As I was doing my normal Sunday online reading, I found this NY Times article about discount commissions that really was a featurette for Redin. In the article, there are anecdotal comments about seller’s agents not being willing to show Redfin buyers their listing. There is also a quote from our own Marlow Harris of 360Digest.com alluding to the possibility that these stories may be more PR than truth (my words, not Marlow’s). A Windermere agent is quoted as saying that such claims are “absolute absurdity.”
So I have a couple of questions. First, are there a significant number of listing agents out there that will look down on buyers who use non-traditional brokerages (even to the degree of making themselves unavailable to show the home) or is this just great PR spin? If there is any truth in the claims, I presume that these uncooperative agents take this stance because they don’t feel like they are paid to fill the traditional role of the selling agent (e.g. showing the home). If that’s the case, then why don’t these listing agents incorporate a variable rate commission (similar to the strategy builders have used for some time to address the selling agent who magically appears after the site agent has done all the work of “selling” the buyer on the new home)? NWMLS rules would allow it, so why is it not being done?
> If that’s the case, then why don’t these listing agents incorporate a variable rate commission[?]
If “representation” like Redfin’s becomes common, this is exactly what you should expect, or listing agents not setting aside funds for buyer’s representaiton at all or reducing it to a nominal sum, like $500, to meet the compensation test of an MLS listing.
There was some comments back and forth on the Redfin ‘Hall of Shame’ blog about Procause. No one ever really answered the question. Why does Redfin’s business model even allow them to be compensated if they don’t show the property? One poster said the “unbroken chain of events” started when the buyer found the house on Redfin’s web page. It would not have gotten there had the listing agent not put it in the MLS. Has anyone gone to arbitration with Redfin?
I posted on this article yesterday also, with the idea of some type of commission modification structure for unaccompanied buyers. It’s a knotty problem. A busy listing agent doesn’t have the time to absorb the selling agent duties, and should be further compensated if they do. It’s even a worse scenario if the listing side is a flat rate or fee-for-services brokerage, as they are working for less to begin with.
I’d be interested in any commission structuring that would work to cover full service or a Redfin model client. The problem I had was with the scenario of showing the home 10 times to Redfin business model clients and then ending up selling it through a regular full service buyer agent. You’ve done the extra showings, but end up un-compensated.
Perhaps a credit card from the buyer for a $100 showing fee.
Just this weekend I faced three different ethical issues involving two different new business models, Redfin included, and “the rules”.
I took a listing of a property that was listed with MLS4U. It was already in the MLS with a “listing agent” the owners had never met. There was a lockbox on the house that they had received in the mail and the property was ACTIVE in the MLS.
The owners clearly considered themselves to be For Sale By Owners who now wanted to list their home. But from my perspective it felt like I was intruding on another agent’s listing, something that has been forbidden for a very long time.
Are agents allowed to solicit these owners of “XA limited service listings” or not? The agent who mailed them a lockbox is a fellow member of the mls and the mls forbids the solicitation of listed property. The owners contacted me, which has always been an exception to this rule. But they did have agents contact them, who were soliciting them the same as if they were a For Sale By Owner, while they were “listed” by an agent of MLS4U. Feels like a violation, doesn’t it?
While I was staging this new listing, a young couple asked to see the property, having been sent there by my business partner. In talking, they indicated that they had considered using Redfin, but it wasn’t working out well. I told them if they bought this listing I would give them the same Redfin deal, but I would insist on two inspections, one by an inspector of their choice and one by my inspector who I know to be overly thorough.
I did explain that I did not want to talk them out of having their own separate representation, but if they wanted to make an offer through me, that was an option as well. If the buyers had said, I am working with John Doe from XYZ Company, I would have said have John call me if you are interested in buying it. I questioned myself afterward. Since Redfin doesn’t meet the buyer beforehand, am I soliciting another agent’s client if they are planning to use Redfin? Where is that line we don’t usually cross, when it comes to Redfin?
In fact, by showing them the listing while I was staging the property, something that happens fairly often, I am breaking another MLS rule. I’m not allowed to show my listing until I give the rest of the MLS members an opportunity to show it. What am I supposed to do when they wander up while I am staging the property, which happens a lot.
Personally, I think the lines are moving, and we are forced to listen to our inner conscious moreso than running to read “the rules”, today more than ever.
I had an agent call me to complain that a buyer called him to see his listing, and after he was there showing the house they said, “Oh yes, we have an agent. But we didnt’ want to bother her.” He was livid. It’s OK to bother ME, but not your own agent who is going to be paid over $15,000 if you choose to buy this house? He said it to himself, of course, and then called me for guidance on the matter. Clearly Redfin did not CREATE this scenario. It’s been around for a long time.
As to charging an “extra $100” as a showing fee…you’re kidding right? I doubt very much that throwing $100 at the complaining agent would have appeased him. I told him to suck it up. The owners are not only his clients, but his friends. He is a newer agent. Having a little practice showing someone a house wasn’t going to kill him. He should thank them for the opportunity to practice his craft 🙂
But Redfin provides the service of showing homes themselves, to their clients. On their blog they state they offer “private home tours for $250 per half-day. If you can’t get into a property through an open house or by contacting the listing agent, call us: 877-9-Redfin.”
That being the case, why is it right that they try to harass and humiliate the listing agent into doing a job for free, that they wouldn’t do and would charge for? The showing agent is taking on this liability that rightfully should belong to the selling agent….. It just seems like a bad business plan. I think this is the crux of the issue, as Zip Realty has no problems with bad PR like this, but they don’t try to pass on savings to buyers by taking advantage of and intimidating other agents in the process…..
And Redfin has listings now too. Do you think they would show their listings to one of MY buyers? Hahahahha..haha haha….!
For the first question, you can talk to sellers if they call you, but only about the hypotehtical case of what you might do once the current listing is cancelled or expired. That’s the NAR Code of Ethics, but I would expect it’s also contract or RE law in Washington.
For the second case, an unrepresented buyer has always been fair game. If the lister writes a contract on the spot, representing either the seller only or both parties, until lately the lister would have been the slam dunk procuring cause of both sides of the transaction. Associations are walking on eggshells becuase of the DOJ snoops, but this is the way it has always been done.
