Don't Sign That Listing Contract!

The contract that an owner signs to put their home on the market is much simpler than the scads of paperwork that come around later when there is an offer on your home.

Here in the Seattle Area, you want to pay close attention to one tiny little portion of the contract before you sign it. It’s very simple to clarify for you, your agent, the buyer and the buyer’s agent, exactly what the commission arrangement is.

Here’s how VERY easy it is. On the main agreement, one page, there is a line of about one inch in length. Let’s say you are agreeing to pay your listing agent 2% and offer 3% in the mls to the Buyer’s Agent. Instead of writing in 5% on that line, just write in what it actually is “2% + 3% to the buyer’s agent”. Pretty simple. Takes about 20 seconds.

That extra 20 seconds will make it clear to you, your agent, the buyer and the buyer’s agent, that the listing agent is NOT to get that +3% in the event there is no buyer’s agent. If the listing agent is agreeing to charge 2% to represent the seller, then there’s no reason why that amount should increase to 5% if at the end of the day they only represent the seller.

There’s plenty of time when the buyer is actually “at the door “to decide who will get that +3% if the buyer has no agent. Maybe the agent should get some of it…maybe the buyer should get all of it…maybe the seller and the buyer will split it 50/50, maybe the buyer and the seller and the agent will split it into three pieces. Lots of options depending on the circumstances at hand at time of offer and acceptance.

But DO NOT write the commission % in as a TOTAL of both your agent’s fee and the unknown, absent buyer agent’s fee. Just write in 2% to XYX listing company and 3% to the company who is REPRESENTING the buyer. This way, if no one is representing the buyer, the extra 3% doesn’t become a windfall profit, without your say so.

228 thoughts on “Don't Sign That Listing Contract!

  1. Nothing wrong with this strategy, but it simply moves forward the decision on what a given listing agent will charge for an unrepresented buyer. Whether it is at the signing of the listing paperwork or upon an offer from an unrepresented buyer, all listing agents can and should decide what they will charge for any given property/transaction.

  2. Just don’t sign the listing agreement without also reviewing the first page of the listing input sheet. That specifies the SOC.

    This is a good topic, however, because whenever a potential client mentions: “Agent X said he’d sell it for 5.0%”—they never seem to know the split.

  3. Oh, I missed what you were saying.

    If you’re trying to make a variable rate commission, you need to disclose that on the listing. Not worth it IMHO because the chance of an unrepresented buyer is so low. The chilling effect on buyers agents too great.

    Stated differently, if you want to sell your house, I wouldn’t do this.

  4. Kary,

    We’ve got to find a way to incorporate this into the system and our contracts. I have not run into to ANY buyer or seller who does not agree with this. The seller may want it back if there is no buyer’s agent and the buyer may want it if there is no buyer’s agent, but I have NEVER had someone think the agent should get to grab it all. That may have been common practice for a very long time, but clearly this issue needs to be addressed differently today than in the past.

    My way may be simplistic and it is intended to be simplistic. Not good enough to say “don’t do it!” Show us a better way TO do it.

  5. Well the problem is you need to work within the rules of ethics. You can do it pursuant to the rules of ethics, but it needs to be disclosed.

    Standard of Practice 3-4 reads:

    REALTORS®, acting as listing brokers, have an affirmative obligation to
    disclose the existence of dual or variable rate commission
    arrangements (i.e., listings where one amount of commission is
    payable if the listing broker’s firm is the procuring cause of sale/lease
    and a different amount of commission is payable if the sale/lease
    results through the efforts of the seller/landlord or a cooperating
    broker). The listing broker shall, as soon as practical, disclose the
    existence of such arrangements to potential cooperating brokers and
    shall, in response to inquiries from cooperating brokers, disclose the
    differential that would result in a cooperative transaction or in a
    sale/lease that results through the efforts of the seller/landlord. If the
    cooperating broker is a buyer/tenant representative, the buyer/tenant
    representative must disclose such information to their client before
    the client makes an offer to purchase or lease. (Amended 1/02)

    I mentioned in the other thread how I deal with this. I don’t offer to reduce the commission up front. If an offer comes in, and a reduced commission will help put the deal together, I’ll offer to reduce the commission. But in doing so I make it clear that if another offer comes in before acceptance, the reduced commission offer is off the table.

  6. If there’s only one agent in the transaction – doesn’t matter which side of the deal it is – that agent is doing the work of two agents to make sure the deal closes. The only time I have found this beneficial is when I sold my own property and the buyer happened to be a developer. We negotiated on price pretty hard and I did credit the buyer for what WOULD have been a buyer’s agent commission. I didn’t take any commission at all (avoiding “income”), and I got to/had to do all the work. I didn’t mind so much since some agents screw up transactions more than buyers and sellers do and this way I was fully responsible for the deal closing. And it DID, but it was late. This was last June, right as we were headed into the credit crunch and the buyer had some stickiness with his loan. But it all got worked out and I was a very happy seller/agent!

  7. How about a simple in bold letters:

    IF THE BUYER DOES NOT HAVE AN AGENT, THEN YOUR AGENT GETS TO KEEP THE BUYER AGENT FEE AND THE LISTING AGENT FEE BOTH!”

    OR

    Listing Agent gets to keep the listing agent fee AND the buyer agent fee IF the buyer has no agent YES___ NO___

    If you spell it out that clearly, you will likely get a different answer than the heretofore norm.

    Buyer CAN take the Buyer Agent Fee as a credit toward closing costs IF he has no agent YES___ NO___

    If you are not having these discussions with your seller clients when you list property, you need to start having them and disclosing this issue well and always.

    It comes up EVERY time I list a house and EVERY time a buyer calls me who has no agent and EVERY time a buyer comes to an Open House that has no agent.

    If you are never seeing it, you need to ask yourself why not.

  8. It sounds like you are penalizing the listing agent if they find a buyer. So you’re advocating that you will pay 3% to any other Realtor who brings a buyer but the listing Realtor gets nothing for representing a buyer?

    Sounds like you’re creating an incentive for the listing Realtor to not look for buyers.

    Why would they bother with your scheme?

  9. Actually, it’s penalizing the buyer’s agents and buyers represented by other agents, which is why there’s the ethical rule against it.

    Think of it this way. You have a buyer, but you know that the listing agent will have an advantage presenting any offers to the seller. Why would you want to put your buyer through that? Making an offer and having it rejected is not a fun experience.

  10. “…but the listing Realtor gets nothing for representing a buyer?”

    How is he representing the buyer if he’s representing the seller? Usually the contract says listing agent represent the Seller ONLY when a buyer comes without an agent.

  11. Kary,

    What do you think about my comment #8? Can we highlight this issue better for sellers? Do you have any problem with better and full disclosure and full instructions from the seller, vs. telling them “how it IS”?

  12. The impact of a variable rate as outlined, if I follow it, essentially you are creating a single agency representation.

    Maybe you lost me.

    Is the issue a buyer with no representation?

    Or dual agency? and Double ending?

  13. I’m sorry, but could you explain to me why the Listing Agent should not get the whole benefit of both “sides” of the commission if their marketing was successful enough to get into such a situation?

    I guess where we differ fundamentally is your thoughts on two sided commissions, where I see one. I see a listing agent charged with getting the home sold and in order to do so paying other agents for their help.

    I do understand where you are coming from and why don’t you just say it? You pseudo-discount your commissions. You don’t do it in a “I discount!” way… no, you lure your seller with the thought that if your marketing and performance is truly successful and you manage to keep another agent away then they could save 3%. Now, let’s say you have two offers on the table. Unrepresented can offer less than represented and win. You are penalizing and discouraging the use of Buyer Agents. Of course, you do have to disclose this and you better believe you are going to make some people very angry.

