[photopress:sl.jpg,thumb,alignright]The Seller’s Agent aka the Listing Agent, can’t be “the girlfriend” calling the “easy servicer” the “slut”. Not anymore, anyway. So the agent responses to my previous article are incorrect and Redfin CAN, yes CAN “write it up”, if the agent who showed the property was THE listing AGENT. Not the listing company (here in WA), but the one and only listing agent. That’s why they need to ask the buyer what the NAME of the agent was who showed them the house. If it was anyone except THE listing agent, and they write it up, then…yes…slut.
Used to be the Listing Agent could be, as Jonathan Dalton put it, the “beginning (of) the chain of procuring cause”, but not any longer. That is a Traditional Agent concept that can no longer be true, and is a leftover from the time when all agents represented the seller. Some leftovers are good, like yesterday’s meatballs. But THIS leftover is green and stinkin’. Why? Because the buyer has the right to separate and equal representation. Whether it’s Redfin or me or any agent that writes it up after the listing agent shows it to the buyer, is irrelevant. NO BUYER can be EXPECTED to use the Seller’s Agent, ever. So ANY time a listing agent shows the property to a buyer, they do so with the understanding that the buyer does NOT ever have to agree to Dual Agency. Kind of “show at your own risk”. If you show a buyer your listing, you ALWAYS do it as the Seller’s Agent and NEVER as the Buyer’s Agent and you can’t force the buyer to be dually represented OR unrepresented. So tough luck on the Seller’s Agent. In States where EVERY agent in the Company would be a Dual Agent of a company listing…then tough luck on all of you (as in CA).
So score one for Redfin here. Traditional agents just have to suck up that their rules are WRONG on this one. The listing agent should never have to be warned that the buyer who sees his listing may not use him to “write it up”, as the buyer must always have the option to hire an agent to represent him, that is not the seller’s agent, even after they see the house.
The tricky part aka the slut part, is when a buyer runs around town with an agent to find just the right house and THEN goes to Redfin. That is the part where Redfin must, by policy, either refuse to write it OR listen to the buyer’s story and decide based on other factors. If the buyer is just trying to save money, then no. The buyer can’t “use” the first agent to narrow down his search and find “the” house, and then run to Redfin just to save money. That is where “see no evil; hear no evil; turn a blind eye to the facts…doesn’t cut it. Technical correction, the buyer can do whatever he damn well pleases, as there are no “rules” for consumers who are not in contract. The rule is there for Redfin, not the buyer. Redfin is the one who can end up not getting paid, or just be “the slut” if they do happen to get paid. The buyer is not subject to MLS “rules”, only members are subject to these rules.
We really do need role plays and have workshops as training courses. So, here’s a question. Would ARDELL be “a slut” under the right circumstances and “get in bed” with another agent’s buyer client. YES, under the right circumstances. Say the buyer didn’t trust their agent. Caught him lying. Caught him being in cahoots with the seller’s agent to “get the price up” or hid some facts. Say the buyer came to me and said, we still want to buy the house that we saw with “our” agent, but we just cannot work with him. Yes, then ARDELL or Redfin or Lar or any agent could step in with the understanding that they might not get paid. But the consumer needs them to step in and take that chance.
That is why Redfin needs to ask the buyer HOW they saw the house and WHO they saw it with and WHY they aren’t buying it with the agent who showed them the house. If it is the Listing Agent (by name), that is OK, contrary to Traditional Agent popular belief. If it is anyone else, then the chain of events was pretty much completed by the time they made it over to Redfin, and Redfin needs to get the story and refuse to write it if the reason the buyer is there is just to save money.
Truth is, if Redfin does not do this, and they give the buyer 2/3rds of the commission, then Redfin would be liable to pay the REAL agent who was the procuring cause, the money they paid to the buyer. While this looks clear as mud, it is true transparency. If you want transparency…we got it…but don’t expect it to be simple stuff. Real estate is not simple stuff. Transparency in all things real estate, may give you a monstrous headache.
Alternative business models who think like “real people” are GREAT! But they have to also understand real estate, and the obligations to other MLS participants. Listing agents need to get on the stick with changes in agency, and stop relying on outdated common practice issues.
The only time the listing agent can represent both sides of their listing sold, is when both the seller and the buyer give their informed and written consent to do so. Most states require that that “decision” of the consumer be ratified at time of contract. So if they agreed in advance to Dual Agency by seeing the house with the listing agent or signing a Buyer Agency Agreement, they still have the right to change their mind when it is time to write the contract. I like to call this “the Mary Beth Whitehead” provision of agency law.
Procuring Cause guidelines need to change to reflect this and should never award a “buyer agent fee” to a seller’s agent, if and when the buyer chooses his own representation.
In fact Procuring Cause needs to change to allow a buyer to switch agents whenever they feel uncomfortable in the process, for any reason, by splitting the fee proportionately. A consumer can fire their lawyer halfway through a case; so a buyer should be able to fire an agent halfway into “the deal”. A consumer can fire their doctor the day of the operation and hire a better surgeon. Likewise, a buyer should be able to fire their agent at any time they feel an “upgrade” is needed. Procuring Cause is a great thing. But PC needs to be updated to reflect the buyers right to pick and switch and do whatever they feel they need to do. Current practice of PC is TOTALLY Agent-Centric. Time for a change. Not time to “eradicate” it. Just time for it to reflect the buyer’s right to make their own informed choices.
