from the very get go — your initial post notwithstanding. Not everyone is as selfless as you. Yes, I want to build a business. Yes, that business is predicated, in part, on convincing people that they can sell or buy a home without an agent. It seems to me that — particularly in light of the MLS monopoly and apparent prevalence of a 6% commission — this is at least a debatable point. Adults can make their own decisions, and if they decide they can do without the services of a real estate agent, I think they should be allowed to make that decision. Moreover, there are advantages AND DISADVANTAGES to doing so — but it’s their call, not mine. I note that Dustin offered to sell his home FSBO, thus saving the agent commission. Will you be directing any wrath at Dustin for trying to convince a buyer to forego agent representation? I suspect not — your wrath seems to be directed at those who are a threat to your economic well-being — i.e. me.

  44. Allen,

    The reason why we are still living in this world that was originally created out of seller sub-agency is simple and unfortunate – buyers cannot legally finance real estate brokerage fees. With the seller paying the fee through cooperation between listing and selling broker, the buyer does not have to come out of pocket for the selling side services.

    If this simple issue was removed, there would be a sea change in the industry and you would have many folks (including lawyers) looking at how to be part of the selling side.

    -Russ

  45. Allen,

    The reason why we are still living in this world that was originally created out of seller sub-agency is simple and unfortunate – buyers cannot legally finance real estate brokerage fees. With the seller paying the fee through cooperation between listing and selling broker, the buyer does not have to come out of pocket for the selling side services.

    If this simple issue was removed, there would be a sea change in the industry and you would have many folks (including lawyers) looking at how to be part of the selling side.

    -Russ

  46. Ardell,

    Let’s not twist words. Of course it possible for a buyer or seller to negotiate a lower fee with a specific agent or broker…happens all the time. It’s just not a legal requirement, which is what your earlier post indicated. Just trying to keep things straight.

    Russ

  47. Craig, truly, this discussion for me is not about self interest. I have just been hoping beyond hope for over 10 years tht buyers would have sufficient counsel and advice when purchasing property. And instead of getting better, it is getting worse. And yes, I do hold you to a higher standard of caring about people being represented, even more so than an agent.

    Maybe that’s not fair to you. But I see properties on market at $200,000 over valued, going STI. Someone has got to care about that and not just “write it up”. So they save $14,000 to make a $200,000 mistake. I don’t call that progress or empowerment. Do you?

    Honestly if someone has $200,000 to lose and says, I know it’s priced $200,000 over value, but I want it anyway. That’s OK with me too. Happened everyday in L.A., no problem. But no one should be paying $200,000 over market without knowing it. And Zillow will likely agree with that price, because you can’t know why it is worth $200,000 less based on the comps.

    I’m going to check Zillow on it.

  48. Craig, truly, this discussion for me is not about self interest. I have just been hoping beyond hope for over 10 years tht buyers would have sufficient counsel and advice when purchasing property. And instead of getting better, it is getting worse. And yes, I do hold you to a higher standard of caring about people being represented, even more so than an agent.

    Maybe that’s not fair to you. But I see properties on market at $200,000 over valued, going STI. Someone has got to care about that and not just “write it up”. So they save $14,000 to make a $200,000 mistake. I don’t call that progress or empowerment. Do you?

    Honestly if someone has $200,000 to lose and says, I know it’s priced $200,000 over value, but I want it anyway. That’s OK with me too. Happened everyday in L.A., no problem. But no one should be paying $200,000 over market without knowing it. And Zillow will likely agree with that price, because you can’t know why it is worth $200,000 less based on the comps.

    I’m going to check Zillow on it.

  49. Russ, I just don’t want people believing that any percentage is carved in stone. Mr. Fly on the Wall #.15 would have been just as happy if the going rate there were less.

  50. The economic inequity of a Percentage Formula Business Model for compensating brokers. location location location. An illustration:

    One broker sells 2 million dollar luxury homes in a luxury market. Even a 3% commission is a tidy $60,000. Compare that to the broker selling in middle class markets or lower class markets. A $200,000 home at full 6% commish is only $12,000. (& he pretty much has to get 6 becasue 1.5/1.5 doesnt get any takers)

    It’s not fair if you’re the broker in the lower market. Hell, he’s gotta sell 5 houses to the lux guys 1. Selling 5 houses is more work (& just as expensive or more so to market) than selling 1 no matter how you dice it. Also not fair to the seller in the lower market. He netted 3% less than the wealthy dude & dudess. And everyone knows its much easier for the lux seller to negotiate a lower commish.