    When you split commissions the way your going you might as well completely divorce them and have the Buyer sign a Buyer’s Agency and pay their Realtor directly. But that would be messy, wouldn’t it?

    All this aside, I wonder, have you actually been doing this and what have been the results?

  14. Ardell, this is too simplistic in my opinion. There is exra work involved for the listing agent if the house is sold with no other agent involved, sometimes just a little, sometimes a lot of time.

    You cannot possibly know at the time you list a property where the buyer is going to come from, or what kind of work might be involved in any transaction with just the listing agent involved.

    I can easily see a lot more time involvement for a listing agent who sells his/her own listing. It’s not just as simple as writing the paperwork, getting mutual agreement and slam/bam you’re closed!

    You might have a buyer that is reluctant to find his own agent (for whatever reason), who asks you to go show him a few more houses so he can get inside and see the differences. I’d certainly be glad to do this, hoping 1) he will like my listing best, or 2) he will decide if he doesn’t like my listing best, that he’d like to work with me and have me represent him on some other property.

    You have to realize that some agents are going to follow path 2) … where the money is, especially if the seller isn’t willing to compensate according to extra work or time, and that of course isn’t what is in the sellers best interests.

    Personally, I think my duty is to my seller to try to convince this buyer that my listing is his best choice, but I most certainly don’t have an obligation to strong arm him into it.

    So, I think the answer isn’t simple enough to negotiate the commission in the beginning, and I wouldn’t recommend it. It is much better to actually see how the situation will play out, and making sure what happens, makes sense.

    Saving thousands seems like a good idea, but not if the savings actually costs you in the end.

  15. Will, I like your ladder analogy, it’s a good one!

    In the past few years, commissions have been more negotiated than ever before, and I think it is simply because many properties sold very quickly, and many buyers bought so fast. It was hard for some to see the value of the agent, since there wasn’t really much visible time investment.

    As the market slows, and agents have more time into a transaction, I think both buyers and sellers will realize two things:
    * their agent spends a lot of time with them
    * their agent has good advise that will help them achieve their goals

    What’s been lacking recently is the ‘getting to know you’ part, and perhaps there have been some agents in such a rush, that their clients didn’t perceive enough value in exchange for the commissions paid.

  16. Ardell wrote: “What do you think about my comment #8? Can we highlight this issue better for sellers? Do you have any problem with better and full disclosure and full instructions from the seller, vs. telling them “how it IS

  17. Interesting conversation. I am of the same mindset as another commenter above – There is one commission. I get paid x% to sell your property and with that x% I will do everything in my power to do my job.

    That may include paying a buyer’s agent, it may not. I may want to pay that agent y%, y-1/2%, or y+1/2% to bring that buyer to the table.

    The point is, x% is what you pay ME and it is to do with as I please. This is why it is against the COE for a buyer’s agent to include commission instructions in a contract. What the split is going to be is between brokers, not buyers and sellers.

    There has been a few times in the recent past that I have had a buyer’s agent put in the contract that the commission is to be split equally between the brokers … This was funny because they were actually receiving more that I was!

    Now, of course, commissions are negotiable. If the seller wants to control the split I guess that’s between them and their agent.

    If that’s the road they want to go down, maybe they should go to a menu-type fee structure and charge a flat rate for what services they desire. Forget the commission-way of doing things all together.

    – James

  18. Ardell — I could not agree with you more! Hey, I think that’s the first time I ever said that!!

    Everyone else — Ardell is attempting to loosen the iron grip of real estate agents around the neck of the RE industry. She believes that agents can and should stand on their own merits in terms of the service and counsel they provide. They do not need to use a monopolistic and deceptive pricing structure in order to flourish in the industry.

    Indeed, Ardell’s larger point is that this is deceptive to the average consumer, who does not consider the possibility that there is no need for a buyer’s agent’s commission because there is no buyer’s agent. Why can’t a sophisticated buyer represent herself? Or hire an attorney? And in that case, should the seller really set aside 3% for a commission (anything less is a waste, right Kary?) to the buyer’s agent, where the LISTING AGENT will in fact get it?

    Give Ardell much, much credit: she has preached, and continues to preach, transparency. That may not be good for some members of the RE agent/broker industry, but it’s very healthy for the overall market and will lead to better service at lower cost to the consumer. Yay Ardell!!!

  19. Kary — you’re missing the point. Neither Ardell nor I have addressed variable commission.

    By definition, a “variable commission” is a fee/commission structure where a smaller fee is charged to the seller if the buyer’s agent works for the same broker. This puts other agents at a disadvantage — and thus their clients as well — so the listing agent must disclose the fee structure. In doing so, the buyer will not be unknowingly “overcharged” by using an agent not associated with the listing broker. In a nutshell, if the seller pays less for a buyer who came from the listing broker in comparison to what the seller would pay for buyer brought to him by ANYONE ELSE, then there is an unfair advantage that must be disclosed.

    Now re-read Ardell’s post. How much will her seller pay an agent that also works for Ardell’s broker? 3% How much will her seller pay an agent from a different broker (or, in the confusing language of SoP 3-4, a “cooperating broker”)? The same 3%. There is no variability and no “variable commission.”

  20. Kary — one other scenario: How much will Ardell’s seller pay ARDELL if represents the buyer? The same 3%, plus the other 2%. Of course, in that instance, the seller would need to consent to dual agency, but at least the seller knows where the fee is really going. So regardless of who brings the buyer, its the same commission.

  21. Speaking of bold letters, Ardell, I think you forgot to close a bold tag, because everything on the front page after this post is in bold at the moment.

  22. The Tim,

    It’s not all bold on my screen. I’ve heard that from time to time in the past. Why would it look normal to me and bold to others? I’ll have to ask Robbie to check it.

  23. Craig,

    Usually if the buyer comes without an agent they either buy through Redfin or represent themselves. Either way, I get the listing fee only.

    A few years back I was asked to represent both parties (seller was a FSBO and I represented the buyer when we all met). I think I added 1/2%. It was a difficult 4 plex transaction with a partial seller carry.

    Generally I find that my clients and I are pretty much on the same page when it comes to commissions. It’s not as big a deal as some make it out to be.

  24. Kary,

    A smaller fee is not charged to the seller, it is simply absorbed by the buyer instead of the buyer’s agent or the buyer negotiates with his buyer agent for a split amongst them. It doesn’t necessarily change the seller’s net except the seller’s net increases if the buyer takes the buyer agent fee off the price.

  25. Ardell wrote: “A smaller fee is not charged to the seller, it is simply absorbed by the buyer instead of the buyer’s agent or the buyer negotiates with his buyer agent for a split amongst them. It doesn’t necessarily change the seller’s net except the seller’s net increases if the buyer takes the buyer agent fee off the price.”

    Well, correct me if I’m wrong, but you were writing this up in the listing agreement. That’s a different scenario than a buyer coming in and saying: “I’m unrepresented, so I don’t want there to be a SOC.”

    I have issues with that scenario too, but it’s not based on variable commissions (it’s based on the fact that the buyer is not a party to the listing agreement and shouldn’t be trying to interfere with that contract).

  26. Craig wrote: “And in that case, should the seller really set aside 3% for a commission (anything less is a waste, right Kary?)”

    Well, it’s not that it’s a waste, but it’s not a wise decision at all.

    We’ll show buyers 2.5% properties, and have actually had a number of transactions in them. But there are some agents that won’t, or that subconsciously might down-talk the property.

