Good point. I’m not sure if this has been brought up in this older thread, but a lot of people seem to think that agents will favor their own listings or listings by other agents in their firm. While that might be true for some, it really is a losing strategy. The goal of the buyer’s agent is to find a property that fits the buyer. If you limit your showings somehow, you’re reducing the chances of that happening, which isn’t good for either the agent or the client.

With that said, I know for sure of some agents that do do this and the analogy for them is simply this…if there are 2 different lotteries and they both cost $5 dollars and have similar odds at winning, but 1 lottery pays out twice as much as the other, which one would you enter?

For me I can not understand this concept. 80 % of $10,000 is much better than 0% of 14,000. Plus, Being ethical is just what you should do and go and work for you clients!!!

Concessions do need to be taken into account and Fannie Mae requires appraisers to call and confirm sales information. Commissions are not normally considered as they show on the HUD statement.

For appraisers the lack of reporting concessions is a major issue and if they can not disclose the items in the report then they must state the degree they sought the information also who they spoke with. Many seek to not report concessions for attempts to hold prices. The only way to really counter the lack of reporting concessions is to check with public records for amount of transfer that is actually taxed.

The problem is that the sale is inflated and that can be a problem however I do not know how ethics may come into play. That makes for a huge post in its own! I would think that you are right that the real price is not disclosed also many times public records are not up to date.

Homes (new or existing) with abnormally large selling office commissions must also appraise, unless the buyer is paying cash.

The appraiser has access to the MLS and can view the seller concessions, and must address these in the appraisal. (I’m making this assumption, please correct me if I’m wrong.)

On CLOSED sales, I have no idea if seller concessions show up inside the MLS. I suppose the appraiser (and also the real estate agent doing a routine CMA) would call the former real estate agent asking if there were any seller concessions.

If the appraiser does not receive a return phone call or otherwise does not know of the seller concessions, then we have an artificially inflated comparable sale, propping up values in neighborhoods.

The true value of the home is hidden from the home buyer.

Unless the real estate agent for the buyer offers the buyer full informed consent as to what is happening with the home values in relation to these seller concessions.

We artificially inflated home values on the way up by doing zero down loans + adding in Realtor commissions and also all the buyer’s closing costs.

I fail to see how artificially propping up sales prices while the market is correcting is morally justifiable without the homebuyer becoming FULLY informed.

This seems to be a Realtor lawsuit waiting to happen.

Am I missing something, Craig?

I am open to your analysis.

“Some builders don’t want it to come out of price because they want it to look like their homes are selling for more”

Is THIS unethical and illegal?

Regardless of whether or not that is true (I suspect this was really a rhetorical device, not an actual factual assertion), you argue that the SOC should be paid by the seller because it allows buyer’s to finance the professional transaction costs incurred. This is, as far as I know, an arrangement unique to residential (and small scale commercial) real estate transactions. It is obviously to the very great benefit of real estate agents, in that they can charge a greater fee than what their clients could otherwise afford. I would argue that this is ultimately to the consumers’ detriment — after all, they still pay the fee, just over 30 years (or out of the proceeds when they sell and pay off the mortgage). Perhaps agents should learn to charge what people can afford, just like other professionals who assist with a transaction? That would provide significant downward pressure on agent fees, to the consumers’ benefit.

If an agent isn’t willing to help a buyer with viewing and/or purchasing a property that fits their requirements because of the advertised SOC then they are definitely creating a conflict of interest with their client. What you can do is to advise your client of the fee being offered and if it is below what you’ll accept – but still show the house anyway with the understanding that perhaps the buyer may need to assist in paying your fee if you cannot negotiate a better SOC from the listing agent or seller (depends on who is involved in the sale). Some people just add a fee on to the sale price to cover it so that the buyer can afford the additional cost.

What I mean by that is that, in the case of some builders right now, there are sometimes cases where SOC is as high as 10%. Now, most lenders won’t allow more than a 3% credit to a borrower so if I took my usual fee and we had the 3% max credit applied to the buyer, then there would be some additional funds on the table that are negotiable. We’ve had some clients split extra SOCs with us, and in other cases we’ve done the credit and negotiated price on the property too. There are lots of iterations that can occur here and they are all based on the willingness of the seller to appropriate the funds elsewhere. Some builders don’t want it to come out of price because they want it to look like their homes are selling for more but we fight that for our clients if they want – or they can sometimes apply those additional funds to free upgrades.

Really, we all run a business so we have to determine what does or doesn’t work for the running of our own organization and what level of profitability we need to stay in business. I’ve successfully used my BAA’s to work with FSBO’s and get my fee paid from the house sale price. My client still pays the market value of the home (as they do in the MLS system) and they aren’t required to bring that much more cash to closing.

While I hear a lot of people here complaining about the idea that buyers finance everything including all commissions – well, seriously, how many people after saving the money needed for downpayment and all their other closing costs want or expect to bring another $5,000 or more to closing? We’ve got a country where the kinds of financing we have available make it possible for most people to afford a home of their own. Most countries don’t even allow their citizens to own property. If you have an area like Seattle where the average sale price is around $450,000 then do you know lots of people who’d have an additional $13,500 laying around (assuming a 3% SOC?) to pay their agent directly? Probably not. Financing provides an opportunity for people to buy that they would not otherwise have and since the seller is the one who has likely profited over time from appreciation (something they have no absolute control over) the overall fee comes from their proceeds.

If there is no profit on the sale then perhaps things would be different, but in general we see that sellers do benefit from the long term appreciation of their property.