Not showing up with your buyer invites all kinds of litigation, anyway. It’s going to be fun watching this stupid stunt blow up…
> Do you think they would show their listings to one of MY buyers?
Do you think the New York Times will paint your portrait in crocodile tears if they won’t?
For those that haven’t seen Glenn’s comments on his blog, I highly recommend heading over to this post.
In case it wasn’t clear, Glenn is clearly not worried about making friends with real estate agents, and even compares listing agents (who don’t want to show their properties to Redfin buyers) to praying mantises who eat their pray: “a grisly illustration of realtors’ hopeful but incorrect argument that showing their own listing can procure cause for garnishing the buyer agent’s commission.”
P.S. Greg: he has a special treat over there for you as well…
> Greg: he has a special treat over there for you as well
I saw it last night. I concluded that the man is a jackass and a fool. In rank order the fools would seem to be 3. Kelman’s clients, 2. Kelman himself, and 1. Kelman’s investors.
Debunking Zillow.com gets dozens of unique hits every day. Let’s go get sued, a blueprint for bringing litigation against cowbird brokers scores fourth when you search for Redfin.com. I think the people at Zillow.com have been very deft in the way they have dealt with criticism. I think Kelman is drunk on his own publicity. The route to fame can be long and uncertain. But it’s just a short hop from there to infamy…
Hustling uninformed newspaper reporters is one thing, but I’ll bet the man doesn’t have the guts to defend his business model in public against an informed questioner.
Greg,
I do not believe Kelman is an agent, I think he is a techie. I hope that knowing this, you will rescind your accusation that he is “a fool”. Redfin was founded by David Eraker, who was basically a consumer promoting change, same as Russ. Kelman more of the same.
Maybe part of the answer is that the non-agents starting and running these companies need to understand the real estate industry a little better. But, to at least the same degree, the industry has to meet the new models halfway, because they truly ARE the voice of the public and many of these changes are warranted.
MLS4U clients appear to have the right to cancel at anytime. I don’t think the traditional rules apply, since the owners consider themselves to be “For Sale By Owner”. There is no phone number for the company on the yard sign. There is a rider that says “call seller” and has the seller’s phone number.
Regurgitating current “rules of play” is not the answer. You need to think a little more out of the box to what “should be” vs. “what has been and currently is”. In other words, the right answer is the third choice. I create that third choice every day.
Hello there,
Can we have a civil discourse? No one has time to engage in a lengthy argument, particularly if the goal isn’t to reach consensus.
I personally do not feel any hostility toward real estate agents, and will not tolerate that behavior at Redfin. I work in the real estate industry, and many of my colleagues and friends at Redfin are real estate agents.
I am responding not to make further argument, but to correct a misunderstanding for which I am at fault. It bothers me that the mantis reference would be used as evidence of a supposed distaste for agents. The mantis reference was a protest against the predatory tactics practiced by a small number of agents, not against the entire profession.
The argument that clients who see a property through the listing agent are obligated to pay the listing agent is legally incorrect. This argument is also beneath the standards of our profession. Clients should work with real estate agents by their own choice.
Perhaps you will think we are trying to have it both ways, vilifying a tactic for procuring cause while claiming to respect agents, but we are not: our position is that traditional realtors are an excellent choice for many clients, but that clients should make that choice.
Many agents, and I would probably number Ardell and Marlow among them, earn that choice. But we will always resist, through a wide variety of tactics, any efforts to limit client choice.
Redfin is a small, new business that has not yet turned a profit. Our site should be better. Our brand should be better. Our customer support should be better. We will probably always feel this way. But we are proud of the service we have given our customers thus far, and focused on building our business for the future.
If you think it will be helpful, we will take the mantis reference down from the blog, and apologize for any misunderstanding, without conceding that attempting to procure cause from a showing is predatory.
If any of you would like to communicate directly with me, my number is 206-340-8794 x 108 and my e-mail address is glenn.kelman@redfin.com.
Regards,
Glenn
Well, good for you for stepping up to the plate.
1. The doctrine of procuring cause could not be clearer. In Arizona, in any case, you would fail at the first challenge, as you should.
2. By not accompanying buyers to showings, you are in default on your fiduciary obligations to the buyer. You will lose the first negligence suit brought against your brokerage, as you should. You cannot defend yourself against a claim that you could have and should have identified a red flag without having seen the property.
After that, more power to you, Cowboy. I rate your the behavior of yours I have seen so far as having been obnoxious — and I think concealing these issues by omission from your amanuensis at the Times was churlish — but this comment is redemptive. Until someone sues you — and perhaps no one ever will — it’s no-harm, no-foul. If someone does sue you, that’s a matter for your attorneys, your ownership and your E&O underwriter.
Ardell,
Your constant attempts to categorize me as someone who does not know anything about the real estate industry has grown tiresome?
Russ
Gregg
You said:
“1. The doctrine of procuring cause could not be clearer. In Arizona, in any case, you would fail at the first challenge, as you should.
2. By not accompanying buyers to showings, you are in default on your fiduciary obligations to the buyer. You will lose the first negligence suit brought against your brokerage, as you should. You cannot defend yourself against a claim that you could have and should have identified a red flag without having seen the property.”
From a legal perspective, the use of the terms “doctrine of procuring cause” and “clear” should not be used in the same sentence. Nationwide, procuring cause suits are all over the board when it comes to the fact circumstances that would generate a commission. Maybe AZ is different than the other 49 states and for our reader’s perspective (and my own), maybe you can cite the case that makes it clear that a limited service buyer’s agent would lose in a procuring cause suit.
As to the claim regarding fiduciary duties, again maybe AZ is different than most states. In the 1990s, most states enacted statutory agency laws that defined the duties of an agent to their principal. For example, in Washington, there are duties that apply to all licensees and more specific duties that apply to an agent who reps the seller or buyer or is a dual agent. In Washington, a limited service buyer’s agent is breaching no duty by not showing the buyer the home. Until recently, that has been the case in most states but has changed a bit with the minimum service laws that some states have enacted. I don’t believe AZ has such a minimum service law so I am curious what statute or case specifies that not showing a buyer the home is a breach of an agency duty.