    Selling your house isn’t like Nordstrom selling socks. They put socks out and if they charge $7.00 for a certain type they might sell 100 in a day from each store, and if they charge $5.00 they might sell 200. Your house, in contrast, only gets sold once, and finding that one buyer can take weeks or months. You don’t want to do anything to discourage that one buyer seeing your house, because that one buyer is all you need.

    My wife and I were looking for a house last year, and there’s another house that we saw while negotiating (for 30 days) with the seller of the house we did buy. After the seller of this one lowered his price, we went and looked at both houses again. That other house came very close to selling, but didn’t., but the sellers have no idea that happened. The same can be true of listings for 2.5%.

    The whole idea behind the typical commission arrangement is that buyers’ agents are valuable commodities, because they know buyers! You don’t want to do anything to upset them–be it a variable commission or a low commission. They’re no longer a valuable commodity if they decide not to show your house.

    And think about it. On a $500,000 house the difference in commission is $2,500.00. If that difference in commission results in the house being on the market 3 months longer, is that worth it? “buddhabrad” in the P-I blog thinks his house is declining in value $5,000 a month, and there’s also interest.

    That said, I’ve seen some very low commissions be successful (e.g. $10,000 on a very expensive house). So you can do a 2.5 and it might work, but it is less likely to work well.

    Oh, one more thing–I’d agree your other thread isn’t about variable commissions.

  27. Commissions already are transparent. The listing agreement covers the commission that is negotiated between the listing agent and the seller, and indicates the seller will pay a buyers agent commission.

    The buyers agent agreement covers the negotiated buyers agents commission as well, who pays: seller or buyer and how much.

    If a buyer wants to negotiate directly to purchase a listed property, they can. If they want to negotiate with seller to reduce the price because they don’t have representation by a buyers agent, or if they are paying an attorney or another agent a fee or commission themselves, they can certainly negotiate how they see fit, and the seller will be looking at his bottom line, just as with any other offer.

    If the seller wants his total commission to be reduced, or possibly eliminated when there is no buyers agent involved, that is a negotiation between listing agent and seller, not buyer, because buyer has no ‘claim’ on the commission without a licensed agent involved.

    Let’s bring FSBO’s into this discussion for a moment. When they sell, they think they get to save the commission, and often they do sell their property at the same price as a similar listed property. It depends a lot on the property itself. But, in general, most FSBO’s think they will save the commission, it’s why they are not using an agent.

    And, most buyers think if they buy a FSBO, the property will be cheaper because there is no agent. The best this seller & buyer can do is simply not worry about the ‘commission’, and negotiate for a mutually acceptable price.

    Unrepresented buyers, or buyers paying for their own agent advice would do well to simply negotiate for a mutually acceptable price, and not spend so much time defining ‘I want my commission’, when it isn’t theirs.

    The listing contract is clear: the commission is a commission, not an automatic reduction in purchase price.

  28. Actually, I’d call Round 2 for Craig, since he’s right that no agents agree with me 🙂

    When I have this discussion with anyone at all. ANYONE except an agent, they all see t the way Craig and I are seeing it.

    NAR would do better to have huge groups of research involving more everyday people, than spending money on image commercials. The public sees it correctly as does the DOJ. Spending millions on commercials is going to change that.

  29. It’s official: the Death Match is a draw!

    Look back at this thread and its easy to see why all non-agents see it like me and Ardell. I’ll explain in detail in my next post… In the meantime, Ardell, the sad truth is that there is more money to be made fighting to maintain the current system — to the great benefit of agents — while using advertising to promote public support.

  30. Kary,

    Your whole argument involving variable commissions is that everyone has to charge the same and the seller has to pay everyone the same. Otherwise it isn’t “fair” to agents.

    Isn’t that price fixing?

    The whole concept of being paid “to bring a buyer to the seller” sounds like slave trading. The buyer agent fee is for a buyer’s representation, not to “bring the buyer” somewhere. The buyer agent fee should be just as negotiable agent to buyer client, as a listing fee is between an agent and a seller.

    The buyer agent can “refuse the co-op” in the sense that it is “withdrawn from the asking price” and then added back in the actual amount as determined by the agent and the buyer.

    The REALTOR COE allowed for this withdrawal of the co-op back in the mid-nineties. Not sure if that language has since been changed. I’m not a Realtor today, so I’m not going to look it up 🙂 My recollection is that it was in 17-3.

    I had to look 🙂 They took the words “withdrawal of the co-op” out, but it’s basically still there in 17-4, 3.

  31. Ardell wrote: “Your whole argument involving variable commissions is that everyone has to charge the same and the seller has to pay everyone the same. Otherwise it isn’t “fair

  32. I think folks tend to overlook the fact that the current system does, in fact, work.

    It may be expensive, it may have flaws, but the MLS system of cooperation for compensation (the root of this SOC offering) sells houses.

    In these times of increasing inventory and market times, if I’m a seller, I’m going to be reluctant to monkey with it. Leave it to the Redfins of the world to worry about the rebates. My listing agent gets to keep it all if she brings me the deal I like. If not, and if after negotiating, our buyer won’t pay what I’d like, my listing agent can agree to reduce (effectively rebate) the fee I’ve contracted to pay her. I’ll negotiate with the buyer, not with my agent.

  33. Gordon,

    Be a buyer instead of a seller for a minute. If a seller is successful at “finding a buyer” by offering an 8% Buyer Agent Fee, should that really be no one’s business but the agent and the seller’s?

    As a buyer, would you not want to know what the seller paid YOUR agent to BRING you TO him?

    Doesn’t that part of this system need some revamping, or at least warrant discussion of more and better options?

  34. It’s none of the buyer’s business what the agent is getting paid unless the buyer and his agent have an agreement where the buyer guarantees the agent x% commission.

    For example, the agreement guarantees the agent $5000 but the seller’s agent is only offering $4000 – the buyer is now obligated to pay his agent $1000 to cover the difference. To add to that scenario, if the agreement also promised the buyer a rebate of any $$ over and above the $5000, the buyer would also then have a vested interest.

    If there is no written contract between the buyer and his agent regarding compensation, then it’s none of the buyer’s business.

    – James

  35. I don’t care what my agent makes, actually. If I like the house, and he gets the 8% fee, more power to him (I’m assuming I’m knowledgeable and have seen everything on the market, and not just that one overly incentivized house). I’ll negotiate with the SELLER on the price of the house, not with my agent (or the seller’s agent). Not that I don’t think that buyers should know what their agents are making, and I understand that lots of buyers are concerned about those fees. But I think it’s distracting from the critical piece of the deal, which is WHAT CAN I NEGOTIATE FROM THE SELLER on this deal.

    At the end of the day, as a Buyer, I am looking at the actual dollars that I’m spending to purchase the house. It either works for me or it doesn’t.

    To riff on this, if I go to my neighbor, who just put their house on the market, knock on the door with my “direct” offer (setting aside the fact that MLS rules prohibit me, as a broker, from doing this), I’ll just make the offer at the price that I am willing to pay. Maybe that’s 3% below their ask. Doesn’t matter. If THEY want to then negotiate with their agent over what part, if any, she wants to reduce the contracted listing fee, that’s up to them.

  36. James,

    Don’t you realize when reading your own words “it’s none of the buyers business what the agent is getting paid”, how truly insulting that is to the homebuyers in this Country?

    Do you really think Realtors can say things like that, and then get people to like them better by spending millions of dollars on PR campaigns?

  37. Our current NWMLS listing forms are confusing on this subject, at best. Any documentation you can generate that helps clarify the intent and understanding of the parties involved – ie. the Seller and Broker, is a good idea.

