As we continue to build WaLaw Realty, I am frequently reminded of the tension between “buyer representation” and the realities of being a real estate agent. On the one hand, agents tout the importance and benefits of “representation.” A “representative” acts on behalf of another, the client, and protects the client’s interests. Needless to say, trust is an essential element of any representation.
On the other hand, agents are salespeople compensated by the seller for selling a home. These two roles are inconsistent with one another. A recent experience of mine illustrates the point. [Forgive my use of “s/he” as a gender neutral pronoun, but that’s a lot easier than avoiding the pronoun entirely.]
I was retained soley as an attorney to assist with a non-MLS purchase. As negotiations progressed, my clients realized that they might not reach agreement with the sellers as to the terms. Accordingly, to hedge their bets (they must move from their current residence) they began looking at homes listed on the MLS. To gain access to these homes, they contacted the number on the sign, the listing agent.
The listing agent indicated that s/he was busy but that s/he would send another agent to provide access. My clients assumed this was an associate of the listing agent, and the listing agent was taking steps to provide access as part of the job of selling the home. The clients were interested in two homes listed by the same agent, and the “associate” provided access to both, only one of which was suitable for my clients. Total time: Approximately one hour. At the end of the tour my clients informed the showing agent that they intended to use my services if they wanted to move forward. The showing agent did not mention that she was totally unrelated to the listing agent and would have a potential claim on the SOC if the clients purchased either home.
The negotiations collapsed on the first non-MLS transaction, and the clients decided to make an offer on the MLS-listed home. Accordingly, they then hired me as a real estate agent. As my web site makes clear, I rebate the SOC to my client in full (after payment of my flat fee and any additional fee incurred by client). Commission rebates to buyers are quite common and I am certainly not the only broker to offer it. Recognizing the possible claim, I contacted the “associate” who provided the initial tour of the home.
The “associate” was actually another agent working under a different broker in a different firm. The listing agent frequently refers new business to this “showing” agent. Because I cannot rebate a commission to which some other agent has a claim, I asked the showing agent if s/he was going to assert a claim on the commission (as the “procuring cause”). The answer? Yes I am! But as a compromise s/he offered to accept 30% of the commission, a typical referral fee. With a sale price of about $700k, s/he wanted $6k for the hour of work.
The story is still unfolding, so I can’t tell you how it ends. But I CAN point out that this claim on the commission is 100% inconsistent with any notion of “representation.” Again, that relationship is built on trust. At an absolute minimum, the showing agent should have explained the fact that, by opening the door, s/he may be entitled to the SOC. The failure to do so was not consistent — at all — with trust between an agent and a client.
I’m curious to hear some counter-argument. It seems to me that agents have been remarkably successful in having their cake and eating it too. They tout the importance of “representation” only to completely ignore basic principles of fairness to the client when its in their interest to do so. They’ve sold the public a bill of goods, because to agents “representation” is ultimately a means to an end, not an end unto itself. But then again, they’re salespersons, selling is what they do, and why they get paid in the first place. Its not about representation, its about sales. And the phrase “representation by a real estate agent” doesn’t make much sense at all.
Let’s assume for a minute that there is a 6% commission set by the seller to his purpose of selling his home, of which the original referring agent (the Listing Agent) and the “Procuring Cause” agent are willing to forfeit 70% of the “buy side half” to NOT “represent” the client. That is really what is happening in the instant case. Two agents are walking away from contractual and membership “entitlements” to make way for a third participant, Craig.
Considering 25% of the buyer side half was likely promised by the Listing Agent to the “Procuring Cause Agent”, both walking away for 30% is what is happening here. Under “common practice” the Listing Agent was likely “entitled” to 25% of the “buyer side half” for arranging for the home to be shown by someone who would not dilute the seller’s 100% representation status by his Listing Agent. This from the buyer side and NOT the seller side of the Commission Model Structure.
Since there seems to be an erroneous assumption that the Listing Side portion of the Total Commission agreed to by the seller has something to do with a buyer seeing the home, it might be helpful to start with the original 6%, and break it down into its components I’m loosely using 1% for each phase of 3 per side…not 100% accurate, but actually pretty close in most every day realities.