Thx
Russ
Apparently it’s not just Redfin that raises the blood pressure of many agents:
Early last month our office closed a sale where the selling agent was exceptionally blunt, smug and belligerent to the other side of their deal. In fact, if the sale failed to close, I would have chalked up this sale-fail scenario to an agent who through their own agenda & behavior, was the procurring cause of a failed sale. I wonder what the agent’s client/buyer, who were totally excited about the purchase, would have thought if they overheard the agent saying to my wife and I quote, “…. going to make it a living hell for the sellers and do nothing, so the seller’s will never list with a discount broker again.”
Sounds kinda pleasant to me. No anamosity here?
After reading the posts from top to bottom I couldn’t help but think about what must be going on in the minds of the sellers or prospective buyers who read this commentary on Rain City Guie. It begs the question:
Do agents have a conversation while signing the listing papers with their client’s remarking, “if any buyers who are working with another broker (Redfin, or in my own office or otherwise) call me and ask me to open the door to show the house out of courtesy, I will refuse because I’m doing the other agents job and it raises representation issues? ” In the meantime, the seller must be thinking,”I’m paying $25,000 in commissions for this? Who the heck cares about who is opening my door to buyers that are interested in my house? I care! Just open the darn door and show it.”
Certainly, many consumers (buyers/sellers) do not understand agency or the cooperation tangled web between brokers, but for some sellers, I would guess they would have serious issues with this thesis and arue that by not showing the house to the buyer, regardless of how a buyer came to find the house, the listing agent is then breaking their fiduciary duty with the seller.
If people want to change the way the industry is perceived by the public perhaps there should be more focus on fulfilling what consumers want and need rather than personally attacking others and calling people fools & Cowboys. The character and true colors of people seems to really show through when falling into this behavior.
I don’t know Glen Kelman or have closed any of Redfin’s
transactions. Whether Redfin exists in ten years, is profitable at this time or has a good or bad business plan, is not the issue. What seems to get lost is that according to their website, consumers who have used their service have received rebates totalling some $900K to date. Buyers received money back, whereas consumers using traditional services do not. Saving that kind of coin is a powerful pull.
Greg Swann and Ardell have rebated money too and I imagine that their clients will be praising them for a very long time. Money matters, it’s tangible.
Russ,
If you are offended that I put you in the same grouping with David Eraker and Glenn Kelman, ie. not licensed real estate agents, I really don’t know what to tell you. Maybe you are a liensed real estate agent in the State of Washington, I didn’t think so. Correct me if I am wrong in that regard.
Pro cause is not a “suit”, it is a claim, the outcome of which is determined by a panel of the agent’s peers and not a Court of Law. Every Pro-Cause body, in the Country has a different standard depending on who happens to be sitting on the panel at any given time. There are guidelines established by NAR for Pro-Cause Panels that are operated by various Boards of Realtors around the Country, but they are merely guidelines, not directives. Some Pro-Cause panels have nothing to do with The Board of Realtors at all, and so are not subjected to NAR’s guidelines and can have their own guidelines.
Russ, your supposition that a listing agent shows the property as part of his listing duties is a “consumer perspective”, and incorrect from an agent perspective. When a listing agent shows a property (Open House possibly an exception) for the buyer client of another agent, he does so as a favor of the other agent. Consequently the other agent should “ask” for that favor.
I can certainly understand that any owner, who is not privy to the inner workings of the real estate industry, might deem it appropriate for their listing agent to show the property to any buyer, even another agent’s buyer client. But, when the listing agent shows his own listing, he does it on the co-op side of the fence, not on the listing side of the fence. To further clarify, If the commission is 2% to the listing agent and 3% to the Buyer’s Agent, the listing agent is working on the 3% side of the fence when he shows his own listing.
Russ, you are absolutely correct from a consumer perspective, but absolutely wrong from an agent perspective. I give you the benefit of the doubt, and the ability to be “correct” in your position, when I say you speak from a consumer perspective. If you want to be held to the same standard as a licensed real estate agent, so be it, but know that makes you absolutely incorrect if you choose that title, when you suggest that a listing agent shows his own listing from the 2% side of the fence.
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Woo! Go away from a weekend and all heck breaks loose 🙂 Seriously, I think Redfin’s right on the substance of their argument (traditional agencies are threatened by discounters), but wrong in thinking their continued antagonism or “woe is us” attitude does anything to correct that. In fact, I think they continually further the antagonism by having the “wall of shame” or the CEO publicly call agents “praying mantises”. It’s part of their corporate DNA right now, apparently. Maybe that will change over time. Maybe not. There are agents, for example Gregg at Bloodhound Realty, who similarly believe that being antagonistic or bandying about legal/philosophical terms are the ways to gain respect. I’m sure they believe themselves to be “Mark Cubans”. In my opinion there more like “John Deloreons”, but that’s just me, who likes his business people not to intentionally antagonize others or have an overly inflated sense of self/ego.
But back to the matter at hand, I think traditional agencies can only survive long-term if they alter their pricing structure. A simple sliding scale of fees (1% for Redfin-style representation, 2% for a set number of drive-arounds and some additional help, 3% for full-service) would pretty much kill the advantage of any RE upstarts. Better yet, just go fixed-fee for everything (e.g. $2,000, $5,000, $10,000) with some payment required up-front and some on successful completion of a sale/buying. You could even add additional fees for additional services. Why would I want to work with an unproven upstart if I can get everything I want from a proven company for just about the same cost?
Sure, the zillions (not a zillow trademark) of new agents each year would probably wither on the vine, and no agent would earn $1500/hour of work selling a $1m house in a today’s hot market(3% = $30,000/20 hours), but I’m not about to shed any tears over either of those.
Tim,
Many, many agents and companies have transactions every single day, that do not total 6%, and whose commission at the end of the day for one side is not 3%. This is not new. This has always been so.
It is a misperception that every transaction closes with 6% or better. For instance, in the sale I closed with you, it looks like I received 3% on a relatively small dollar amount transaction. In fact I paid a handyman almost $1,000 from that, a cleaning lady $100 bucks, a hot water tank company about $700 bucks (found a good deal in the end!) and numerous other out of pocket expenditures not shown on the Closing Statement from one side of a $200,000+ sale.