    All of this would just go away if we could get the state legislature to do away with Dual-Agency Law in this state. Unfortunately the WAR has too much clout in Olympia on this issue, IMO. It’s completely self-serving to agents and I think the public is wising up to it.

  38. I may have been a bit blunt, but that’s who I am.

    It’s none of my business what they make, so why is my income suddenly an open book? The buyer’s agent is getting paid by the listing broker, not the buyer. As I stated before, if the buyer is footing the bill, then it’s their business.

    This whole “transparency in real estate” thing is beginning to get way out of hand. I’m not going to tell them how I vote either.

    – James

  39. “The buyer’s agent is getting paid by the listing broker, not the buyer. As I stated before, if the buyer is footing the bill, then it’s their business.”

    Hey James, I presume you’re a licensed agent or broker in CA. Who is it again that you owe the fiduciary responsibility to when you’re working with a buyer?

    BTW, speaking of things getting out of hand, how’s the market in Palmdale/AV doing these days?

  40. James,

    If you could just remove yourself as “a party in interest” and get that all monies involved in the transaction ARE the business of THE parties in interest, buyer and seller, we could talk.

    It’s not about being blunt. No one is more blunt tham I am. It’s about insulting people’s intelligence. It clearly IS their business what THEIR agent is being paid or what you are being paid as a consequence of their being unrepresented.

  41. “Hey James, I presume you’re a licensed agent or broker in CA. Who is it again that you owe the fiduciary responsibility to when you’re working with a buyer?”

    Obviously your fiduciary is to the buyer. I may be off base, but fiduciary responsibility has nothing to do with what I am being paid unless it has a direct bearing on how I am directing the buyer in the transaction.

    If an agent is not negotiating on the buyer’s behalf because he is trying to obtain a higher fee then he should not only lose his license, he should be taken out behind the woodshed.

    “BTW, speaking of things getting out of hand, how’s the market in Palmdale/AV doing these days?”

    Actually, things have picked up quite a bit in the last few months. The buyers are able to pick up some excellent deals and if the interest rates continue to stay low we’re going to have an awesome Spring.

    – James

  42. If the buyer is concerned about what their agent is getting paid they should insist on a buyer/broker agreement which is in fact a buyer hiring an agent to work for them for a guarantee of compensation – either from the commission offered or the buyer themselves. Instead, they refuse to sign the agreement and run the the next agent in line that won’t ask them to.

    The buyers that are concerned with what an agent is getting paid are the same buyers that write an offer with another agent after using another agent to open doors and drive them all over hell and back. They want transparency but offer nothing in return.

    The Seller is paying the listing agent to sell his property. The listing agent is offering a fee to the buyer’s agent to bring the buyer. The fee is between the brokers, not the principles.

    How about this scenario. The seller owes more on his house than the buyer is paying. The seller is bringing $25,000 to the table to close. This $25,000 includes the fee he is paying to his agent (who is paying the buyer’s agent out of the fee). We’re talking hard money here – not proceeds from the sale. Does this still concern your buyer?

    What business is it of the buyer how much the seller is paying his agent and in turn what the listing agent is paying the buyer’s agent? The fee is not coming out of the buyer’s pocket.

    Hard money or proceeds from the sale, it doesn’t matter. The seller is paying the fee to the listing agent every time. What the buyer is paying for the property has nothing to do with the fee. The value of the property doesn’t go up or down because the fee is higher or lower. What concern is it of the buyer what the fee is unless he is paying it?

    I feel like a broken record.

    – James

  43. James has a point that changing/knowing would likely require that the buyer sign an agency agreement.

    I’ve posted this issue before, somewhere. I don’t want to disclose to my buyer that the listing is only a 2.5% listing, because I don’t think that should affect their decision. But if I ever showed a 4% listing, I’m not sure I’d follow the same rule. I can’t explain why it should be different, but it does seem like it should.

  44. In California, it works a little differently. The seller agrees to pay the agent the commission, and farther down in the contract, the listing agent states the portion of the commission that they will share with the buyer’s agent.

  45. Ardell, Craig, Kary, Gordon and James, Jim & everyone else … it’s sort of an argument circle we have going on. We’ll all hang onto our viewpoints, and we’ll all go around in circles, but I don’t think any of us will change our individual minds! The historical fact of the commission is that a seller pays the commission to attract agents with buyers, not so that buyers without agents can get a discount.

    Discounting is a very new phenonomen, and in a changing market, I don’t know that I believe it will gain toehold. We’ll have to see.

    If I were a seller today, I’d tell my agent to do whatever she feels best with the commission I’m willing to pay, and if my agent told me I wasn’t paying enough — you betcha I’d agree to pay per her recommendation.

  46. Leanne,

    It’s not true that people aren’t influenced by these discussions, though you can’t do it every day, there is value from doing it from time to time.

    Often the person who changes their mind is someone who is reading and not commenting. An agent will read this and say, “OMG! I HAVE been acting like it’s none of my client’s business! What’s wrong with me? I’ll have to stop that right now!” 🙂

    The other thing that happens is clients of the people comment read this and say, “Hey! Is that my agent saying it’s none of my business?”

    Lots of value in transparency. The value is for the public, not the agents.

  47. Ahhh, but we HAVE transparency :-)!! The listing agreement is quite clear in what the sellers negotiated commission is, as well, so is the buyers agent agreement. Black and white, transparently so.

    A non-represented buyer? He’s not a party to the listing contract.

    He can negotiate any way he sees fit with the seller, and the seller can decide if buyers offer is an acceptable net to seller.

  48. And if we talk transparent … how can a buyers agent rebate a commission back to a buyer without the buyers lender being disclosed that this is part of the agent/buyer contract?

    A seller cannot do that without the lender considering it a concession against purchase price, and lender likely will reduce the loan amount accordingly. A seller or an agent can certainly pay the buyers closing costs, but to have either seller or agent give a rebate check after closing seems to me that it should be disclosed to buyers lender.

    Lenders, how do you feel about this? It certainly is legal, and I don’t object to the practice at all, but I do feel that it’s an underwriting conflict.

  49. Leanne:
    “A seller cannot do that without the lender considering it a concession against purchase price, and lender likely will reduce the loan amount accordingly. A seller or an agent can certainly pay the buyers closing costs, but to have either seller or agent give a rebate check after closing seems to me that it should be disclosed to buyers lender.

    Lenders, how do you feel about this? It certainly is legal, and I don’t object to the practice at all, but I do feel that it’s an underwriting conflict. ”

    I would love to hear some lenders weigh in on this, too. If a lender will only allow a percentage of seller consessions, why shouldn’t these rebates be disclosed and count in that number?

  50. Well, I think the bottom line is that the commission will go the way of the dodo in the next 10 years. If I were to start a brokerage of my own, I may very well lean toward a pay-per-service type of structure.

    Agents are service providers. Our time and expertise is our product. We can give our clients a choice of a traditional percentage of the sale or a menu of services with flat-rate prices attached.

    If we treat our practice much like an attorney or an accountant does this conversation wouldn’t be happening. If I decide my time is worth $300/hr then a client can either pay or go to someone who thinks their time is only worth $150/hr.

    My seller clients would pay me for what I do and the buyer would pay his agent for what he does. If the buyer is unrepresented, I’ll be happy to offer my services to him as well – for a fee.

    The commission system is whacked anyway. I mostly work in the REO business and I have a number of clients that will only pay commission on the NET sale (sales price less concessions to the buyer).

    You’d think that’d be a non-issue, but can I note in the MLS that those are the terms? Nooooo … Evidently CAR MLS model rules prohibit me from offering anything other than a % of the gross OR a definite dollar amount even if the terms are disclosed.