1% to get the home ready for market and put it on the market…that takes you to Day 1 of the Listing. This is the beginning of Representing a Seller client by not letting the property become available to the public view until the product presentation is the best reflection of the seller’s objective both in person and online. Not all sellers have the same objective, so this varies from client to client. For one seller this might be one ugly photo (one photo is mandatory by the mls system) that will encourage no one to come at all. For another it may be as many good photos as the seller and agent can muster up to create the most showings. It is erroneous to assume that every seller wants a lot of people to come to their home. Some do not.
1% to handle all the things that need to be addressed until the seller has an offer from a buyer that becomes mutually accepted, none of which involves direct contact or assistance to prospective buyers of the home.
1% for “Contract to Close” function on the Seller side of the equation, which includes working through the inspection in a way that proceeds to closing vs “cancelled on inspection” and possibly running some interference with the buyer’s loan process if extensions due to special circumstance become an issue.
The above involves the Listing Agent’s “half” of the equation, none of which has to do with direct contact with a potential buyer.
Now for the 2nd 3% called “The mls Offering”.
This amount (which may or may not be “half”) is set aside by the seller so that agents who are not the seller’s agent will show the home to prospective home buyers. If the Listing Agent is involved in any way in showing the home to prospective buyers, it falls on this same side of the commission fence…the buy side.
No portion of the Listing Fee involves direct contact with home buyers, and the seller offers this 2nd half (or portion) of the total commission to have agents show and sell his home, whether that be the Listing Agent or another agent in the Listing Agent’s office or any Member of the mls.
The Seller when agreeing to set aside this amount from the Sold Price has no real interest in the buyer’s representation or lack thereof when offering this amount. The seller offers this to have his home shown and sold, and to afford him the opportunities of having his home in “an” mls system to further his goals of selling his home.
The seller and his agent may have agreed from day one that any buyers who call or come in contact with the Listing Agent direct are to be referred to someone else, for a % of this 2nd buyer side fee to be paid to the Listing Agent. That agreement is determined by the seller at time of listing, and not necessarily changeable by the “buy side”. That is why the buyer needs to approach their own agent to represent them vs the seller’s listing agent from first contact and not after they decide to buy the house.
“Procuring Cause” is about a chain of events leading to the sale of an owner’s property set in motion by the owner of the home. When the chain of events is started by the buyer via the Seller’s Listing Agent, that link in the chain needs to be addressed by the agents involved. In this case via the 30% shared commission for that “link” in the chain of events involving not one, not two, but three agents in the instant case. A business model cannot offer a reduced commission by changing the structure of payment set by the seller at time of listing. An alternative model can only promise to give the buyer the amount they are “entitled” to under the commission framework, which is NOT the “total mls offering” unless the buyer contacts the alternative model prior to seeing the home.
The seller may have instructed at time of listing his home that he does not want his representative to represent “both sides” in any way, shape or form. The act of an agent being involved with both the seller and the buyer in any way, requires the express, written consent of the Seller…and then eventually also the buyer. If the Seller has not given that written consent, then the Agent must refer all sign or other direct calls to someone who does not represent the seller, and also have the Open Houses done be an agent who does not represent the seller. The buyer, or an alternative buy biz model, cannot dictate to the seller in this regard, as the seller is entitled to equal and separate representation if he so chooses. That is usually determined prior to the home going on market and not in the buyer’s purview. That is why all commissions arrangements are worked out with the seller of the home prior to it being listed, and that information is between the Seller’s Agent and their client, the owner of the home being sold.
Assuming the “Buyer’s Agent” is not the Listing Agent, as in most cases and the instant case, the commission can loosely be broken down as follows.
1% to assist the buyer in formulating a general plan of where & what to purchase, which involves the seeing of property, not necessarily to buy one of them, but to highlight the various options in play. This is the beginning of representing a buyer client.
The above amount can usually be “saved” by a buyer if they already know where and what they want to buy, as long as they do not “use” agents to come to that determination. If they “use” agents to come to that determination, then the sellers of the homes shown (whether the buyer purchases one of them or not) have already committed some portion of the buyer side fee to that purpose.
1% to assist the buyer in nailing down the final selection of home to make an offer on and to negotiate a contract up to the point of “mutual acceptance”.
1% for the Contract to Close phase, including the inspection and the inspection negotiation and assistance as needed with acquiring the funds to purchase.