It has never been forbidden to negotiate fees, what has been forbidden, and the rule the “discounters” break, is the unwritten rule that when you receive less than 6%, you keep it quiet 🙂
One thing that confuses Brokers, and I throw this one out to Russ, is that we have been told for many, many years that we are not allowed to even MENTION our fee structure to someone outside of our office. We have been told that talking about fees with another Broker of another Company is an anti-trust violation. This puts “discounters” at an advantage in that while we are listening to what we are told are the rules, they are out there showing commission rates in print and on websites, when we have been told that is an anti-trust violation.
The orientation film for the Board of Realtors has a piece in it where a Broker refuses to have lunch with another Broker to discuss commissions generally. That skit is shown as an example of what is an anti-trust violation. Maybe they changed the film, I certainly hope they updated it from the agent in the little white gloves.
Why can’t Traditional Companies talk about commissions with each other, while “discounters” can shout their commission structure from the rooftops?
Hey Cricket!
Did you miss the part where we were hijacked by the Turks??! That was “all hell breaking loose”. This is just a friendly business discussion, relatively speaking.
> maybe you can cite the case that makes it clear that a limited service buyer’s agent would lose in a procuring cause suit.
Sorry, I’m not in the legal citations business, but an analogue of the Redfin.com business model is the way procuring cause is taught to Arizona licensees: Agent Goofus sends a buyer to view Agent Gallant’s listing at Agent Gallant’s open house. Agent Goofus then writes a purchase contract for the home, which is accepted and closed. Agent Gallant brings a procuring cause action against Agent Goofus and wins, since the unbroken chain of events leading to the close of the transaction was initiated by Agent Gallant.
We went through this by analogy in comments at BloodhoundBlog:
I’m pretty sure a good attorney could find a way to muddy these waters — but that’s why we do this in mediation. 😉 For what it’s worth, my impression is that the Arizona Association of Realtors is treading very lightly on this issue right now — because of the DOJ.
> I don’t believe AZ has such a minimum service law so I am curious what statute or case specifies that not showing a buyer the home is a breach of an agency duty.
What I’m thinking of is case law, not statute law, regarding the things a responsible fiduciary “could have and should have known” about a property. Facing the questions of a plaintiff’s attorney, Redfin.com has no plausible argument to make about responsible agency. It’s entire reason for being is irresponsible representation of its clients. This may never come to bite them in the ass, but, if it does, I don’t think it’s going to bite just once. Do you disagree?
For Tim: Why should ordinary people care about this issue? Because the net consequence of these kinds of stunts could be the loss of buyer representation altogether.
Ardell
I am not offended by the reference to Kelman and Eraker since I don’t them either of them. The whole “he is a just a consumer” crap is what gets to me.
Thanks for the primer on procuring cause. Whew, you sure cleared it up for me. How many professional standards or MLS hearings have you personally been in on procuring cause. My guess is that I outnumber you by at least double. And my role was as lawyer who provided advice and counsel to the hearing panel on how to apply the rule.
Where do you think the guidelines for procuring cause come from? Hint, its called case law. Case law is judge made law derived from actual disputes. Procuring cause started out under the common law and has been applied by industry organizations in their local forums. To say that common law principles of procuring cause don’t impact the industry forums is ridiculous.
You also said
“I can certainly understand that any owner, who is not privy to the inner workings of the real estate industry, might deem it appropriate for their listing agent to show the property to any buyer, even another agent’s buyer client.”
You spout off all the time about what separates real estate agents from the other real estate service providers. You harp on the fact that the role of “agent” separates you from the masses as you are held to a higher std of care. In the same breath, you are audacious enough imply that the “inner workings” of the real estate industry overshadow the agency role of the seller’s agent cuz they don’t get paid to be the selling agent. Washington’s agency law says that, unless otherwise agreed to in writing, a seller’s agent MUST make a good faith and continuous effort to find a buyer for the property. I don’t understand how a listing agent could comply with this legal requirement by turning away a potential buyer who wants to see the house.
When you boil it all down, it comes back to money. And if the listing agent wants to get paid for doing some or all of the job of the “absent” selling agent, they need to incorporate a variable rate commission structure and have their seller sign off on it. Problem is, most listing agents don’t want to have that discussion with their seller. Why is that?
Russ
Ardell, yes, totally agree!
After I pushed send, I cringed, knowing that you probably would chime in on my generalization–in many many deals, rebates or reduced commissions are commonplace, discount broker and/or traditional. I was just speaking in the context of matter at hand.
Glenn, I have heard dozens of anti-agent remarks for every pro-agent remark from you. I heard you claim to be “fighting the man” as part of a marketing pitch. I have seen you repeatedly troll for inflamatory stories about “traditional agents” on your blog and, upon finding inflamatory stories, you lump said inflamatory agent with all “traditional agents.”
We discuss many real estate technology companies and discount brokers here and sometimes we give them a hard time. Claiming that you are missing listings was unfair and inflamatory. However, claiming that you seek conflict with agents and brokers is neither uncivil nor inflamatory. It is the perception of many in the industry.
Never a dull moment at RCG!
The main questions being asked in this discussion are, “Whose job is it to show properties to a buyer, and does that action qualify as ‘procuring cause?'” I have nothing to add to the raging and colorful debate on the latter, but on the former, at least here in the Bay Area, it’s clearly the job of the buyer’s agent to show properties to that buyer. The notable exception to this is holding open houses, which often — though not always — is done by the listing agent.
If I’m a traditional broker and I don’t show my listing to a buyer who’s working with Redfin, I end up on Redfin’s (and the New York Times’) “Hall of Shame.”
Now let’s say that we’re in contract with the Redfin buyer. My client (the seller) is out of town and wants his brother (who doesn’t have the key) to go to the home and get, say, his diary. Whom should the brother call to get into the house? Clearly, that would be me: I’m the listing agent, I have a responsibility to look after the needs of my client, the seller, so I’m the natural choice.