    I guess CAR feels that a listing agent can do the necessary math to figure out what the commission will be on a $500000 sale with a $10000 concession but a buyer’s agent cannot, so it’s unfair. Instead, they want us to do the math for them and adjust the offer of commission accordingly.

    Problem there is – what if it sells with a $15000 concession? Now I can be screamed at and fined for shorting the buyer’s agent $150 due to not being allowed to disclose the fact that the commission is based on the NET and not the GROSS.

    So what do I have to do? I drop the offer of compensation by 1/4% so I don’t get fined by the board and when we open escrow and the agent sees that they’re actually getting MORE, no complaint. Funny how no one complains about more.

    I digress. Sorry. I still say this is a good discussion – even though we’ll probably never agree.

    – James

  51. “A non-represented buyer? He’s not a party to the listing contract.”

    Leanne, you’re making me cry! Read your agency law. ALL buyers are represented in the State of Washington unless they approach a listing agent or they fire you. You represent all buyers at first contact.

    A State that gives so much, more than any other State, and yet as Rodney Dangerfield would say “They Get NO Respect!”

  52. Leanne,

    We do NOT have transparency. We have a one way mirror.

    Transparency involves the answer that is derived after considering the impact on ALL parties and adjusting our mindset and rules as and if needed.

    Until agents let the people in the room who are impacted by all of these rules, and stop ONLY considering the agents same old same old way of thinking about it and doing it, they are in the dark room all alone. The light is not ON.

  53. I don’t know how WA listing contracts are done, but when I write a listing contract there isn’t even a buyer in the room. A listing contract is my contract with the seller. What does a buyer have to do with a listing contract?

    If I am representing a seller and a buyer wants me to write an offer on it I have them sign a Buyer Non-Representation disclosure. I will not represent a buyer who wishes to buy one of my listings. My fiduciary is to the seller.

    If a buyer doesn’t feel comfortable with that they are encouraged to find an agent that will provide them the same level of representation that my seller is receiving from me.

    I think this whole Transparency Trend is BS. I feel like it’s more akin to desegregation. Agents are being attacked by people who feel that we get paid too much for what we do and are trying to say we are unnecessary.

    Some agents are starting to believe what these people are saying and feel guilty for getting paid and therefore are trying to get rid of their guilt by using this Transparency act. These agents feel that by being totally open they’re paying for the sins of their forefathers.

    This is total crap. We work in a free-market system. If enough people think that the commission-based system is flawed there will be a revolt and the system will be changed. There are alternative business models out there that are trying to break in and become the new standard. No problem. Prove that your way is better and the masses will follow.

    Like it or not, the system we use works. I don’t feel guilty when I get a commission check – EVER. My sellers know what they’re signing when I list their property. They know I don’t get a dime if I don’t do my job.

    When I represent a buyer, I don’t generally discuss what I’m going to be paid. There have been many times where I have sold homes for less than I would normally want to get paid, but I figure it is what it is. I do my job and represent my client for the purchase they want to make – not the one that may make my check fatter.

    I’ve given up a portion of my check to get a transaction closed. How many auto mechanics offer to throw in some of their family’s food money to make sure you can drive your car home? None.

    I am not a salesman. I’m a consultant. I’m a customer service representative. My time is valuable. The knowledge and experience that my team and I bring to the table is priceless. I will get paid for my service. I will not feel guilty when I cash my check. If you’re an agent and you can’t say the same, maybe you should find another line of work.

    – James

  54. James said: “When I represent a buyer, I don’t generally discuss what I’m going to be paid”

    THAT is the part that is “total crap” James. They hire you to represent them and then this is how you treat them? None of their damn business?

    Really, some day you are going to wake up and say OMG! How could I ever have thought that way?

  55. James “I think this whole Transparency Trend is BS. I feel like it’s more akin to desegregation.”

    So do I James, so do I as to that last part. It’s time for the buyers to get out from the back of the bus…don’t you think?

  56. The system “worked” as long as the buyers stayed in the back of the bus. Why do we need them to fight for their rights? Can’t we just invite them up to the front of the bus without someone MAKING us do that?

  57. “I feel like it’s more akin to desegregation.” What the heck did you mean by THAT James? Are you opposed to THAT too? Anytime someone is not being treated fairly then YES…it is “akin to”. Your point? Are you saing desgregation shouldn’t have happened either and some loudmouths made everyone feel guilty?

    But yes, you are correct. Telling people to sit down and shut up and stop asking what you are paid to reperesent THEM is akin to…for sure.

  58. James,

    A man walks into an escrow company and pays a million dollars for a house. How can we continute to pretend that he is not paying for his agent therein?

    The ONLY reason the seller is asked to set aside the amount at the beginning, is so that it is included in the price of a million, not so the buyer can be told it’s none of his business.

    Now explain to me how you are entitled to X for representing a buyer client, and get that same x if it is your listing and the buyer doesn’t have an agent. If X was to be paid for the buyer’s representation, then why if that buyer is representing himself, does he not get it? Why does he forfeit it?

    I can certainly understand you and the seller insisting that the buyer be represented by someone for the protection of both you and the seller. But simply grabbing the extra money left on the table as a result of the buyer’s lack of representation, is profitting at someone else’s expense.

    I’m sorry if that sounds like Norma Rae or someone defending the rights of a group not given due and equal consideration. I don’t do it to draw attention to myself. I do it because I think we should all do it. I wish I weren’t so lonely and standout about it. I wish it were commonplace. And frankly Redfin does deserve ALL the credit and PLEASE stop calling them a discounter.

  59. First, thanks for clarifying your position – I probably missed it somewhere before.

    “A man walks into an escrow company and pays a million dollars for a house. How can we continute to pretend that he is not paying for his agent therein?”

    If a house is purchased for a million dollars than the house is worth a million dollars. A buyer is buying a property, not paying a commission. If the value is not there the purchase will not occur.

    “The ONLY reason the seller is asked to set aside the amount at the beginning, is so that is included in the price of a million, not so the buyer can be told it’s none of his business.”

    At least here in CA, a seller agrees to pay a brokerage fee to his agent to sell his property by whatever means necessary. If his agent offers to pay a fee to a buyer’s agent to meet that goal then so be it.

    Our listing contracts do not specify two separate commissions – only one. It does, however, have a space to define how much the seller wishes to his agent to pay the buyer’s agent if he so chooses. It also has the option to allow the agent to modify compensation as he sees fit.

    “Now explain to me how you are entitled to X for repreenting a buyer client, and get that same x if it is your listing and the buyer doesn’t have an agent. If X was to be paid for the buyer’s representation, then why if that buyer is representing himself, does he not get it? Why does he forfeit it?”

    First of all, this point would only be valid if a separate commission were in fact detailed for the express purpose of paying a buyer’s agent. See my point above.

    If a buyer is not being represented, then the listing agent is in fact doing the job of two agents sans the fiduciary duty to the buyer. Why should he not get paid for the work that he does? Are you suggesting that if there is an unrepresented buyer, the buyer then does all the work that a buyer’s agent would do with no intervention from the listing agent? I think not.

    The buyer forfeits nothing because the buyer had nothing to forfeit. The buyer is buying a house for an agreed price. The one who may have a right to feel taken advantage of in this case is the seller. He is losing equity that would otherwise be in his pocket. If the seller is not happy with that situation, that is between him and his agent to come to a satisfactory agreement.

    “I can certainly understand you and the seller insisting that the buyer be represented by someone for the protection of both you and the seller.”

    Hey, at least we’re on the same page on something!

    “But simply grabbing the extra money left onthe table as a result of the buyer’s lack of representation, is profitting at someone else’s expense.”