    Labor & compensation are not proportional w/ a % system.

    That’s why I told my son, if you’re going to be a waiter, work in an expensive restaurant–you get more $ in tips for the same amount of work simply becasue the cost of the meal is more.

    For what it’s worth on a % based business model.

  51. The economic inequity of a Percentage Formula Business Model for compensating brokers. location location location. An illustration:

    One broker sells 2 million dollar luxury homes in a luxury market. Even a 3% commission is a tidy $60,000. Compare that to the broker selling in middle class markets or lower class markets. A $200,000 home at full 6% commish is only $12,000. (& he pretty much has to get 6 becasue 1.5/1.5 doesnt get any takers)

    It’s not fair if you’re the broker in the lower market. Hell, he’s gotta sell 5 houses to the lux guys 1. Selling 5 houses is more work (& just as expensive or more so to market) than selling 1 no matter how you dice it. Also not fair to the seller in the lower market. He netted 3% less than the wealthy dude & dudess. And everyone knows its much easier for the lux seller to negotiate a lower commish.

    Labor & compensation are not proportional w/ a % system.

    That’s why I told my son, if you’re going to be a waiter, work in an expensive restaurant–you get more $ in tips for the same amount of work simply becasue the cost of the meal is more.

    For what it’s worth on a % based business model.

  52. I fault Redfin as well on a business model that does not afford consumers the opportunity to review the house and neighborhood and value, in person, with a knowledgeable representative who represents them, prior to offer. That is not a good trade off for most people, and no one in the industry should be encouraging that method of purchase.

    I do care that industry professionals are promoting their business model in a way that causes people to have no one with them, in the house, prior to making an offer. The consumer has much more to lose than to gain, in that scenario. Clearly, unrepresented people are not better off in most cases.

    Please explain your statement. Why is not having an agent in the property prior to making an offer adverse for buyers? Do you feel buyers are too stupid that they’re unable to do their own research? Exactly what real benefit does a buyer’s agent actually provide prior to offer, other than unlocking the door. True, a good agent will be on the look out for potential red flags but buyers who do their due diligence shouldn’t be disadvantaged. I just want to understand where you’re coming from.

    If its an issue with the structure, an inspection should reveal it. If it’s an issue with pricing, several companies provide MLS sold data; it wouldn’t unreasonable for buyers to calculate relatively accurate comps on their own. Sure there may be things an agent will be on the look out for and make necessary adjustments, but I don’t think the DIY comps are going to be that far off.

    The Redfin model does provide representation, just not prior to writing the offer. At the time of writing the offer, I presume the Redfin agent will do comps as well, advise the client to get an inspection and so forth.

    I bought my house before I became an agent (big traditional, full-service brokerage) and from my perspective the real value of a buyer’s agent comes in once a client has decided to make an offer. Otherwise, they’re basically chauffeur and door opener. Quite frankly, now being in the industry I can’t say that my associate broker ABR buyer’s agent was much of any value during the showing process. Maybe because as a buyer I did my research and not as gullible as you think buyers are.

    Exactly where are these supposed $200,000 over paid homes you allude to? Are you willing to provide the MLS numbers or is that a statement pulled from thin air. It’s a bit skeptical someone would make a $200,000 “mistake”. Certainly, if this was the case, there could be other reasons for a buyer willing to pay a premium…doesn’t necessarily mean they were too dumb or had an incompetent agent.

    What is market value anyway? A basic definition – the most probable price a property would bring in an arm’s-length transaction under normal conditions on the open market. So, were they really overpaying $200,000 or is market value $200,000 more than the list price? Besides, very rarely will agents come up with the same opinion of value.

  53. I fault Redfin as well on a business model that does not afford consumers the opportunity to review the house and neighborhood and value, in person, with a knowledgeable representative who represents them, prior to offer. That is not a good trade off for most people, and no one in the industry should be encouraging that method of purchase.

    I do care that industry professionals are promoting their business model in a way that causes people to have no one with them, in the house, prior to making an offer. The consumer has much more to lose than to gain, in that scenario. Clearly, unrepresented people are not better off in most cases.