What would the Redfin agent do if my client’s brother called him/her to open up the property? The agent would politely (and rightly) say, “Sorry, you’ll have to call your agent.” (Or, I suppose, the Redfin agent might do it for their ~$60/hr fee.)
As noted above, Redfin’s management mostly comes from a non-real estate background. That’s not at all a bad thing, since they’re bringing innovation from their backgrounds into an industry sorely in need of it. However, the difference in backgrounds can lead to friction, as this and related blogs have noted.
My advice to Redfin is simply to do a better job of educating their buyer clients about how the industry currently works with respect to showing properties. It may or may not be screwy that showing properties is the responsibility of the buyer’s agent, and Redfin et. al may wish that it weren’t so, but that’s just the way it is — at least for now. With its fee structure, Redfin has no choice but to charge its ~$60/hr fee for showing properties. Its clients need to realize that unless they can arrange all their home viewing during open house hours, they’re simply going to have to shell out some money to view the properties. In other words, they may not get back quite the full promised 66%.
Russ, look again. I had the three of you together…Glenn is the CEO of a real estate company and is clearly not “just a consumer”. It is a “consumer perspective” that the listing agent shows the property within the listing agent side of the commission, but it is not true 99% of the time. The listing agent shows his listing as a favor to a buyer’s agent or as the potential dual agent or treating the buyer as a “customer” who has no agent. Lots of options. But doing it “as the listing agent” isn’t one of them.
Tim,
Never cringe…right is right and the rest is up for discussion. Lots of discussion makes for change…or not. But open discussion is always worthwhile, especially with consumers being able to watch and learn. That my friends, equals the transparency that they crave…maybe too much so 🙂
What is the big deal about showing your listing in my opinion this should be a mute point. That being said if a redfin buyer calls why wouldn’t you just let them know the next time you will be at the property and if they would like to meet you at that time you can show them the house. If they want to see it earlier they need to contact their agent. I really think the issue is providing someone else’s client the same service leve you provide you own clients.
Typical situation: Phone rings your client wants to see a house you know time is of the essence, you stop what your doing and run over and show the listing. That 24/7 level of service you are proud of.
You don’t have to offer that level of service to someone else’s client. Not showing the listing in my opinion is unacceptable and irresponsible.
Russ says…
“Washington’s agency law says that, unless otherwise agreed to in writing, a seller’s agent MUST make a good faith and continuous effort to find a buyer for the property. I don’t understand how a listing agent could comply with this legal requirement by turning away a potential buyer who wants to see the house.”
I agree! I’d have a very frank comversation with my agent if I learned that they did not show the house to a prospective buyer regardless of who they were working with.
Russ continues:
“When you boil it all down, it comes back to money. And if the listing agent wants to get paid for doing some or all of the job of the “absent
Russ,
There are some areas around the Country that have tried putting in “SOC to be reduced to X if Buyer’s Agent is not present at time of first showing.” But that is to discourage buyers from seeing any homes without their agent, and I personally think that is counter productive. It makes buyers unable to go to Open Houses, without their agent in tow, which is totally unnecessary, and it would put a huge unfair crimp in the new business model’s stategy.
It also carries a negative connotation that I would not welcome. Since these “restrictions” are not shown, by and large, in the Public Remarks section, it would put consumers in a position of less transparency rather than more. It is not a move in the right direction, IMNSHO.
Ardell
Not sure I understand your last post about transparency.
This model works just fine for new construction. What about open houses in new plats? Site agents used to have the prospective buyers fill out a registration form and write in the name of their agent (if they had one). Has that gone away?
If a (resale) listing agent held an open house, they just have to have a sign in sheet where the buyer would list their agent’s name. If the buyer does not have an agent at that time, doesn’t mean that the buyer cannot get an agent. It just means that with respect to that home, the buyer’s agent will get a lesser SOC because they did not help the buyer find that property. The more work the listing agent does with the buyer before they bring in their agent will result in an even lower SOC.
Please tell me who loses in this scenario.
Russ
Re. Alan’s posting above (#28):
Let me clarify my position. If a potential buyer (represented by Redfin or whomever) calls and asks me to see one of my listings, I have no problem making arrangements to show the listing at a time when I would have been there anyways for another reason. For that matter, I’d be happy to show the listing if I were headed in that direction anyways and this was only going to take up 20 minutes of my time. That would be a matter of simple courtesy.
What I object to is a buyer (and a buyer’s agent) acting entitled to my showing the property, at their convenience. e.g. “I have to see the property this afternoon at 3:30pm”
Kevin
If asked, what are the expectations of your seller client when it comes to this issue. If you played out this situation to the seller and responded like you did above at the time that you made the listing presentation, would you get the listing?
Russ
Russ,
In areas where I have seen the SOC reduced, the mls instruction says “SOC of 3% to be reduced to 1% if Buyer is not accompanied by agent at first showing”. There is no exception for the buyer “signing in” and if the buyer calls the listing agent to meet them at the property, signing in is not a normal event in that scenario.
The exact percentages can be different than the ones I have noted. I just thought it would be clearer if I used real numbers. The net effect is that agents get very testy with buyers who go see things without them, and Open Houses are not necessarily an exception once this notice is in the mls.
I can poll the Country and report back with regard to how areas who use this are doing. When they started it, it was pretty nasty and not consumer friendly at all. Also, agents would not enforce the restriction on agents they knew and liked, and only invoked it on certain agents and Companies, so it just doesn’t work out very well to have a variable rate in the mls with restrictive conditions.
As to the “transparency” issue, a buyer cannot normally see the SOC restriction. Anything that affects the consumer that they cannot readily see, is not a good thing and not “trasparent” to them. Let’s say the buyer arranged for a 1% back from their traditional agent. Then they wander into an Open House and their agent gets knocked down to 1% as a result. The buyer inadvertently would have cost themself the 1% by doing something without full knowledge of the consequence.
Comparing new construction to resale is like apples and oranges to me. Just “does not compute”. My brain won’t go that way 🙂
The big issue is that the buyer does not TELL the listing agent when they ask to see the property that they have an agent or are planning to use an agent. The listing agent then feels “duped” by the buyer, which creates the bad feeling. If the buyer is willing to wait until the next time the agent is going to be at the property, or the Open House, there wouldn’t be a problem. But that is not normally the case and they could lose the opportunity if an offer comes in before the agent is at the property next.