Ardell, we trackbacked to your previous post but can’t keep up with this new one. You are the Balzac of real estate bloggers…
http://blog.redfin.com/blog/redfin/2006/12/post_6.html
OK, I would like to comment, plus post an observation…
First, while procuring cause can be debated, under the current ‘system’ it is after all the listing broker who is making an offer of compensation in the local MLS to agents who bring a buyer. Naturally, it is every listing broker’s prerogative to structure the co-broke commission in any way they want. So the “entitlement” online brokerage firms who do not provide full service may be effectively challenged in the future in one way or another.
Second, my observation and a general comment to several posts made… What is really the big deal about Redfin??? Let’s be frank, they may be the hottest thing in Seattle and may be the first broker to offer a buyer discount in Seattle, but hello, this is nothing new. In our market there has been a firm offering a 50% commission rebate to buyers (for full buyer agency representation) for YEARS!… If you search on Google for “50% commission rebate” you will dozens if not hundreds of agents and agencies in the country offering a rebate and some offer much more, such as http://www.buysiderealty.com with their 75% commission rebate.
Redfin’s business model is seriously flawed in that it is based on their retention of 1/3 of the traditional 3% (+/-) co-broke commission offered to buyer agents. What will happen when that co-broke will drop to 1.5% (as it already has in some markets, and as it has been pioneered in this country by Foxtons whom I consider much more of a trailblazer to be frank)? What if real estate divisions of a lender all of a sudden offer “free” buyer side representation, as in ‘we’ll give you all our commission if you get your loan through us?”
Yes, Redfin is causing a shift in the thinking of people, but the consumer wants value and service, and in the end it will be those companies that provide both outstanding service and fabulous value that will win.
If the disintermediation that is beginning to take place (of the realtor and the real estate transaction) then the natural and logical progression will be that listing agents get paid by the seller for their services and buyer who wish to hire hire and pay for a buyer agent (i.e. no more co broke and no more MLS as we know it). Buyer who wish to just go directly to the listing agent because they found them on the net pay nothing extra, nor does the listing agent earn extra for doing ‘twice the work’ as some suggest (a rediculous suggestion I may add).
Clearly this works just fine in many other countries, including most European nations.
What makes Redfin special in my opinion is its focus to give buyers a well rounded online experience with a solid set of ‘do it yourself tools’ and in return offers buyers a rebate of their earnings. I can tell you without equivocation that it will be only a very very very short time until many other agents and firms will do the same, but with better and more extensive service (how about old fashioned buyer represenation PLUS the commission rebate)?
So Glenn, whilst you are obviously quite a phenomena in the W Coast techie and real estate community, and whilst you clearly are an innovator (love your latest blog initiative), you’ll need to do a lot better IMO if you want to take Redfin nationwide. Right now Redfin does not have much of a competitive advantage, really.
TH
PS: Why did Redfin delete my reply to Ardell’s post?
Ardell, now I understand your previous post much better. Your “slut” argument is not about a Redfin client having the listing agent himself/herself show the property, but rather about a Redfin client using a non-Redfin agent to run around town showing properties, and then, having found one he likes, call up Redfin to write the offer and give him back 2/3rds of the commission.
Agreed, but a few comments…
First, while Redfin’s clients are by definition price-conscious, that doesn’t imply that they’re also unethical by definition. The large majority of people out there would feel uncomfortable with taking up days of Agent X’s time, and then writing up an offer using Agent Y. Yes, it does happen, but probably no more so with Redfin’s clients than with the public in general.
Second, what was that buyer’s agent doing shuttling around an uncommitted buyer for days on end without a buyer-broker agreement? You can usually sniff out somebody who’s planning on going around your back within the first couple of homes. If you get that funny feeling about this buyer, either stop showing them more homes or get them to sign an agreement. Problem solved.
Thirdly, consider the following all-too-possible situation: Redfin buyer client sees interesting property while driving by and calls the number on the sign, assuming that number is for Realtor Suzie, the listing agent whose name and picture are in front of the house. Turns out that number is the general office number for Suzie’s office, and the buyer ends up talking to Realtor Wendy, who’s on floor duty. Wendy shows the property. Redfin client uses Redfin to write up the offer. Now what?
Thomas,
Redfin is great because, unlike you, they recognize that the buyer is entitiled to hire their agent and negotiate THEIR agent’s fee with THEIR agent, unlike you who still want to believe that the seller and/or seller’s agent is paying the Buyer’s Agent.
It is a “convenience of the transaction” that the Buyer Agent’s Fee is financed. The Buyer is financing both the Buyer Agent’s Fee AND the Seller Agent’s fee, or paying it someway as part of the sale price.
You need to do that thing that Kramer does to get water out of his ears and get that garbage out of your head. It makes no sense for anyone to think that the Seller is paying for the Buyer’s Representation. It causes agent’s to think that buyers are getting a free ride and when someone thinks they are “servicing” someone who is getting something for nothing…the repreentation becomes…what it often is.