What most Alternative Models do is jump into the business based on incorrect assumptions. Hopefully the above explanation of “Chain of Events” as set by the SELLER and the mls “SYSTEM” from day one, will help in that regard.
You cannot start a new business model by promising something that is not “yours” to promise or give away. So knowing what may or may not be “yours” to give away…is a good beginning, vs an “end run”.
Thanks for the detailed comment, Ardell. That said, you don’t really address my post, other than to point out explicitly that the method of compensating the “representative” has absolutely nothing to do with the “representation” provided. Rather, the compensation is paid for selling the home for the benefit of the seller. Which in turn is 100% inconsistent with any reasonable definition of “representation.”
Basically you just made my point: Agents have worked out a system whereby they claim to perform one task — a very important task — while getting paid for a completely different and to a certain extent antithetical task. Agents not only created this system, but they’ve managed to conceal this inherent flaw from the consuming public. Brilliant! For them, anyway. Bad for everyone else, though, and in particular every homebuyer in the land.
As for your implicit criticism of my model, that criticism is misplaced. WHEN we are paid a commission, we must rebate it to the client. We don’t simply promise a 3% rebate. We promise a rebate of the SOC, and only once we are entitled to it. However, that doesn’t make it any more tolerable when a “professional” who makes a living by “representing” clients manages to get his/her hooks into a client for a claim on the SOC, without the client’s consent or even awareness. Its stunning that this is what “representation” can look like.
Craig,
A portion…though not necessarily all…of the buy side “offering” MAY be used by the buyer to hire and pay for their separate and equal “representation”. That is the buyer’s choice. Some choose to be represented, some do not. The seller does not make that choice for them.
I wrote this to help you and your clients understand how and when they can avail themselves of that opportunity.
Every buyer has the right to be represented, and every buyer has the right to choose the person whom they want to represent them. They can in some instances use ALL of the seller’s and mls “offering” to do that, if they do it correctly knowing the rules in play, which are contained in this post. If they have already “used up” a portion of that offering before choosing to hire someone to represent them, like you for instance, then the REMAINING portion is available to buy that representation…not the full amount.
You can’t spend the same money twice! 🙂
Hmm, you’re close. Let me clarify it for our readers:
A portion or all of the SOC may eventually be paid to a buyer’s “representative.” However, the “representative” does not earn the fee for representing the buyer. Rather, the fee is paid because the “representative” sold the house to the client. That said, agents have masterfully convinced the consuming public of just the opposite: You get representation, and the seller pays for it. That is simply untrue.
Here is the truth: You have the right to representation; the seller offers a commission to agents who sell the home; you can find an agent to represent you because in the process, from the seller’s perspective, the agent “sold” the house and is thus entitled to the commission; and you may be able to find a wonderful agent who will do a good job of representing you, not because that is what she is paid for doing, but because she has a good heart and a strong work ethic.
But to claim that the SOC has anything to do with representation is inaccurate.
To say a buyer is not represented when using any agent who does not already represent the seller, is just NOT TRUE, Craig. You are forgetting the overlay of WA Agency Law which DOES require that the agent REPRESENT the buyer…that is simply not what the MONEY is about as pertains to the seller who offered it.
The Law that REQUIRES an agent to REPRESENT is not about the money.
An agent who was not hired by the seller to represent him DOES “have to” REPRESENT the buyer…by law…not by mls rule or the seller’s offer to pay a real estate commission. So even if the buyer does not elect to “be represented”, they CAN and most always ARE “represented”, unless they choose to work with the person who was hired by the seller to represent HIM. All other agents represent the buyer, even if they work for the same Company as the agent the seller hired to represent him. THIS is NOT true in CA or some other states, but is true in WA.
Hmmm, you’re right, I may have overreached a bit there. How about this:
The law imposes certain limited obligations on an agent who provides brokerage services to a buyer. However, those obligations are not consistent with the method by which agents are paid. Agents are paid to “sell” the house, not to provide representation. Buyers should be specifically informed and aware of this disconnect. Moreover, the legal duties imposed by the statute may fall far short of a buyer’s understanding of the scope of the “representation.” Agents typically do not inform their clients of these facts.