    Please explain your statement. Why is not having an agent in the property prior to making an offer adverse for buyers? Do you feel buyers are too stupid that they’re unable to do their own research? Exactly what real benefit does a buyer’s agent actually provide prior to offer, other than unlocking the door. True, a good agent will be on the look out for potential red flags but buyers who do their due diligence shouldn’t be disadvantaged. I just want to understand where you’re coming from.

    If its an issue with the structure, an inspection should reveal it. If it’s an issue with pricing, several companies provide MLS sold data; it wouldn’t unreasonable for buyers to calculate relatively accurate comps on their own. Sure there may be things an agent will be on the look out for and make necessary adjustments, but I don’t think the DIY comps are going to be that far off.

    The Redfin model does provide representation, just not prior to writing the offer. At the time of writing the offer, I presume the Redfin agent will do comps as well, advise the client to get an inspection and so forth.

    I bought my house before I became an agent (big traditional, full-service brokerage) and from my perspective the real value of a buyer’s agent comes in once a client has decided to make an offer. Otherwise, they’re basically chauffeur and door opener. Quite frankly, now being in the industry I can’t say that my associate broker ABR buyer’s agent was much of any value during the showing process. Maybe because as a buyer I did my research and not as gullible as you think buyers are.

    Exactly where are these supposed $200,000 over paid homes you allude to? Are you willing to provide the MLS numbers or is that a statement pulled from thin air. It’s a bit skeptical someone would make a $200,000 “mistake”. Certainly, if this was the case, there could be other reasons for a buyer willing to pay a premium…doesn’t necessarily mean they were too dumb or had an incompetent agent.

    What is market value anyway? A basic definition – the most probable price a property would bring in an arm’s-length transaction under normal conditions on the open market. So, were they really overpaying $200,000 or is market value $200,000 more than the list price? Besides, very rarely will agents come up with the same opinion of value.

  54. Great comment 3 cents!!

    Ben, I’m only halfway through your comment, but obviously I cannot give you the mls #, though I can get one of my clients to support my statement. The reason it is priced $200,000 over is because it is a tear down worth lot value, the structure should not be comped against other structures as it was and as Zillow does. That fact may come up at inspection…it’s still STI. We’ll see if it makes it to the end as you say, hope not.

  55. Great comment 3 cents!!

    Ben, I’m only halfway through your comment, but obviously I cannot give you the mls #, though I can get one of my clients to support my statement. The reason it is priced $200,000 over is because it is a tear down worth lot value, the structure should not be comped against other structures as it was and as Zillow does. That fact may come up at inspection…it’s still STI. We’ll see if it makes it to the end as you say, hope not.

  56. P.S. Ben,

    My sister is the most brilliant person I know, but she doesn’t know as much about real estate as I do. That doesn’t make her “stupid”. Someone who buys a house every ten years just doesn’t have the same knowledge bank and perspective.

  57. P.S. Ben,

    My sister is the most brilliant person I know, but she doesn’t know as much about real estate as I do. That doesn’t make her “stupid”. Someone who buys a house every ten years just doesn’t have the same knowledge bank and perspective.

  58. Russ,

    Commissions are financed every day. My friend just purchased a home and put 5% down. With the commission being 6% he financed 1% of the commision. (if you choose to look at it that way) Am I wrong ? It wouldnt be the first time.

    The seller just has to agree to pay it out of closing or choose not to and not have a deal. (this is my understanding)

    I feel some of these hard hitting buyer only agents (chest pounder types) should be giving the rebates not to the buyers but to the listing agents who are locking in easy money for them.

  59. Russ,

    Commissions are financed every day. My friend just purchased a home and put 5% down. With the commission being 6% he financed 1% of the commision. (if you choose to look at it that way) Am I wrong ? It wouldnt be the first time.

    The seller just has to agree to pay it out of closing or choose not to and not have a deal. (this is my understanding)

    I feel some of these hard hitting buyer only agents (chest pounder types) should be giving the rebates not to the buyers but to the listing agents who are locking in easy money for them.

  60. Allen,

    Practically speaking, you are right. The buyer could always condition the acceptance of their offer on the seller agreeing to pay their amount of their agent’s fee at closing. This might work in many situations but buyers and their agents would be put in a very difficult situation when the seller would not agree to pay the fee and the buyer really wanted the house. Then what? If buyer is cash poor (most of them), they have a dilemma and I suspect many of them would rather get the house than pay their agent.