I know your thinking is “traditionally” correct and literally correct, but I challange you to be as Great as Redfin and “get it”. The Buyer is Paying their agent as part of the sale price. The buyer should have a commission discussion with their agent the same way a seller has a commission discussion with their agent.
It’s their mindset that makes them Great.
KEVIN!!! YES!!!! VERY, VERY YES!!!!!!!!
THANK YOU!!
All I’m asking Redfin is if they do what you and I would do. If they do what every member of every MLS is expected to do if someone comes in and says “I want you to write an offer for me on X house”.
Do they “assume” the buyer followed the instructions OR do they make sure the agent BY NAME who showed them the house IS the listing agent.
I’m not going to address the rest of your comment, so we stay on target here. To ASK the BUYER who you KNOW has seen the house you are writing, for the details of what happened prior to their showing up at your doorstep, is part of the “spirit of cooperation” that binds every MLS Membership together and allows it to function as it does.
First: Does Redfin ASK and Second: What would they do IF a buyer says, “I worked with an agent for two months, but when that agent led us through the maze of houses and info to this house…we found out we could save money if we came to you.”
Ardell, I never said that a buyer doesn’t have a right to independent representation. I’m all in favor of it, actually. But this discussion isn’t about whether someone else can write the offer for the buyer. It’s about what happens to the co-broke offered in the MLS.
Here’s what our MLS rules say …
“Such offers are unconditional except that entitlement to compensation is determined by the cooperating broker?s performance as the procuring cause of the sale (or lease).
Telling a buyer to look around, have other agents show them the houses and then call when they find one hardly would be a sturdy case for arguing procuring cause. Maybe I’m not the procuring cause. But the buyers’ agent in this case absolutely isn’t.
When we reach the utopian ideal where buyers’ commissions are paid separately and not through a cooperation agreement, then I’ll agree with you. But under the current setup I don’t see an obligation to pay an agent who never stepped foot inside the house.
(And yes, I’ll likely regret this later … I feel like one of Geico’s cavemen, but I’ll continue swinging with my club anyway.)
Jonathan,
Redfin has already reached that “Utopian Ideal”…when are Traditional Agents going to “catch up” and “get it”. The allowance by the seller in the sale price, offered via the Listing Broker, IS THE BUYER paying the BUYER AGENT FEE in the sale price!
Don’t quote me same old, same old, Jonathan.
First step, Jonathan. Stop calling it a “co-broke” and start calling it a Buyer Agent Fee, for the buyers representation of choice.
Just CALL it something else and BINGO, it becomes that something else. This is not NEW and I learned it in 1992. There’s a reason the Realtor Organization and MLS Systems brainwashed you into calling it a “co-broke”. Think about it. Do me that one favor, Jonathan, just think about it differently.
Buyers “get it”, Redfin “gets it”, I “get it” and many others…time for “traditional” to CHANGE! their thinking…it’s semantics to call it what serves the agent best…it’s Agent Centric and NOT Consumer Centric to call it anything but what it truly is. Another one traditional agents have to Cry Uncle on.
No, No, No. And bolding isn’t going to convince me! 🙂
Until you can prove to me the sales price will be a couple of percentage points less with buyers paying for their representation, I’m not going to buy the argument. Sorry.
My listing agreement says nothing – NOT A WORD – about co-brokes, buyer’s agent fees or “Murrays” (I’m going to call it that just for fun.) It says this is the commission the seller will pay from their proceeds. The presence of a buyers’ agent is irrelevant – the sellers would pay whether there’s a buyers’ agent or not.
So let’s say we make the change and take the commissions away from the sellers’ side. Seller pays their agent and either offers a credit to the buyer or buyer pays their own agent. How many buyers would go unrepresented because they couldn’t afford to pay their own agent? Would have been me on my first couple of purchases.
Does that serve the consumer in any way shape or form?
LOL Whoopee! Jonathan put his gloves on! …or took them off 🙂
“Until you can prove to me the sales price will be a couple of percentage points less with buyers paying for their representation…I’m not going to buy the argument.”
OK…how’s this.
1) Almost every time an agent buys a house for himself, he does NOT accept the “co-op”, because who wants to pay taxes on a commission to buy your own home? Almost every agent in the country either applies the co-op fee toward his costs OR takes it off the price.
2) The money paid to the Buyer’s Agent is ALWAYS in the price, Jonathan. When you list a house and give the seller his net proceeds, you deduct the listing fee AND the buyer agent fee from the price to show the seller his expected net proceeds
3) When the buyer is an agent he represents himself and GETS the 3%. Even the Court system doesn’t force someone to hire someone and CAN represent himself. So the buyer IS his “own agent” and represents himself. He “brings himself” to the seller and gets paid that fee from the seller for “bringing a buyer to the table.
4) Seller agreed say to pay 6%. No one needs to prove that the 3% for the buyer agent is IN the price. Every listing agent knows that. Question isn’t is it IN there…question is why does the listing agent get 3% if another agent comes around BUT wants to keep all 6% when the buyer chooses to represent himself.
If the buyer had an agent standing next to him, you’d give that guy 3% from that SAME final negotiated price. So let’s say the buyer is an attorney and FULLY capable of representing himself. Why can’t he just take the same fee you would readily and happily have paid to “his agent”? Same dollars, same saleprice, why the difference? Why does the listing agent want to keep it when the buyer doesn’t have an agent?