Why do I think that “representation” is different from the obligations imposed by the statute? In my example above, the “showing agent” provided real estate brokerage services to the buyer. Therefore, s/he “represented” the buyer within the meaning of the statute. Would any buyer in this situation agree that they got “representation” from this agent? Consumers believe they are getting a whole lot more than what is required by the statute, and agents do absolutely nothing to educate them otherwise. Indeed, they do just the opposite, or at least they did so in this case.
Craig: “Hmmm, you’re right, I may have overreached a bit there.
Ardell: Agreed.
Craig: “How about this: The law imposes certain limited obligations on an agent who provides brokerage services to a buyer.”
Ardell: No, not true. ONLY true IF said agent were not already hired by the Seller to represent him (and a few other exceptions to that). The Law does NOT “impose certain limited obligations on an agent who provides brokerage services to a buyer” IF that agent were previously hired by the Seller to represent him. A few other exceptions as well.
Craig: “However, those obligations are not consistent with the method by which agents are paid. Agents are paid to “sell
Great Craig, while reading the post I was confused with the line “Representation by a Real Estate Agent doesn’t make sense”, you explained it too.
Actually Jeff, in the State of Washington vs where you are, our Agency Law requires that all agents “represent” the buyer of a home, unless they are already hired by someone else to represent the seller. So the issue becomes what portion of the “offering” is for “representation” of the buyer vs the “showing of the home”, and whether the Statutory Duties of representation of a buyer under WA Agency Law is the limit of what a buyer chooses for themselves.
Again Ardell, you’re close but still miss the mark. Your first sentence is right on the mark — here’s the accurate response for the remainder of the comment:
Nonetheless, the offering is paid because the buyer’s representative “sold” the home. That’s why its paid by the seller. That’s why its called the “Selling Office Commission.” In many instances, the same person who “sold” the home to the buyer also represented the buyer in the transaction, so agents get to claim that they are paid to represent the buyer. Nonetheless, buyer’s agents have legal obligations to their clients, even though they are paid by somebody else for performing a different task, that are set by RCW 19.86.
That is only true if the buyer agreed to what I call a “SELLER-SELLER” contract. IF the offer is written by the Agent for the Seller AND the agent checks “represents the seller” in both the Listing Side and Selling Side boxes, AND the buyer signs and agrees to THAT, then and ONLY then is what you are saying true.
The Purchase and Sale Agreement determines if the buyer is represented or not, not the mls system. WA Law governs whether the buyer is represented or not, not the mls system.
What the money is paying FOR is determined by law and the Purchase and Sale Agreement. THAT it must be paid by the seller, is what is determined by the Listing Contract and MLS system. The seller agrees to pay ALL of it to the Listing Broker. What happens from there is not necessarily in the seller or buyer’s purview, unless there are special arrangements in the Listing Contract that DO NOT conflict with the MLS RULES.
Wow! That’s totally law, dealing with contract and agreements.
By the way, thanks to explaining this to me. I will ensure my understandings on these discussions.
Thanks Ardell and thanks Craig!
Craig…when you go into a store and buy a chair, you say “I bought a chair.” The store says “I sold a chair.”. Semantics. What the seller says happened and what the buyer says happened are never the same, and does not “control” what happened.
The seller will pay whether the buyer is represented or not. Whether or not “the mls offering” was paid for a buyer to be “represented” depends on the Purchase and Sale Agreement and WA Law…not what the seller or mls system chooses to “call it”. How much of “the mls offering” is available to pay for the buyer’s representation depends on the buyer’s actions. If the buyer chooses to see homes with an agent before hiring someone to represent them, they have already “spent” some of the money set aside to hire one. The ball is in the buyer’s court in that regard, but only BEFORE they see a house…any house. Once they choose to see houses with an agent…any agent…they start to spend the money they could have used to hire an agent of their choice. They chose to see homes with an agent, leaving the balance available to hire other agents to another purpose.
You can’t spend the same money twice, and you can’t expect service for free. You can pay two agents the same way you can pay two attorneys. Stop whining that 30% of the commission has to go to pay for a service that YOUR client asked for. ANY TIME you agree to accept a client who SAW the house before they met you, you are agreeing to step in 2nd the same way you would be if you accepted a client who used another attorney for part of the legal process. You don’t get paid for the other lawyer’s services to date…and you don’t get paid for the other agent’s services to date at the time you met your client.