    Again, refer back to my 1st point. There is no money left on the table here. The listing agent is not taking advantage of anyone. He is collecting his agreed upon fee for doing the job he was hired to do. If you normally run 4 large ads for a listing but you sell it after only running two, do you offer to give the money you would have spent on the remaining ads to the seller, or is that money “left on the table?”

    “I’m sorry if that sounds like Norma Rae or someone defending the rights of a group not given due and equal consideration. I don’t do it to draw attention to myself. I do it because I think we should all do it. I wish I weren’t so lonely and standout about it. I wish it were commonplace. And frankly Redfin does deserve ALL the credit and PLEASE stop calling them a discounter. ”

    Everyone has the right to an opinion. And you know what they say about opinions … 🙂

    I do appreciate where you’re coming from, I just don’t agree with where you base your opinion. I believe that when the commission-based program first came about it probably made more sense than it does today. I mean, back then you were talking thousands of dollars and not hundreds of thousands when you’re talking about purchase prices.

    Maybe the industry should move to a pay-for-service system, but EVERYONE would have to do it for it to work. The next few years will be interesting.

    I don’t know if Redfin deserves all the credit … Help-U-Sell and the like have been doing a low-tech version for years. I don’t think I ever called them a discounter … I’ve called them an “alternative business model.” Who knows, maybe the dinosaurs who still use the commission-based model will be called “alternative” in a few years.

    – James

  60. I appreciate the exchange, James. One last thought. “when the commission-based program first came about…” all agents represented sellers and no buyer had representation.

    Someone took the time so that I could get this and it took many years. I’m just “passing it on”. I don’t expect you to agree anymore than I did when I first heard it. It honesly didn’t hit me until I personally paid a lot of money for a house and then it was immediately obvious that I, as the buyer, was paying myself.

    Why can an agent who represents themselves take a credit? Why, if the agent is the buyer who is representing themselves, is the fee not removed? Why doesn’t that same logic apply to all buyers of homes?

  61. Yes, when we, as agents, buy a house, we can sometimes get paid. Just like people that work at a restaurant get free food. This is our business, and there are advantages we can get just like any other business owner. When I actively ran my HVAC business, I got free heating and air installed in my house. I also got perks (cruises, etc) for selling large amounts of my supplier’s inventory. I still don’t feel the guilt. If a buyer wants to get paid for buying a house, he has the right to go and get licensed just like we did. If they want free heating and air, they can get a contractor’s license and install that themselves too!

    You did not pay yourself, the seller paid you. You were not taking a credit, you were being paid by the listing broker because you brought a buyer to the table. The buyer just happened to be you.

    As I mentioned before, I am an REO agent. It is very common for my clients to NOT pay an agent who is buying a property for themselves. In fact, this extends as far as if a co-op broker’s housekeeper buys one of my properties a co-op will not be paid.

    REO listing agreements are very different from the standard CA listing agreement. Many times there is a fee that is defined in the listing agreement for the buyer’s agent as well as the listing agent.

    My point that really was never addressed is this … How can there be money left on the table by the buyer when any money that is spent is the seller’s? The commission has no bearing on the value of the property. The fee is coming out of the seller’s pocket, not the buyer’s.

    I think the thing that blurs the picture is that the fees are paid out of the closing. As I said earlier, if the seller was bringing money to the closing table to pay the commission does the buyer have the right to be upset because the seller isn’t throwing any cash his way?

    – James

  62. ARDELL, You got a good discussion going here. Let me add my 2 cents worth coming from the perspective of a transaction broker. My listing agreement is between the seller and the broker. Whatever commission we agree upon is mine in it’s entirety. As part of the agreement we also agree how much of MY commission I will offer a buyer rep.

    If a buyer decides to pursue this property without representation then the commission in it’s entirety is paid to me. BUT….this rarely happens, in almost all cases I CHOSE to apply some of the co-broke to the deal to help both parties. The buyer may get a little better deal and the seller may get a little better NET and I probably get a little more than if I had to pay another REALTOR(R). How this money is distributed is 100% up to me.

    I agree with James that the only way the buyer has the right to know about the commission is if they have a signed BBA with their agent/representative. If they have a signed BBA then the co-broke is certainly their concern. If they choose to go it alone then it’s not. They are not entitled to anything.

    And really why should they be? Are they going to do any work to earn it? I doubt it. It will be the listing broker who is now stuck handling all inspections, dealing with the lender, assuming additional risk by having to deal directly with the buyer etc… Just the additional risk alone justifies the co-broke.

    Having another agent/representative on the buyer side is a HUGE difference in liability than when there is a unrepresented buyer.

    An unrepresented buyer is just that….unrepresented. If they are capable of negotiating a better deal for themselves then have it. If their only goal is to take part of my commission then it ain’t happening. It’s just not that simple.

    In my opinion, commissions are in the value of the property. Even the comps used to price the house have a commission in them. Commissions are not being paid by the buyer. They are being paid by the seller. Even though the buyer is the only one bringing money to the deal the seller is bring his property. It’s an equal exchange of value. The offer to purchase is the opportunity to negotiate the value of the property NOT the distribution of the compensation.

    OK I’m starting to ramble. Too much coffee.

  63. Here in Texas we have simplified that, but many agents still don’t do it. There is a place in miscellaneous comments box where we can select Variable Rate Commission. That indicates that the listing agent will take less if he or she finds the buyer and it really needs to be stated.

  64. James wrote: “There are too many buyer’s agents out there that do not insist on having a written contract with the buyer. Stupid. Like a listing agent knows he will be getting paid, a buyer’s agent should have the same protection. Unless you’ve got a written contract with a promise to be paid for your services you have not been HIRED – you have an informal agreement.”

    I don’t use buyer’s agency agreements. My relationship with the client is one of trust–but then again, they don’t find me typically as a result of some web search. And by the time we find a house, I’ve demonstrated my value to them. I’ve yet to have a problem with it (knock wood).

  65. Ardell wrote: “Why can an agent who represents themselves take a credit? Why, if the agent is the buyer who is representing themselves, is the fee not removed? Why doesn’t that same logic apply to all buyers of homes?”

    Well the technical reason is the listing contract refers to the “selling office commission” and where the buyer is unrepresented the listing agent is the selling agent.

    But I know that doesn’t answer your question. Look at it this way. The seller has agreed to pay X% for the listing agent to sell the house. Why would it matter to them how it’s sold? They just want it sold. It is irrelevant to them where the money goes, because they’ve agreed that’s how much they’re going to pay to get the house sold.

  66. James said:

    “In fact, this extends as far as if a co-op broker’s housekeeper buys one of my properties a co-op will not be paid.”

    Are you saying the buyer agent doesn’t charge his housekeeper or that the Bank refuses to pay a fee if the agent is the buyer or in any way connected to the buyer? What happens to “the co-op”.

    By calling it “the co-op” instead of the buyer agent fee, you make it clear that it is not funds paid for buyer representation. I’d like to see the word “co-op” stricken as well 🙂 It was a “co-op” back when the agent with the buyer represented the seller. It’s 2008. Time for that word to go the way of the do-do bird.

  67. James asks: “How can there be money left on the table by the buyer when any money that is spent is the seller’s? The commission has no bearing on the value of the property. The fee is coming out of the seller’s pocket, not the buyer’s.”

    Picture it this way James. House price is $500,000 with 2% to the seller’s agent and 3% to the buyer’s agent.

    Buyer walks in with two checks. One for $485,000 which he hands to the closing agent. He has a 2nd check for $15,000. Buyer asks the closing agent where the agent for the buyer is, so he can pay them their 3% commission. Closing agent says there isn’t one. Buyer says, well then lets take that charge off the sheet and I’ll just cancel this check I brought to pay the buyer agent.