Technically same as when YOU buy a house for YOURSELF, isn’t it? Do you want to give the seller or the seller’s agent that 3% because you don’t have an agent? I’d say NO. When you represent yourself you get it…when someone else represents themselves…???
No bolding…just some caps. I’ll play fair.
Now we’re getting somewhere …
1) Applying the fee to costs is the same as taking the fee, but without the tax ramifications. And if the fee is taken off the price, where does the line get drawn? “I offered 8% less … 5% as a negotiating tool and another 3% because I’m not taking a commission.”
1a) If I have a home listed and you come buy it (really, please do … I have some great homes for sale) and decline the co-op, this doesn’t in and of itself change what the sellers are paying. The listing agreement is between my brokerage and them. You don’t matter.
Realistically, would I make an adjustment? Probably. Am I in any way obligated to do so? Nope.
2) The commission I charge is part of the price. Again, there is nothing in the listing agreement that states what I’m offering to the other side. Unless otherwise stated, the commission is same whether there are two agents involved or one. Should it be? That’s an entirely different argument, based on what should be but not what is.
3) Unless I’m reading it wrong, you’re contradicting number one.
4a) Because we’re all money-grubbing swine, or so I’m told. For the record, if I represent both sides I reduce my commission to 4%. And there is a tradeoff – I’m taking a buyer with whom I can earn a full 3% and bringing them to my own listing for 1%. But my seller’s happy, my buyer is happy and all is right with the world.
4b) Why can’t an attorney take the co-op fee? Because it’s against the law here in Arizona. Again, we can argue over what should be but that is what is. You must be licensed to be paid in a real estate transaction.
I’ve gone three days without a blog post … I really ought to pull a Greg and start arguing on my own site at some stage.
Jonathan…LOL You lost me at “you don’t matter”. I’ll go back though…cause I know you didn’t mean it. But never, ever tell a woman she doesn’t matter.
Jonathan,
You are CORRECT in that “the buyer doesn’t matter” under current common practice and current agreements. Now FIX THAT!!
The Buyer DOES matter and Redfin makes it so and I make it so and many make it so….now go out into the world and make it so in YOUR mind and practices…and guess what…things will change and the buyer WILL MATTER!!!
When you only take that 1% of the 3%, give the remaining 2% to the buyer NOT the seller. It’s the fair and right thing to do…although not done before.
It is my challenge to you and all. Redfin is VERY RIGHT in that regard and everyone else is incorrect…go fix it.
Ardell, I knew you weren’t going to like that line. I just wanted to make sure you were still reading. 🙂
I’m not saying the buyer didn’t matter … and if I did up there, I reserve the right to extend and amend my remarks … the presence of a buyer’s agent doesn’t matter, at least not in a simple agreement between the seller and the listing brokerage.
> give the remaining 2% to the buyer
Not an option when the listing agreement has language that says the commission will be 4% if the listing agent represents both. And that language comes as part of the negotiation between the seller and me well before any buyer appears.
Buyers have their opportunity to work for a better deal when they submit the offer … especially currently when almost every offer includes a 3% credit back to the buyer for closing costs, etc.
Jonathan,
First let me agree with you in that you do EXACTLY what I used to do.
Second let me point out that that is EXACTLY the way we have been doing it for many years…meaning back when all agents represented the seller…so guess what…can’t be right today.
The buyer agent doesn’t matter because all that stuff was carved in stone before buyers were represented.
Once you realize that, I’m hoping you are at least willing to think about it differently. Saying “the buyer agent doesn’t matter” is the same as saying the buyer doesn’t matter.
Redfin has updated their thinking…because they never had the old leftover thinking from when all agents represented sellers. Learn from them. They are right on this one.
Trust me. When you only charge 4%, that 2% should go to the buyer and not you or the seller. Think about it. Why should the buyer not having representation create a benefit to your or to the seller? Shouldn’t. Never should have. Bad thinking.
FIX IT! Maybe not today, but over the next year, I hope you will at least pause and think about it when the situation arises. That’s all I ask of you. Give me at least that. Promise me you will at least think about it and keep an open mind.
I’m a man, Ardell. We don’t think and we don’t have open minds. You can call my wife at her office to verify …
In principle, I understand what you’re saying. But I don’t think there’s one correct view. If I represent a seller, I’m going to argue all day long the money should go back to my seller. If I represent a buyer, I’m going to argue the opposite. There may be one great, “right” answer but I still think it will be colored by a buyer-centric or seller-centric focus.
I’ll say this … if the mass change doesn’t come, I likely won’t object. But I hope it turns out to be a clean conversion and not the messy one that I envision.
(Oh and I did finally fire back on my own blog … been running on empty for three days there.)
Jonathan,
That’s good enough for me. I get the linear thing. As long as you agree there’s not “one correct view”…that’s good enough for me.
And I didn’t miss that you agreed that Redfin was correct for the Buyer Clients 😉
Depends on the local MLS rules, Ardell … here in Phoenix it won’t work, despite Glenn’s claims about winning commission debates.