Anytime a client fires one and hires another, he pays the first one. Makes no difference if that is a lawyer or an agent. If a legal client fires you as an attorney and moves on to another attorney…do you say “Oh, OK…don’t pay me then.” I’m quite sure you do not.
Whining? Wow — talk about sharp elbows!
For the record, I’m not whining. Its no skin off of my back. But it is an outrage. Indeed, I’d wager dollars to doughnuts (the cheap ones that cost way less than a buck) that no consumer will comment here in support of this system. Its BS for consumers, plain and simple. And my client didn’t ask a random agent to show the property, he asked the LISTING agent who has been hired by the seller to sell the property. THAT agent made the decision to rope in another, but without disclosing any relevant facts to the consumer.
You bet I expect to get paid for the work I do. That’s because my clients sign a specific written agreement spelling out when I am entitled to compensation. When my clients hire me, they understand the terms of my service. The same certainly is not true of agents, particularly in the circumstances above.
The bottom line Ardell – and my final comment in response to yours – is that consumers don’t understand the system, and agents do nothing to educate them. Indeed, agents do just the opposite. And that is inconsistent with any meaningful definition of “representation.”
The buying consumer does not set the rules for homes on market. The owner’s of the homes, the sellers and the brokerages and the agents, set those rules. The buyer has some leeway to maneuver within that “system”. BUT they do not control it nor CAN they “control” it, as it must be in place BEFORE the home goes on market.
The answer to your quandary is for there to be NO “mls offering” and NO “mls system” so that the buyer is in full control of their side of the fence. But that is not in the cards, at present. IF there were no mls system…sellers would not get their homes SHOWN at all. And they do not want that. So you have to deal with the system we have in place.
You need to change what you promise to buyers. THAT is what this is about. You made an error in calculating what was yours to “give away”. This is not about “consumers”. It’s about a Member of the “mls system” who didn’t understand the mls system and started promising money to “consumers” erroneously.
Make the correction, as you can only give away what is yours to give. Right now…that seems to be 30% less than your original and erroneous calculation and promise to the consumer in the instant case. If you were their lawyer, you would demand that 30% be paid to “the consumer” whether the person who pomised it received it from the seller or the Listing Brokerage or not.
You are not the first business model to make this mistake. Others before you have had to pay it whether they received it or not. Others before you have tried to “refuse the offering” and replace “the offering” with a different contract agreement with the buyer vs the seller. It didn’t work. They had to pay the money whether they “got” it or not.
Time for a “do over”.
Ardell, the post was never about me or my model — you’ve done a great job of hijacking it though. Nice work! But then again, this is a difficult issue for agents, and you’ve got to do SOMETHING to change the topic, right? 😉
Not a difficult issue for me, Craig. When a buyer hires me to represent them in buying a house they have already seen, I know what I’m “stepping in to”, and understand that I am “2nd in”. Happens all the time. It’s part of the rules of the mls system. Always has been.
How a buyer is “represented” or a seller is “represented” is always best done by an agent vs a lawyer. Just not by ANY agent vs ANY lawyer. 🙂
You know, Ardell, and I know too. The point of the post, though, is that the CONSUMER has no idea!
The consumer has been taught — first and foremost by real estate agents — to believe that real estate agents are trustworthy and loyal representatives who always put the interests of the clients first. That’s fine. The problem is that, in many instances, it is wildly untrue. Want an example? Reread the post. Consumer calls listing agent to get access to home for sale; listing agent complies by sending another agent. That “showing agent” NEVER EXPLAINS that by providing this service the consumer is “spending” 25-30% of the SOC that is otherwise available for their “representative.”
Any agent that is truly trustworthy and loyal to a client WOULD NOT get over on a client in this fashion. It is completely antithetical to any notion of true “representation.” And if you don’t have a difficult time with this very common practice as laid out in the post above, indeed if you aren’t embarassed by this practice of other agents (surely you would never act in this fashion), then you’re as disconnected from reality as many other agents.
Again, want proof? Run this scenario by a consumer. I am 100% certain that EVERY consumer will be taken aback by this business practice. Indeed, I think it would make for a wonderful claim under the Consumer Protection Act, which bars unfair or deceptive acts or practices in business. In my book, this conduct is totally unfair and deceptive.
I have to agree with Craig in this example. The problem is there is no implied desire for representation from the consumer. The consumer is not asking to be represented by simply asking an agent for access to a property. I had something similar happen to me when I bought my first property where an agent was trying to claim representation when no such agreement was either made or even implied.