I think Kevin said it best. Listing agents do not generally show their listings to the buyer clients of other agents. There are several drawbacks. First the Buyer Agent would not likely appreciate it if he didn’t know about it beforehand and request the favor. Secondly, the listing agent then gets put in the postion of maybe saying the wrong thing to another agent’s buyer.
While Washington State may think the listing agent should show the house to another agent’s buyer client, the Code of Ethics might call that “contract interference” if the buyer has a written contract with the other agent.
Also, if the buyer has a written contract with the other agent for 3%, then your “variable rate” commission in the mls might force the buyer to have to pay the difference between the “penalty amount” and the 3% out of their pocket.
Not a good thing for buyers anyway you slice. It might be OK for sellers and the agents of the sellers…but clearly not a good thing for the buyer trapped in the middle.
Russ,
How bout this:
Dear Mr & Mrs seller there is this new bread of buyers out there that try to work outside the current system you have decided to enter into. These buyers do not have agents to show them properties but do have an agent that will write up a property if they wish. These buyers are generally trying to get discounts on the selling side of the transaction. Normally when a buyer is thinking discount first they are also thinking discount when they make an offer (read low offers). We don’t know much about these buyers except they call the listing agent to view properties they are interested in. We don’t know if they are qualified, are lookyloos, or are real buyers. If I get a call from one of these types of buyers I will try to find out if they have been pre qualified and request any documentation their lender has put together for them. If they haven’t been pre qualified I will contact you and see how you wish to proceed with this potential buyer. Let us also not forget for safety reasons both yours and mine we don’t just run out and meet anyone that calls and says the want to see your home.
Allen
I am the other agent competing for this listing. I say:
“Dear Mr. and Mrs. Seller:
There is a new breed of cat out there. These are buyers who wish to get a portion of the selling office commission rebated back to them. Kinda like cash back points you get with some credit cards. Maybe you have such a card or are involved with a program like this. Anyway, these buyers may use an agent that is not willing to show the buyer your home but does help the buyer write up and negotiate the offer. While assisting these buyers with a showing is typically not been the job of the listing agent, I believe that my job is to help you get your home sold, anyway that I legally can. If you or I get a call from one of these new cats, I will make sure they are prequalified and that they are legitimate. Once I make that determination, I will do whatever it takes to get that buyer in here to see your gorgeous home.”
All other things being relatively equal, who gets the listing?
Also, why make the assumption/innuendo that these buyers are some lower class citizen because of the type of agent they use? Is it possible that these buyers can use the rebate in order to actually “afford” more house with more money going to the seller?
Russ
More money going to the seller/buyer will only truly happen if the discounts go away and the overall fees involved in the transaction are decreased.
Sure, a Redfin buyer gets 2% refunded, but the price of the home is the same, so they’re essentially financing that 2% refund over 30-years at whatever their mortgage rate is. The seller doesn’t see that money because the 3% is deducted from the final sales price (going to Redfin, then to the buyer).
If RE transacations are just going to end up being cheap enough to do profitably for 1% for each side, or $2-5,000 for the seller and 1% for the buyer, just reduce the FSCK!NG fees to those levels and move on. Or, if it costs more, charge that.
Enough with the games on both sides. The lack of transparency is killing your reputation with consumers. Only the auto industry has a worse reputation. And is that the high bar?
Speaking of the auto industry, why hasn’t the Cars Directs (Redfins) of the world taken over the car sales (RE sales) industry by storm? They take out the sleazy car salesman (real estate agent), and offer the consumer the chance to research the features of their desired model and make (square footage, bedrooms, style) from the comfort of their own home. Heck, if they want a test drive, they can just go window shopping at a dealership (visit open houses, call listing agents to show properties).
A small number of consumers swear by this model (Redfin rebated 2/3rds of the agent commission back to me!), but most still are, at the end of the day, shoppers who do little advance research (browse some houses on Windermere or HouseValues), and ‘know what they want’ from a combination of impulsive instinct and good salesmanship (an agent driving they around showing houses that match well).
The only big difference – and a key one in the debate – is that I’m sure auto dealer margins, and surely the commissions paid to car salespeople, have eroded over time due to the steep competition and explosion of available models. In RE sales, there has been none of this natural erosion due to competitive pressures. Has there? Is this even a good analogy?
Russ,
“Once I make that determination, I will do whatever it takes to get that buyer in here to see your gorgeous home.
But have the buyer’s rights been compromised in the process? Their right to have an agent who represents THEM showing the property, to help them see the home’s weak points in addition to the home’s strengths? It’s a “two party system” for good reason.
> Are we wandering into grey areas with represenation and liablility?
Indeed. One of the incidental benefits of buyer brokerage, as compared with sub-agency, was the division of liability for errors, omissions, negligence and malice among the brokers. As fiduciary for the seller, your responsibility is to present the home in the best light, subject to disclosure requirements. The buyer has the right to know all negative factors about the home, including those which are not disclosure issues. If you are showing your listing to a Redfin.com buyer, you cannot discuss such things, and yet the buyer has an absolute right to know them. Who is liable for this omission?
Your concern for the buyer is much admired but seems to me that the buyer has made a choice of having the seller’s agent show them the house in exchange for the rebate at closing. Isn’t that their choice? If this type of system creates mass consumer confusion or loss, don’t you suspect that the AG’s office will be johnny on the spot to step in and address consumer rights.
This is the same line of reasoning used by real estate commissions across the country who are adopting minimum service laws to “protect” the consumer from companies that provide little or no service to the client. From anecdotal information that I have seen, there have been very few actual consumer complaints that they were harmed because of this limited representation.
By analogy, would you support a law that says that you MUST actually speak with a stock broker before you make a trade. People invest tens of thousands, hundreds of thousands and millions in the stock market every day. Clearly, making an online trade without advice from a “professional” can be risky. But it is not outlawed. Consumer beware. Buy a stock and you may lose all your money. Sell a stock and it may double the next day. People have their own risk tolerance and make decisions on that tolerance every day.