Ardell,
Have you considered the possibility that you and every other agent that works without a buyer agency agreement are the ones responsible for all this so-called sluttiness, allowing buyers (and themselves) personal gratification without any type of commitment?
I applaud you for struggling with this whole procuring cause issue, but you are literally trying to stick a square peg into a round whole with your arguments. I’m sorry, Ardell, but procuring cause is not a “great thing” when it comes to buyer agency. For all your lip service paid to a consumer’s right to be represented, you are totally backwards on this issue. When it comes to buyers, pro cause is like a thief in the night, stealing a consumer’s right to choose without them even being aware of what has happened.
No Ardell, pro cause is not a good thing when it comes to buyer agency. Pro cause is purely a sales concept, and should only be utilized to determine entitlement to the “sales commission” as between competing seller agents.
You seem to acknowledge that procuring cause needs to change, because it doesn’t make sense in the current environment. I agree with you wholeheartedly that pro cause is “a Traditional Agent concept that can no longer be true, and is a leftover from the time when all agents represented the seller.” Unfortunately, you don’t seem willing to follow your own ideas to their natural conclusion.
How about this, Ardell? A Buyer retains his or her own agent, and negotiates with that agent the amount of compensation to be paid for buyer agency services. The buyer agent then submits their client’s offer to the seller, rejects any offered co-op, and includes a provision in the purchase agreement wherein the parties agree that X% (the agreed upon buyer agency fee) is to be paid to the buyer agent on behalf of the buyer. Tell me please why the Chicago mob changed the COE to allow listing agents to steal the buyer agent’s fee in this situation?
I think you really need to reconsider your fear of buyer agency agreements. You claim that it is unfair to rope a buyer into working with you by means of a buyer agency agreement, yet you complain when that buyer calls Redfin after seeing a house with another agent? Agents should be able to take care of themselves, without the pro cause crutch. Professionalism goes a long way.
You need to kick your pro cause addiction entirely, Ardell, when it comes to buyer agency. While I concur with many of your expressed sentiments, I flat out don’t believe that procuring cause should be applied to a situation where a buyer purchases property using a buyer’s agent. Can you please enlighten me?
Your scenario of every buyer needing to sign a buyer agency agreement just to see a house, sounds good from an agent perspetive. But going back to the Amazon.com example, it would be like Borders making a customer sign a contract before entering the store, saying that they cannot buy a book anyplace else, once they enter the store.
If you apply that “you can’t see unless you sign first” analogy to any other market and any other product, it would sound absolutely ludicrous. So no, I don’t think it’s practical to expect people to sign a contract before seeing any houses, any more than it makes sense for them to sign a contract before seeing books in a bookstore.
The only time in 16 years I’ve gotten involved with a Procuring Cause issue, was on behalf of another agent. AND it was the one time there WAS a written buyer agency agreement. So, no. Can’t say written agreements are the answer. In fact, it was the opposite. No written agreement equalled no problems. Written agreement equalled a procuring cause issue.
But here is what I have been thinking about. Say a consumer takes an agent all over town for many weeks and finds a house to buy and then calls Redfin to buy it. Under the existing “old” rules, Redfin is supoosed to ask some questions.
But really, what do I expect Redfin to do with those answers?
A consumer can go into a bookstore to determine what books they like and then go borrow those same books from the library. I guess it’s the same. A consumer can go find homes, by whatever means are available, and then go buy the house from Redfin.
Do I expect Redfin to say no, you can’t buy that house through us? Seriously, even if they did do everything that is required by membership in the MLS…what’s the next step?
The system we have now, has created a “price fixing” end result, moreso for buyers than for sellers. I really can’t think of any practical solution at this time. I think some things just have to play out in the marketplace. Clearly penalizing any broker that charges less is wrong. Clearly forcing consumers to sign a contract just to see a house is wrong.
So I think Redfin’s plan of having the listing agent show the properties, is about the best thing out there right now.
My post at Redfin stated…the wings of change are that of a butterfly at present. What tornado of change may be created in the long run, is yet to be seen.
On a national scale, I don’t think I’ll live to see the change. But in Seattle…all things are possible.
We hold almost 100% of our listings open on Sundays and rarely take any offers without having at least one Open House. That allows plenty of time for unrepresented Buyers to view the home. We always have at least one Buyers Agent in attendance, and sometimes two, depending upon the size of the house.
When I take a listing, I explain that I may not always be there with a Buyer, but every Buyer who comes in with another agent is presumed to be a qualified, represented Buyer. I urge the seller not to allow any unaccompanied or unrepresented Buyers in the door, and I assure them that I will not either, if I can help it. This is for their own security, of course, and for ours. Why should they just let anyone walk through their front door? During a public Open House, we usually have two Buyers agents and plenty of walk-through traffic and are able to monitor Buyers as they walk in. Sometimes these are unqualified, unrepresented Buyers, but what can we do in this situation? Open Houses have good and bad aspects, but we usually end up doing them, unless the Seller doesn’t want them.
In an instance where someone does not want to attend the Open House but wants me to show them the house on their own time, I need to have them make assurances that they are who they say they are and that they are pre-approved for a loan. Since I do not participate in Dual Agency, they must also have their own agent. Just like in a court of law, if you don’t have an attorney, we can choose one for you, if you like. If they want to get their own agent, fine. The only people who are not agents here in the State of Washington, who can represent themselves and are entitled to the Selling Office Commission, are lawyers. In that case, we don’t require that they have representation. However, they also do not have keybox access, so sometimes we need to make special arrangements for them.