Procuring cause was probably intended to protect agents when performing services that do in fact lead to a sale. I am sure the intent was above and beyond opening a door or tricking buyers who go to open houses without their agent to signing open house sheets so they can try to withhold commissions to the buyer side. Unfortunately, that nuance gets lost on a lot of agents.
Russ said: “Unfortunately, that nuance gets lost on a lot of agents.”
Russ,
Seriously…you don’t “get” it? HOW is it any different from YOUR industry and how YOU get paid? Of all the people to NOT “get it”, you are the last one of anyone who should be saying that. It is the SAME as YOUR industry. People get paid at closing. Period!
When a sale of a home, that is using financing as part of the funds to close, closes – the Lender gets paid and from that payment you get paid, and the processor gets paid and the underwriter gets paid and the person who did the loan docs gets paid and everyone who touched anything on that loan gets paid, whether the buyer asked for “them” or not.
Did anyone in that string “represent” that borrower? According to Jillayne some laws are changing requiring Fiduciary Level of Care by the LO. So maybe yes…maybe no. The Law determines that and the Law is likely different from one State to the next. Same in real estate.
IF the law says that YOU, Russ, MUST “represent” the borrower at the level of Fiduciary care…then that is what you must do whether the buyer asks for that or not. Can the borrower ask you NOT to do that and offer to pay you less NOT to do that? Probably not.
The borrower can’t say “Oh…I just wanted a mortgage. I didn’t want anyone to get paid. I didn’t want anyone to ‘represent’ me.” The system in place already provided for the payment and determined what that payment was for. The borrower does not get to change the system and say at closing…don’t pay anyone.
Yes…they can choose a different LO. Yes if you go on vacation halfway through, a different LO may be assigned by you or your Company to represent that client in whole or in part. What happens in your operation if a borrower closes on a loan and for some reason two or even three different LO’s are needed during the process? Do you get nothing?
Can the borrower determine that you should not be paid at all, and only “the 2nd guy” should be paid, AND deduct the amount you don’t get paid from their cost? Can the borrower choose a different LO the day before closing and ask for a credit for all of your service fee against the loan costs? NO!
PROCURING CAUSE does NOT protect AGENTS, as the Listing Brokerage is going to get the Total Commission via a binding contract with the seller of the home BEFORE it was listed for sale. Procuring Cause protects the SELLER from multiple claims.
Seller promises to pay 6% (or some other amount) to the Listing Company. The Listing Company promises to give 3% of that (or some other amount) to any company “deemed to be the procuring cause of the sale of the home”. Who gets paid is at the Listing Company and mls system discretion and NOT the buyer OR the seller. A home cannot go in the mls without an agreement to pay for all services needed for it to CLOSE escrow, the same way that NO LOAN can be initiated without the borrower paying for all services that are needed for the loan to close.
Seriously Russ, OMG! IF the law says you “represent” a borrower, and a borrower calls you for a loan and closes on the purchase of a home using that loan, are you really suggesting that the borrower can tell your Company not to pay you because they did not “ask for you to represent them”?
Ardell, I understand the chain of who is paying who and fiduciary responsibility. However, that still does not change that consumers are disconnected from the inside baseball of how agents are paid and as Craig says, in the example listed above, you would be hard pressed to find someone to agree that the agent in question has any claim to that commission and that agent is in anyway providing “representation” on the buyer side. This is no different from when some LOs abuse YSP to take advantage of consumers. It taints all of us even if 95% of the time, it is how things should work.
The difference with an LO is that we can’t make any claim whatsoever over the consumer. Believe me, I’ve lost count of the times I have done a ton of work only to lose the deal because the consumer thought they were getting a “better deal” elsewhere. Absolutely nothing I can do but drink it off at the bar. We do not have any kind of procuring cause protecting us for services performed which is one of the reasons that pre-approvals are all but worthless because no lender want to commit to the time and expense to really do them (as in send to a real underwriter and issue a true mortgage commitment) since there isn’t the same level of commitment on the consumer side.