If people get burned, they will tell their friends. The Blogosphere will be filled with stories of risk and reward. Information will spread and the best and most efficient business model will prosper.
Russ
> Your concern for the buyer is much admired but seems to me that the buyer has made a choice of having the seller’s agent show them the house in exchange for the rebate at closing. Isn’t that their choice?
Is it really beyond your ken to see that the party offering the rebate is not the one bearing the costs for it? If it is, I think I’ll start making my photocopies at your office instead of my own. I know that lawyers have really good copy machines. When I need to host a meeting with clients, I’ll run over to Tim’s title company. Title companies have really good conference rooms — and even better photocopiers than lawyers!. Either way, I’ll be able to pass the cost savings on to my clients, and that’s all that matters, right? You’re not anti-consumer, are you?
Aha! Back to my original post and the whole money thing. Simple enough. Variable rate commission. Listing agent does work for selling agent…selling agent bears the cost by a lower SOC. If, as Ardell points out, Buyer is harmed because they signed a Buyer Agency Agreement that specified a certain commission, then the buyer can work that out with their agent when they decide to submit an offer.
Works, right?
> Variable rate commission. […] Works, right?
I think so. We don’t do dual agency, but we’re always happy to talk to people who want to buy our listings — because we want to compete for the listing the next time the house sells — so we would pay anyway. But it’s possible to get even closer to an Ardellized world:
Offer $10 as the co-broke for MLS purposes, then put this in the publicly-viewable remarks: Seller to concede 3% of purchase price to buyer at COE to be used at buyer’s discretion to pay for buyer’s representation, closing costs, etc.
This would put the issue of negotiating the buyer’s agent’s fee right out in the open and let people choose, a la carte, how much service they want to pay for. I expect buyer’s broker’s would quickly write limited service employment contracts, like limited service listing agreements, to cover their liability. In the end, we would have something much better than Redfin.com. If listers end up with higher costs, they can negotiate accordingly. Or just throw a licensed assistant — preferably a really shy one — out to do eight half-hour open houses every day.
Russ,
I ask you to weight your thinking process to what is best for the buyer, because we must fight against seller bias’ in this industry. Not because I don’t like sellers, of course I represent sellers every day. But when the bias has a natural shift to the seller, then we must fight that natural progression and focus on buyer rights to preserve balance.
Variable Rate Commission is not the answer to this issue. Variable Rate Commission is a “put on notice” issue to other buyer agents, that the listing agent charges less for their buyer, on their listing, than the published SOC. It is a notice that is of importance in the case of multiple bids. That is different than the SOC being variable with regard to other Buyer Agents and not carved in stone…which is very dangerous territory.
As to your suggestion that the buyer has made their choice by choosing money OVER being well represented…I suggest they have been lured away from the issue at hand. Until the Agency Disclosure Booklet addresses the tradeoff of “save money vs. being represented”, we cannot say that the consumer made an “informed” choice.
Why doesn’t the Agency Disclosure requirement in ANY state give adequate representation to the NO AGENCY options? Maybe because the State is being influenced by Broker oriented advices??
Clearly most buyers want an agent who is going to give them information that will help them make better choices. Clearly absent those agents in the marketplace, buyers will opt for the route with the lowest cost and I don’t blame them. If the Buyer Agent is “selling a house” and not watching the Buyer’s back (something you seem to hate that I do, BTW, not sure why), they might as well save the extra dough.
Greg,
That is the most brilliant resolution to the mls co-op issue that I have ever seen. Absolutely brilliant! And does follow the “Ardellized/Idealized” principal that the buyer agent fee is “an allowance by the seller within the sale price” and not not a carved in stone payment to someone.
It resolves the finance the fee issue as well! OMG…We’ve been talking about this in all agent circles for over 8 years and here it is…the perfect solution…on Rain City Guide by a fellow blogger.
And they say blogging has no positive effect on the industry…Russ, can that be done here now?
> And they say blogging has no positive effect on the industry…
There’s more:
1. Buyer’s agent’s would get the disclosures and employment contract signed up-front — and buyers would end up being choosier and better-informed.
2. Except for VA/FHA loans, seller concessions would be maxed out in advance. Sellers could go back to negotiating on price.
There’s probably more I’m not seeing yet. I may write about this tonight. I may start writing contracts for this tonight…
Think about all the listings being sent out by bot. The buyer says, “I wanna see THAT one!” That’s fun just to think about…
Now Greg, let’s not get carried away 🙂
I don’t agree with 1) as buyers would sign the contracts too early on in the process, if they had to sign one just to get to see a house.
I don’t agree with 2) as the 3% commission does not now, nor would it in the Ardellized scenario, max out seller concessions. It would be a bad thing if it did, for buyers with not enough cash for closing costs.
Worth mentioning, most lenders max point is 10% total, 7% for commission and 3% for buyer.
Now remember to look only at the benefits to the buyer and not agent and seller benefits:-), the rest will do very well, it’s the buyer side that needs “work”.
Let me ask you Greg, do you think when a buyer works with a listing agent, they fully understand what they are “trading away” in terms of representation? Do you think that when a buyer gets coerced into inadequate representation with a $100 off coupon, that they understand what they are trading away to get that $100?
> Now Greg, let’s not get carried away
That’s interesting about concessions and lenders. I need to talk to an underwriter…
> buyers would sign the contracts too early on in the process, if they had to sign one just to get to see a house
Recall that I think all employment contracts should have a firing clause built in. I think I might build this the way I talked about the with listing contracts: A gross fee with a $2,500 discount if the client pays a $2,500 non-refundable retainer.
This is what Cutis Hall and REBAC were aiming at, they just didn’t see the next step.
My take: Buyers don’t need more babying, they need to be treated with the same respect as sellers — with all rights, responsibilities and compensation negotiated in advance.
That’s like saying you want to treat your cat like a dog and take it for a walk on a leash. Possible, I guess…but not necessarily a good thing for the cat.
Russ,
A couple of answers in and So.Cal tried the reduced fee if agents didn’t show the house, and it didn’t work out. Apparently that method has now been banned by the mls there, after a trial period. Another responds that their board considered it, but since the majority of those affected would be alternative models, they felt it would draw the ire of the DOJ.