I agree with Stefan Scholl’s previous comments that a Buyers Agency Agreement is crucial. Without it, the agent showing the house has no obligation of confidentiality and no prohibition against conflict-of-interest. It spells out the commission schedule too, and that’s important if you want to negotiate that. If the Seller’s throwing in a trip to Hawaii or a big-screen TV, maybe the Buyer wants that….. without an Agency Agreement, it goes to the Sales Agent office.
You wouldn’t work for a Seller without a contract, why work with a Buyer without one either?
I would agree with you Marlow, if what you said were true. But it is not. Not in the Sate of Washington.
All buyers are represented here, by all agents EXCEPT the one and only LISTING agent, without their need to sign an agreement to “make it so”.
What you say is true somewhere, may in fact be true where Stefan is…but not here in Washington.
Washington State and Seattle Area specifically is a “buyer represented by default” State, under our laws. To suggest that a buyer needs to sign an agreement to be represented here, suggests that you need to read the Agency Pamphlet and the opening paragraph that states to consumers, that the buyer is represented UNLESS they are speaking with the agent who represents the seller. In this state, that is NOT anyone who is licensed by the same broker, but only the listing agent his/her self.
It is one of the reasons the real estate market in Seattle is “the greatest”! But only if agents who work here understand the laws here…which apparently and unfortunately, is not the case.
Ardell,
Of course I am familiar with Buyers Agency. But if you ask a Buyer to sign a Buyer Agency Agreement and they REFUSE, then how can you still argue that you are their agent? Though it is not stated, that should be the test. “Do you want me to represent you and will you sign a Buyers Agency Agreement?” If they say NO, then there is no agency. That is why I always ask, because of the “buyer agent by default” clause, I think it’s necessary.
To insinuate that I do not understand Washington State Agency Law is not nice.
Marlow,
Ask 1,000 agents and you get 1,000 answers. By going straight to that place, right off the bat, that negates the relationship set in place by the laws of Washington State, you in effect render them useless for the buyer consumer.
The intention of the law is for every agent to give the buyer consumer the benefit of representation in all real estate related conversations and dealings. By “separating the men from the boys” so to speak, and forcing the question “Do you WANT me to represent you”, too early on in the relationship, is contradictory to the purpose of the law.
Actually, I thought it was “nice” to suggest you didn’t understand it. Seems you do understand it, enough to circumvent it.
Clearly I am their agent, whether or not they sign a Buyer Agency Agreement. That is what the law says. How can one not be? The only agent who isn’t is the agent of the buyer, is the agent of the seller, under the law. A buyer in WA does not have to sign a Buyer Agency agreement to be treated as a buyer “client” vs. buyer “customer” under the laws of our our State.
Now if you say you refuse to interact in any way with someone who won’t sign an agreement to insure you get paid. That of course is your choice. If you will not show someone even one house or offer any advices whatsoever, if they will not sign an agreement to insure you get paid, that is your choice. But to treat buyer consumers you interact with who sign agreements, differently than those who won’t…I don’t think that’s an option.
If the ABR class didn’t teach that here, it wouldn’t be such a sore point for me. I believe the ABR class to be totally contrary to the laws of the State, in teaching agents that somehow they can lean toward the seller’s interests or their own interests, if the buyer refuses to sign a Buyer Agency agreement. I have told them so, and I firmly believe that course should be monitored and the curriculum modified from state to state to match the existing and differing agency laws of each state. Otherwise they are spreading misinformation regarding how agents should treat buyer consumers.
The course actually teaches that the agent represents the seller, unless the buyer signs a Buyer Agency agreement. That is far from the truth here in Seattle.
Ardell: You stated: “Redfin is great because, unlike you, they recognize that the buyer is entitiled to hire their agent and negotiate THEIR agent’s fee with THEIR agent, unlike you who still want to believe that the seller and/or seller’s agent is paying the Buyer’s Agent.”
Well, clearly you do not understand myself or our business model and philosophy. Could be a simple misunderstanding.
For the record, I am in total agreement that the buyer is entitled to select their agent and negotiate their commission. I don’t know where you got the idea that I did not believe this. I have always defended this view point. Of course the buyer ‘pays for everything’ at the closing table. But so does the seller, too, since the seller’s net proceeds are reduced by all deductions. Two different perspectives to the same thing.
(Of course this does not change the technical fact that under the current real estate paradigm, the seller determines the amount of commission to be paid, and the listing broker determines and offers compensation in the MLS – to which by the way only members of that MLS are entitled. i.e. a non-realtor real estate agent is not entitled to compensation when they sell a property listed in the MLS, unless the listing broker agrees to this)
As a matter of fact, our company offers a 75% commission rebate WITH full service buyer representation, Plus an unconditional satisfaction guarantee (so much for Redfin being ‘the only company offering a 100% satisfaction guarantee). We also offer full service seller representation at half the cost, again with an unconditional satisfaction guarantee. Our company does not pay its agents a commission and we are not agent centric but rather ‘consumer centric’.