    Would there be a charge on the sheet to pay the mortgage broker if it were a cash deal and there were no mortgage broker? Of course not. So why is there a charge on the sheet for an agent for the buyer if there isn’t one?

  68. BB,

    Florida, where you are, is one of the only States that pays agents to represent no one 🙂

    In WA every agent represents the buyer unless that agent is the listing agent.

    Since we’ve taken the high road of buyer representation being the default status, we are in a better position than most States to elevate the buyer to an equal player in the transaction.

    We’ve all had situations where the buyer’s agent disappears the moment the contract is signed. There is no mechanism to not pay an agent who does no “work”, is there? So “the work” is not the basis for the payment whether it is not done by a buyer’s agent or not done by the buyer himself.

    Ever seen a case where the buyer’s agent was docked for the work he didn’t do?

  69. I am going to repeat myself. The non-represented buyer is not a party to the listing contract. What the listing contract clearly does, is allow the listing agent/office to pay a share of the commission to another agent/office.

    How many times have our sellers told us when we list a property, “I hope you get it all”? You’d think it’s an odd thing for them to say, but it’s a true and honest statement, many of them would far prefer for their listing agent to be the only one in the transaction.

    It’s funny, but the activity in recent years from buyers approaching listing agents wanting to buy properties and reduce the price by the buyers agent commission is far more prevelent on the Eastside than in Seattle. Is it because the Seattle market is far more intense for buyer competition?

  70. Sam,

    Variable rate is used to show that the seller’s net will be different. That is not the case in my example. The buyer’s purchase price is different, not the seller’s net.

  71. Kary,

    Try this one on for size. Your mother gives you five dollars and says take your brother to McDonald’s and get dinner for you and for him.

    Brother isn’t hungry. Do you keep the change? Give your mother back $2.50? Hand your brother his $2.50?

    Who should benefit because your brother chose not to eat? There’s a strong case for Mom gets it back. There’s a strong case for brother get’s to keep it in case he gets hungry later. There is NO case for first brother keeping the whole $5.00.

    When your seller agrees to pay two fees for two agents, what should happen when there is one agent using the logic from the above example.

    Now let’s change it slightly. Your mother hands you $5.00 and says $2.50 of that is for your brother. Your brother is not in the room so Mom gave you the whole $5.00. You see your brother and you hand him the $2.50. Do you have to make sure he ate?, or is that his business.

    There is zero/NO case for one person keeping both, is there? Just because there was only one agent in the room, and the seller gave both fees to that one agent because the second agent was absent and unknown at the time of the agreement, that should not cause the agent to keep both fees. Same as brother shouldn’t keep both dinner amounts.

  72. “…the technical reason is the listing contract refers to the “selling office commission”.

    Well then let’s stop calling it “selling office commission” and call it “Buyer Agent” commission. Just because we made the rules and terms back before agents had representation and every agent represented the seller, is no reason to argue from that basis today.

    Truth is we did not change much of anything many years ago when all agents stopped representing the seller and buyers became entitled to representation. The terms of what we call everything and the way we operate is the same as when the agent with the buyer was the subagent of the seller.

    It’s about time for “technically correct” to become flat out wrong. The technicalities and rules were established when only the seller was represented by agents, no matter who they were with and what company they were with.

    WA has changed that to almost all agents represent buyers, and yet we in the industry do not use “buyer agent fee” in our terminology when listing property. Why is that?

  73. Leanne said, “but it’s a true and honest statement, many of them (sellers) would far prefer for their listing agent to be the only one in the transaction.”

    Of course the seller would prefer that he be the only one represented, the same as they would prefer that there not be a home inspection. The same as a husband and lawyer prefer if the wife doesn’t hire her own lawyer. Still the lawyer for the husband does not get paid double if the wife chooses to represent herself, does he?

  74. Ardell wrote: “Of course the seller would prefer that he be the only one represented, the same as they would prefer that there not be a home inspection. The same as a husband and lawyer prefer if the wife doesn’t hire her own lawyer. Still the lawyer for the husband does not get paid double if the wife chooses to represent herself, does he?”

    Believe me, attorneys don’t want the other side to be unrepresented.

    And I really doubt that many agents would prefer the buyer to be unrepresented. Between being represented by a bad agent and no agent at all, I’d probably prefer no agent at all. But between a good agent and no agent at all, I’d much prefer the good agent. The goal is to get the property sold, and the buyer being represented by a good agent is most likely to make that happen.

  75. Leanne wrote: “It’s funny, but the activity in recent years from buyers approaching listing agents wanting to buy properties and reduce the price by the buyers agent commission is far more prevelent on the Eastside than in Seattle. Is it because the Seattle market is far more intense for buyer competition?”

    Maybe that’s why I don’t see it as being that likely–perhaps it’s dependent on area. Also perhaps it’s because I go over their options when they do contact me directly (e.g. no representation, full representation, limited service representation).

  76. Kary,

    I had six siblings and no way in hell Mom would let one of us keep the change. No Mom in the universe would expect the one child to keep the change. Are you an only child?

  77. No, not an only child.

    Apparently like mother like daughter. But it doesn’t really matter what your mother would have done. It’s about what is the best system for bringing in buyer’s agents, and that happens to be the current standard system.

    I think I’ve said this before, but I’ll say it again. The worst thing for a buyer’s agent is to have an offer rejected, and not be able to come to terms on it. That can discourage buyers from continuing on to other properties (or continuing with the agent). If the buyer’s agent knows that the listing agent has an advantage presenting offers (an unfair competition), that will make some of them less likely to show the property. Anything that makes some agents less likely to show the property is not good. The seller doesn’t care who sells the property–they just want the property sold.

    The obvious way to get around the issue is for a buyer to use a rebate firm. That way they get represented and they actually get something back for sure (as opposed to not really knowing in other situations).

  78. “Picture it this way James. House price is $500,000 with 2% to the seller’s agent and 3% to the buyer’s agent.

    Buyer walks in with two checks. One for $485,000 which he hands to the closing agent. He has a 2nd check for $15,000. Buyer asks the closing agent where the agent for the buyer is, so he can pay them their 3% commission. Closing agent says there isn’t one. Buyer says, well then lets take that charge off the sheet and I’ll just cancel this check I brought to pay the buyer agent.”

    Right here is why we don’t agree. It’s not the BUYER bringing in the two checks, it’s the SELLER. I have never seen a charge for a commission on the buyer’s HUD-1 unless the buyer is contributing to it because of a buyer/broker agreement.

    This also goes back to the fact that there is only ONE commission. If there is no buyer’s agent then the listing agent gets paid per the listing agreement. If the listing agreement actually specifies two separate commissions, then no, the seller would not pay a SO commission – the SELLER SAVES MONEY. The buyer doesn’t leave money on the table, the seller gets to keep more of HIS money.

    If you look at it like that, it gives more of a reason for you not to support separate commissions because the seller might encourage an unrepresented buyer to come to the table so he won’t have to pay the SO fee that was agreed upon.

    If the whole purpose here is to protect the buyer, it would seem to me that the way we do things is better than what you’re proposing …

    “Would there be a charge on the sheet to pay the mortgage broker if it were a cash deal and there were no mortgage broker? Of course not. So why is there a charge on the sheet for an agent for he buyer if there isn’t one?”

    There isn’t. There is a charge on the sheet for the listing office and the selling office. If I did both I get both. However, if this is the case, usually there’s only one charge on the sheet and only one check cut to my office.