If you say 3%…then you pay 3% regardless and file a PC claim if you have a problem with how it was dispersed, seems to be the continued method even for those who tried your suggestion. Just doesn’t work for some reason.
Russ,
Here is another response to your suggestion of varying the commission in the mls if the agent who sells it is not the agent who shows it. Others have tried what you suggested and have reversed their position.
This from Temecula CA:
“I read your (question) concerning reduced commission for agents that are not present with buyers. We went through that here, a few years back. It was determined and enforced here, that it violates MLS rules, to have a conditional offer of compensation.”
Of course that others have tried it and found it to be unsuccessful, does not mean that we can’t try it. But it’s like checking out consumer reports before buying a product. If it didn’t work elsewhere…chances are it won’t work here either.
The entire process of showing homes is predicated on the offer of compensation. To make that conditional pulls the rug out from under…question is then…what is under that rug?
Ardell
I appreciate the feedback you received but it is misguided.
Variable rate commissions are NOT a conditional offer of compensation. The offer of compensation just varies depending upon certain pre-published conditions. While I have no idea what the Temecula MLS Rules might say, variable rate commmissions are permissible under NWMLS rules and probably most MLSs across the country.
Also, variable rate commissions have long been enforced in new construction settings. There is absolutely no difference (from an MLS rules standpoint) whether the listed home is brand new or 20 years old.
Drawing the ire of the DOJ? C’mon. What we are talking about is dividing commissions based on how much is actually earned by the tasks performed by the Selling Agent and which is determined by each company independently and applied ACROSS THE BOARD to all cooperating brokers. Exactly how does that violate anti-trust laws? Answer: doesn’t.
Russ
Russ
Real Estate Commissions have never been earned by “tasks performed”. Setting that precedent can do more harm than good to the major companies, as that could be applied to houses that sell quickly vs. over a long period of time. Clearly every house and every buyer carries a different set of “tasks”.
To single out the “task” of showing a house, and not penalize for any other “tasks” not performed by both buyer agents and seller agents, would indeed look like a boycott or war against a single entity.
Should someone who shows a house three times before the buyer decides to write an offer receive more than if they show it once? Clearly assigning a price to a showing appointment is not the answer.
A main concern noted in this thread is by listing agents who don’t want to show another agent’s buyer the home. I realize you are looking at this from the buyer’s side of the table, but for once, please look at it from whence it came, the listing agent side. From the LA (and seller) perspective, what are the downsides?
Russ,
You know Russ, the RULES haven’t considered the buyer or even the seller for way too long. It is high time for the buyers and sellers to be a large part of the equation. The industry has gotten away with making rules, about themselves only, for 100 years. Well it ain’t gonna fly much longer.
BIG, BIG downside for the buyer is THIS! The buyer is entitled to equal and separate representation no matter when in the process they realize they need equal and separate representation.
This business is not about tasks and services and metres…it is about representaton. No buyer OR seller can be forced into Dual Agency without written and informed consent. Once the Buyer Agent can’t get his piece of the pie because of some “mistake” the consumer made who doesn’t know the rules…then the consumer CANNOT get FULL and separate representation and MAY be forced into Dual Agency.
That is a VERY BIG deal for the BUYER. I have heard many, many Buyer’s Agents say you HAVE to work with the listing agent now because you saw the house with him. If they get paid less, we will hear that even MORE. That forces buyers into Dual Agency and NO STATE can promote that in any way, shape or form and no MLS can promote that in any way shape or form.
That is the downside 🙂 for the BUYER, though you didn’t ask that…and why don’t you care about the Buyer, Russ? Why are you only looking for the downside for the seller and seller’s agent as if the buyer doesn’t matter? That’s really an atiquated way of thinking.
Ardell,
It’s not that I don’t care about buyers, it is just that they don’t matter for purposes of this thread. Why do you keep wiggling away from answering the question?
Russ
Russ,
You just can’t seem to follow this to its ultimate conclusion. The buyer DOES matter to this thread. How can the buyer NOT be involved in an issue that says if the buyer calls a listing agent and after the fact realizes he can’t rely on the person who represents the seller, to represent him, he is SOL!
Historically agents and sellers have eliminated buyers from the equation, except as a pawn to be used to accomplish the goal of selling the house.
The buyer will be affected if the listing agent is permitted to take a portion of the fee to represent them. Many agents will say You SAW it with the listing agent, now I can’t get paid. So you have to go back to the listing agent and accept Dual Agency or no representation at all.
I actually saw that on an EBA website. An EBA, Exclusive Buyer Agent, who is supposed to be an advocate for buyers only. It said if you saw the house with the listing agent, don’t call me, because now you HAVE TO use the listing agent. If the fee is split because the buyer saw the house first at an Open House, the sellers invited them in, any number of ways, you are saying they have chosen a portion of their representation inadvertently.
We do not get paid for services and metres that can be delineated in a contract that has a checklist. We get paid to represent people. And a buyer should have more choice in that, without some mls rule dictating that they “spent” the BA fee without knowing it, on someone they did not choose to represent them.
“Buyers don’t matter”, Russ? I can’t believe you put that in print. We are talking about the Buyer Agent Fee and the Buyer’s seeing houses…how could they NOT matter for purposes of this thread?
Here’s another one, Russ:
“Some agents and offices became creative by adding in the MLS listing the note, that if the listing agent/office had shown the property to the other agent’s client, the commission will be cut with 1%.. According to NAR this is illegal.”
One of the benefits of a large real estate forum is you get to see what happened, when others have tried what you are thinking about trying. NAR’s position was that it singled out a specific business model, and so was an anti-trust violation. My position is it effectively reduces the Buyers Representation options.
Not one area of the Country has weighed in at being able to keep that extra 1% on the listing side, though several have said it was a deterrent measure, and reduced the number of agents not showing the property.
Why aren’t more agents using variable commissions?
the NWMLS says it is policy that site registrations are for use by “development sites and new construction”. Further, variable commissions may not be against NWMLS rules, but the NWMLS’s June 6th Monday Update comments (with examples) on SOC Remarks with Variable Office Commissions make implementation difficult with the remarks field limit size and no use of site registrations.