Redfin is not the first company to offer a buyer discount, period, and they will need to do more/better if they want to have a long term viable business model. What they are doing right now presents no competitive barriers to entry. Any independent agency can do what Redfin is doing (in fact we are doing better), and much of the investment they are making in their proprietary technology will soon be available to agents and brokers for a modest fee from a number of providers (check out http://www.realestatewebmasters.com for great custom IDX solutions including map searches and more).
I am not bashing anyone, I am simply asking some tough questions. And, I *am* a consumer activitst who is much more concerned with consumer choice and value to the consumer, than I am with protecting the status quo for independent contractor agents.
IMO that business model will be dead within a few years. There is no need for 1.5MM Realtors in the US, doing 6-8 transactions a year each.
Keep up the great work, love your blog and even though I am in a different market I do find much of it relevant.
Thomas Heimann, President & CEO
Bravo Real Estate, Sarasota FL
http://www.BravoBrokers.com
Thomas, part of that is not true here. The MLS here is not Board owned. As for “the current real estate paradigm”…anything that has been around for as long as that paradigm, should at least be open to the idea of “rethinking the rules”. What’s it been…50 years or more!?
I’m always amazed when I read arguments like these that so few people actually go back and define agency via the law that the individual states have provided. It’s not just the MLS that makes the rules. One problem with these so called buyer “sluts” as Ardell likes to call them (but that I am not a fan of) is that it seems clear that not only is there no discussion of buyer’s agency but no discussion of agency law AT ALL with them. I’m continually disturbed when I go on appointments with people that are shopping for an agent that when I pull out the Law of Agency Pamphlet that WA State requires I present to all possible clients that the majority of these folks have never seen one. ALL agents are supposed to have them distributed in the FIRST conversation with a prospective client but a lot of agents miss this step. It helps to qualify prospects as well once you bring it out – you figure out who’s serious and who’s not pretty quickly. And, even if you don’t pass out the pamphlet there are laws in WA that are pretty specific that discuss the idea of duration of an agency relationship and the beginning of that relationship can be as soon as an agent “undertakes to provide real estate brokerage services to a principal” which could be interpreted as providing listing info, showing properties, giving advice on properties, referring additional resources (lenders, inspectors) and such. Unfortunately, with the revolving door that is real estate most people in the business aren’t experienced enough, nor do they receive enough training, to make sure they follow these procedures. Most of the folks coming out of their licensing exams barely have enough money to get by the first few months of business and they have little sales experience in qualifying prospects so they unfortunately are desperate enough to be willing to take around un-qualified buyers. It’s a sad and common nationwide problem in our industry.
If anyone has taken a procuring cause class in the recent past you’ll also find that there is a mistaken belief that just giving someone a flyer on a house constitutes substantial services but that isn’t the case. However, if in the case that Ardell is relating in this thread that people are asked to drive a prospective buyer all over town to see properties and then the buyer goes to Redfin to get their discounted purchase opportunity there is possible cause for concern about a lawsuit or mediation for that SOC. There is no guarantee that by taking it to mediation it will go one way or the other but time and effort could be spent/wasted.
My clients get a chance to read and discuss my listing and buyer’s agency agreements in advance of us working together. I would suggest that Redfin post the laws of agency on their site (I do) and not only provide the recommended language for talking to listing agents but also perhaps a virtual copy of the law of real estate agency pamphlet that is required by WA State (I have it posted to the RCW on the State’s website).
Having recently experienced a sale with a Redfin agent it is clear that Redfin “clients” aren’t actually clients yet and they aren’t familiar with agency law or how it works. I could have disputed the SOC payment to Redfin based on several things that happened but in particular since this buyer was attempting to discuss the pricing of the property and what her upcoming offer might entail. And, I’ll tell you that when I represent only my client in a sale with an unrepresented buyer I will usually discount my fee to the seller if a SOC isn’t to be paid. But, back to the story…When I tried to follow up with Redfin initially, after this person had asked me to show my listing to them, no one at Redfin knew who this gal and her family were. Basically she had just decided on her own that she’d use this method to buy the home so she could get the refund amount they advertise and I was left to answer a lot of the questions, to qualify her as a reasonable prospect for my clients to consider, and more. I showed her the property a couple of times and answered some questions although I made it very clear that there were certain things I couldn’t answer that were confidential to my clients and I didn’t have permission to disclose and I also told her I wouldn’t interpret any information for her. I was frank and honest with her, as agency law requires in Section 3 of the agency pamphlet. The definition of services http://apps.leg.wa.gov/RCW/default.aspx?cite=18.85.010 doesn’t really go into things such as driving people around and it targets specifically that services include negotiating on behalf of the client. When this buyer starting discussing terms of a deal directly with me then there is possible cause for me to negate Redfin an SOC.
I did make it clear to the people at Redfin that I had expectations of the duties they would perform once the contract was agreed to and they did live up to those expectations.
I disagree with Ardells constant comment about fees being part of sale prices in all situations. Plenty of property is sold in all areas of the country without commissions being included. House prices aren’t artificially high to account for commissions, they are based on market forces and what a seller will accept and what a buyer will pay. The true definition of “value” for a home/property. Commission fees can range all over the map and how then do you also account for FSBO prices? Are you trying to say that a FSBO puts their house artificially low because agents aren’t involved? No, they aren’t. These are folks hoping to get that much more because they don’t think they’ll need to pay a commission. Again, market forces – what a seller will accept and what a buyer will pay.