    – James

  79. “I don’t use buyer’s agency agreements. My relationship with the client is one of trust–but then again, they don’t find me typically as a result of some web search. And by the time we find a house, I’ve demonstrated my value to them. I’ve yet to have a problem with it (knock wood).”

    Many times I don’t either. People just don’t want to commit to an agent. The point here was the buyer “has a right to know and/or control” how and how much I am being paid. I call BS on that statement unless the buyer has hired me via a buyer/broker agreement.

    – James

  80. “It’s about what is the best system for bringing in buyer’s agents…”

    And why is it NOT about the best sytem for buyers to receive the BEST representation? If agents who represented buyers poorly got paid less instead of the same as everyone else, we might be getting some where.

    A seller can pay anywhere from $500 to 3% on average, depending on how much or how little they want their agent to do. A buyer agent gets the same no matter what? Somehow the system has to provide more choices for buyers. Not just one or two companies that every hopes and helps fail, but a change in the system toward better and more options for buyrs.

    I think treating the 3% as a set aside from the getgo is the answer. This way seller’s net does NOT change and there is no need to report “variable rate”.

  81. Kary, please. Mom gives you $100 for two pairs of shoes. You talk your brother into liking his current shoes better, and you buy yourself a pair that costs $100?

    No one in the universe will agree with that logic. No one. Clearly this is not about my Mom vs. your Mom. Ask your wife.

    The seller gives you two fees meant for two different agents. You keep yours, not both unless all parties verify at time of sale that they agree to that. Same as Dual Agency. It may be covered in the listing contract, but you have to ratify that decision at the time it happens.

    Agents should need the same consent for Seller/Seller I keep all the money from both parties, as they do for Dual Agency to take place. “informed written consent” at the time it happens.

  82. Kary #88 – I knew I should have left it at seller prefers their agent be the only one in the room same as husband prefers wife has no lawyer.

    When the agent for the seller “helps” the buyer, they do it from the seller’s perspective.

    “How much should the Earnest Money be…LOTS!”

    “House needs a roof…sorry, seller isn’t willing to do that”

    Etc…

    The agent for the seller should not get the buyer agent fee for helping the buyer while representing the seller.

  83. I also think it is worth noting that Mom used to give us $100 for shoes for both of us. Now days, smart moms give more like $75, with $25 for us and $50 for little brother. Evidently, little brothers are much harder to outfit….

  84. Ardell wrote: “And why is it NOT about the best sytem for buyers to receive the BEST representation? If agents who represented buyers poorly got paid less instead of the same as everyone else, we might be getting some where. A seller can pay anywhere from $500 to 3% on average, depending on how much or how little they want their agent to do. A buyer agent gets the same no matter what? ”

    Well, as I mentioned earlier, the seller controls the game, so they do what works best for them.

    The buyer controls things somewhat in that they can negotiate a rebate.

  85. Ardell wrote: “The seller gives you two fees meant for two different agents. You keep yours, not both unless all parties verify at time of sale that they agree to that. Same as Dual Agency. It may be covered in the listing contract, but you have to ratify that decision at the time it happens.

    Agents should need the same consent for Seller/Seller I keep all the money from both parties, as they do for Dual Agency to take place. “informed written consent

  86. So what you are saying Kary is that forever and always every seller has to pay the Buyer’s Agent 3% and neither the buyer OR the seller has any say in that. It HAS to be that way because that’s the system.

    And they wonder why the DOJ is looking for a loophole to dismantle the whole system.

  87. I don’t think that is what Kary is saying at all. He’s saying it is his recommendation, and the seller can choose based on their discussion of choices, with pros and cons

    The buyer chooses only with his purchase and sales agreement terms, ie, his offer, or his own negotiations with his buyers agent.

  88. Right. The seller that uses the MLS has options, but especially in this market you don’t want to pick options that will lessen your chances. People do it and succeed, so it’s not like it makes it impossible. I’m just saying they aren’t risks worth taking, IMHO. And that’s especially true of the variable commission because the chance of that benefiting the seller is so low.

    The buyer has options too, but those really should be options he discusses with his own agent. Anything else is problematic.

    Back when we were looking for our own house last year, we didn’t generally make offers that reduced the SOC. That’s because we didn’t think it would necessarily help us. The difference is we’d get the SOC, where an ordinary buyer wouldn’t. For a buyer to be certain, they really need to go the rebate route.

  89. Leanne and Kary,

    If the expectation of agents was 1.5% for homes priced over a million dollars, then that is what Kary would recommend. Kary recommends what agents expect.

    So why does the expectation of the whole never change whether it is a hot market or a slow market or a $250,000 condo or a $1.2M house?

    Why does the expectation, and thus the amount needed for a seller to be successful, remain a constant for so many years regardless of home prices or market conditions?

    Why can’t the expectation be 3% or $15,000 whichever is less, or some other formula that appears more reasonable?

    Why does every seller in the Country, by and large, seem to be given the same advice that Kary is giving?

  90. I think if you look at sales over $2,000,000, there are a lot of them that only offered 2.5%. But to answer your question, agents with buyers looking for $2,000,000+ homes are more valuable than agents representing buyers looking at $200,000+ homes. That’s because that type of buyer is more scarce–supply and demand.

    As to lower priced properties, and why it’s not 1.5%, it’s because the others are mainly offering 3%. There’s a concept in pricing goods of prices being sticky downward, meaning they go up faster than they go down. This is slightly different than that, but with similar effect. As long as most people are offering X% to a buyer’s agent, it’s risky to offer less.

    But this isn’t the type of market where you’d expect it to go down. That would be a hot market, where even a good percentage of FSBOs are successful. The slower the market, the more the risk in offering less.

  91. Kary,

    So why when the expectation was an offer within 30 days, and often more than one offer within a week, was the amount recommended not less?

    The industry fails when it does not adjust due to strong market conditions, and yet holds market conditions to blame in a weaker market.

    The amount recommended should be the lowest amount at which the seller will be successful at his objective. The agent for the seller should be adjusting their advices based on market conditions. Yet the concensus suggests that the % is an expectation regardless of price and or market conditions.

    Let’s call $15,000 per the bogey and the lowest $6,000. Wouldn’t that place a cap at $24,000 for a balanced result? Why should it not have a cap the same as most agents demand a cap on total amounts paid to a broker? If there is no limit to what you can charge, then why is there a limit to what your broker can charge an agent in a year’s time? Where is the “practice what you preach” in that?

    A minimum and a maximum. A higher % until you hit the minimum and a lower one past the minimum to the cap?

    Whatever the logic beyond “You HAVE TO offer THIS”, the industry cannot expect the public to perceive them differently and well, if the chips always end up on the agent side of the table regardless of market conditions and price.

    It’s OK to do that, but it’s not OK to then wonder why the public perceives us as it does.

  92. Ardell wrote: “The amount recommended should be the lowest amount at which the seller will be successful at his objective. The agent for the seller should be adjusting their advices based on market conditions. Yet the concensus suggests that the % is an expectation regardless of price and or market conditions.”

    I’ll go back to the Nordstrom selling socks analogy. This is not selling socks. You only need to sell once, and that one event isn’t likely to happen on the first day. That affects the decision.

    One thing I don’t thing agents take into account enough is that selling is stressful. Anything that is likely to increase the duration of that stress is not likely to be appreciated. That means doing everything you can to shorten the process. The commission is just part of that. Pricing and condition of the property are other parts of the equation. But when you’re done with all the variables you want something reasonably likely to get acceptable results within a reasonable period of time.

  93. Will we have stable markets in the future, or hot and cold markets?

    Commissions are always negotiable between the parties – ie, the seller and his agent, and the buyer and his agent.

    The buyer is not a party to the listing contract.

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