    This is all solved if the buyer could finance the selling broker’s commission.

    Russ

  61. Allen,

    Practically speaking, you are right. The buyer could always condition the acceptance of their offer on the seller agreeing to pay their amount of their agent’s fee at closing. This might work in many situations but buyers and their agents would be put in a very difficult situation when the seller would not agree to pay the fee and the buyer really wanted the house. Then what? If buyer is cash poor (most of them), they have a dilemma and I suspect many of them would rather get the house than pay their agent.

    This is all solved if the buyer could finance the selling broker’s commission.

    Russ

  62. Russ,

    Thanks for the input.

    My final thought on this:

    I wonder if the list price to sale price would increase if the buyers agent knew the seller had to agree to pay him out of closing. I wonder if the buyers agents would be as aggressive if they knew insulting the seller may result in their client having to write a check to pay for their service.

    As a seller how could this be a bad thing.

  63. Russ,

    Thanks for the input.

    My final thought on this:

    I wonder if the list price to sale price would increase if the buyers agent knew the seller had to agree to pay him out of closing. I wonder if the buyers agents would be as aggressive if they knew insulting the seller may result in their client having to write a check to pay for their service.

    As a seller how could this be a bad thing.

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  65. I have an acquaintance who recently ended a working relationship with a brokerage whose office manager came right out and said, “This office can’t afford NOT to take 6% listings.” At that time, it was common knowledge among the agents in this office that 2.5% went to the buyer’s agent and 3.5% into the brokerage coffers. I suspect that many franchise brokerages play this game. Who’s to say? So the buyer’s agent gets 3%. The MLS doesn’t tell us how much the listing brokerage is getting. So, is the notion of 6% listings really a misconception among the real estate public joe???

  66. Candybags,

    Each area is different. I think your representation of the listing boker keeping 3.5% and giving 2.5% is NOT the norm anywhere I have worked. If you did see that somewhere, it must have been a very strong seller’s market. Usually if the buyer agent is offered 2.5%, the total would be 5% and not 6%.

    One of our agents called the other day regarding offering a 2 1/2% Buyer Agent Fee on one of her listings. I advised her that if she were taking a 5% listing, that should be 2% to us and 3% to the buyer agent. If that is not the case, then the seller should be made fully aware of the that fact. She agreed to drop back our percentage, seeing that it would be in the best interests of her/our client to do so. I always counsel agents to consider how these decisions affect the client and they always agree.

    In very high end markets in CA, I have seen total areas pricing at – 5% splitting it 2 1/2% -2 1/2%. In low priced markets in Florida several years ago, the entire area “norm” was 7% – 3 1/2% – 3 1/2%. Many builders are offering huge buyer agent incentives up to a full 6% buyer agent fee or more. I don’t think anyone can say there is one absolute norm for the entire country, and norms in slower times in the fall and winter vary in the same market vs. high season sale time.

    I don’t think any office in the Country can go through a year’s worth of actual sales and find one rate used absolutely consistently across the board.

  67. Candybags,

    Each area is different. I think your representation of the listing boker keeping 3.5% and giving 2.5% is NOT the norm anywhere I have worked. If you did see that somewhere, it must have been a very strong seller’s market. Usually if the buyer agent is offered 2.5%, the total would be 5% and not 6%.

    One of our agents called the other day regarding offering a 2 1/2% Buyer Agent Fee on one of her listings. I advised her that if she were taking a 5% listing, that should be 2% to us and 3% to the buyer agent. If that is not the case, then the seller should be made fully aware of the that fact. She agreed to drop back our percentage, seeing that it would be in the best interests of her/our client to do so. I always counsel agents to consider how these decisions affect the client and they always agree.

    In very high end markets in CA, I have seen total areas pricing at – 5% splitting it 2 1/2% -2 1/2%. In low priced markets in Florida several years ago, the entire area “norm” was 7% – 3 1/2% – 3 1/2%. Many builders are offering huge buyer agent incentives up to a full 6% buyer agent fee or more. I don’t think anyone can say there is one absolute norm for the entire country, and norms in slower times in the fall and winter vary in the same market vs. high season sale time.

    I don’t think any office in the Country can go through a year’s worth of actual sales and find one rate used absolutely consistently across the board.

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