Reba,
Clearly any property listed for sale via the MLS has the Buyer Agent Fee as offered built into the price. No gray area there. Not sure where you are confused.
You say: “I did make it clear to the people at Redfin that I had expectations of the duties they would perform once the contract was agreed to and they did live up to those expectations.”
Are you suggesting they would have handled things differently had you not made it clear what “you expected”. Wouldn’t they have done those things whether you made them a list to follow or not? What might have been missed do you think, had you not first told them what “you expected?”
I totally understand that change is hard, but Redfin discounting to the buyer vs. the Traditional discounting the SOC/Buyer Agent Fee back to the seller is clearly more appropriate. If the seller was paying the SOC to the Buyer Agent, then the Buyer should benefit when that fee is less or zero.
It was pretty clear when I spoke with the original contact from Redfin what my clients would expect in an offer and the thoroughness that we’d be looking for in terms of paperwork. This person was not as familiar with certain aspects of the MLS such as the newer “attached documents” where they could get forms such as the seller’s disclosure form, legal description, etc. They were under the mistaken belief that you can submit offers without the legal and can attach later – a subject that has been the talk of a lot of real estate circles in WA lately. (Contracts are not valid without a proper legal description attached at the time of the offer.) I also made it clear that if they were representing the buyer they would be expected at all inspections (not asking me to open up for them and stay present during the inspection) including those that were just the buyer looking at the house again to be certain it was what they wanted.
The seller doesn’t pay an SOC to a buyer’s agent – a seller pays a listing fee to the listing agent. The listing agent then has the option of offering an SOC and generally does so if the property is in the MLS; that amount can vary just as much as the listing fee is negotiable. There is nothing that states that if a SOC isn’t paid there should be a discount to the buyer. Unfortunately several people perpetuate a myth that if there isn’t an agent representative for the buyer that the seller must drop their price by what some people “think” is the “standard fee” for a buyer’s agent. Any attorney will support the stand that a listing agreement is a legally binding contract between a seller and a listing agent only. No other party has any right to negotiate the details of that agreement – the fee is strictly between the agent and the seller. You can’t write into a real estate contract anything that impacts the previously negotiated commission agreement between the seller and listing agent. If an SOC is advertised in the NWMLS then the listing agent is bound to follow the terms of the stated fee payment agreement but that is because of membership in a cooperative listing service such as the NWMLS. Rules can be put around the receipt of a SOC and the terms of a SOC such as in new construction where it is frequently stated that if an agent isn’t registered ahead of time the SOC fee is either discounted or waived and any buyer’s agency fee is left to the buyer to negotiate with their agent. As long as those restrictions are clear and consistently applied across the board to all agents then it can stand.
I’ve had cases where I’ve helped clients buy from a for sale by owner situations and I’ve negotiated my fees from sellers at various levels – sometimes on a percentage, sometimes as a flat fee, it all depends on the situation and the price point of the property and the expected amount of work and liability I’ll be taking on. In those cases it wasn’t that the seller had left a percentage in the price to negotiate – in fact, in one case the price my client discussed with the seller was without discussion of agent fees to be paid at all and I had to go in and negotiate and justify the fee that this gal was going to pay me. In the end she said it was worth it because she had received a property in probate and she was from out of state and didn’t know what she was doing. The property had been a windfall for her anyway, and she needed guidance in making sure everything was done properly, which I was happy to do for my client, the buyer. The seller knew I only represented the buyer but I spoke with her clearly about agency law (and gave her the pamphlet) and outlined how I had to treat her fairly and honestly in all of my dealings. In the end I received a 3% commission for my work for that specific deal.
I don’t have a problem with change – it’s the best thing going and it keeps the job challenging and interesting. What I have problems with are people misinterpreting much of what goes on in this industry and/or not knowing enough about their industry to give it a more professional face. More self-policing would be welcome and so would higher restrictions and requirements to get into the industry.
Reba,
You and I have seen and seen MANY new agents submit incomplete offers and we have kindly helped them “get their act together”. Well I have, so I’m assuming you have also. One John L. Scott agent who submitted his very first offer on one of my listings even sent me a huge flower arrangement for helping him get all of the paperwork in order when he was writing the offer.
Redfin is a newer company, some of the agents are newer, why does that elicit such a response from you. It’s not like we don’t see newer agents every day in this business. Why single out Redfin in that regard?
There is no doubt in my mind that lawyers will agree with you that the buyer has no say in the commission issues, as the contracts are currently written and used here in this area. Would be very simple for NWMLS to draft a suitable form to empower the buyer with regard to the SOC. What are the odds THAT is going to happen.
All you are saying is what I am saying. The seller and listing agent have always taken advantage of the situation when a buyer is unrepresented…I say it’s time for that to change and Redfin seems to have found a way to do it. Let’s copy them, not fight them or get angry with them. Let’s implement some of the good things they do, without making it into some war against them.
How about an agent that offers her clients sex if they list with her?
I know one in Apple Valley CA.