The easy way to resolve this is to decouple buyer commissions from the seller all together. If a buyer wants true representation they can hire their own agent and banks should amend underwriting guidelines so the commission can be financed as part of the mortgage. This spot light on the buyer side would of course probably drive commissions down as buyers would be more aware of what they are paying. Agent shopping would almost be as bad as mortgage shopping I would imagine.
If NAR or the real estate industry really cares about the consumer, the sell side wouldn’t care one bit when a buyer engages an agent and under what circumstances. Trust me, it is better the NAR figure out how to fix any issues like this before the government decides to do it for you. Just ask the mortgage brokers/lenders what happens when the spot light get shined on you. It isn’t pleasant.
Russ — two comments:
1) Heck YEAH! To use Ardell’s phrase, you get it. Thanks for the comments. I am 100% in agreement with you.
2) You let Ardell off the hook!! I finally had her in a corner — she’s cagey, that one — and was looking forward to her reply. Was she going to claim consumers APPROVE of this conduct? That would have been interesting. But then you chimed in and BAM! she had another topic to address. Oh well — I’ll get ‘er next time. 🙂
Start over Russ.
1) You do a pre-approval for a loan. You do all the work collecting the borrowers information and having them sign all disclosures and authorizations to do the credit check. The buyer calls you for 5 weeks asking questions and you help them for 5 weeks.
2) The day they find a house and are in contract they call you and do the formal application for a 30 year loan.
3) A week later they decide to change to a 7/1 product. You are on vacation that day. Your phone message says “I am on vacation until X and in my absence please call “Joe” at this number if you need assistance”. The borrower calls Joe as you instructed and changes the loan to a 7/1.
3) You come back from vacation and you reconnect with the client, or you let the 2nd guy take it to closing. Maybe the borrower has some choice in that matter. Maybe they want you back. Maybe they want that 2nd guy to stay to the end.
HOW DO YOU BOTH GET PAID? Can the borrower pay less and ONLY for the 2nd guy and his time? Can the borrower “dock you” for the week you were on vacation and pay less? NO!
YOU ONLY deal with the buyer of the home. THE MLS must deal with both the buyer and the seller from DAY ONE, even though the buyer is unknown at that time. IF you as a seller don’t want to arrange for payment of the “other” agent, that is not your agent, then you would not be “IN” the mls. And you can do that…and sit in your home…and hope someone finds it. 🙂
Your company somehow provides for BOTH of the LO’s in the above scenario to get paid, if the borrower closes with your company. It is the same with “the mls”. All MEMBERS of “the mls” are guaranteed payment if the home sells the same as all LO’s in your company are guaranteed payment on a closed loan.
THAT is the mls. No matter how many agents are needed from the day the house goes on the market until the day it closes, ALL agreements to pay ALL agents to get the home from Listed to SOLD are already in place and signed by the seller of the home.
The mls is an AGREEMENT TO PAY and a PROMISE TO PAY. Without an agreement to share the total amount contracted to the Listing Brokerage by the seller…there IS NO “mls”.
Maybe home buyers, “consumers” as you call them, ARE “ready” for that to happen. But do you really think there will come a day when sellers will not want their home shown? I doubt it.
Take a look at the rental industry. No central system where people can find rentals in one place. No person to take them to ALL of the rentals available via a promise to pay that person arranged for in advance. Do you really think that is better? Ask the people looking for a place to rent. It is NOT better.
I didn’t see, Craig where you had a Buyer’s Agency Agreement with your “buyer.”
If you did have a Buyer’s Agency Agreement was that disclosed to the listing agent by your buyer before viewing the property?
If your buyer had proper instruction of how to view properties on their own that avoids a lot of procuring cause issues.
David, please re-read the post, but slowly and more carefully this time. As discussed above, I was not the clients’ broker at the time of the home tour. Therefore (a) I did not have a Buyer’s Agency Agreement with them, and (b) I had not yet instructed him on this “trap” for unwary consumers who are attempting to pay less for broker services.
That said, yes I agree if more consumers are aware of this trap, fewer will fall into it. The problem I have is that agents themselves don’t bother to educate consumers, and instead they portray themselves as trusted advisers. Accordingly, consumers don’t EXPECT an agent to set a trap for the unwary. At a minimum, the “showing agent” should be obligated to reveal the ramifications of the showing before providing it.
Craig, as a “member” of the mls system who bought into the total package of having YOUR listings shown via that system, is it really fair of you to call it “a trap”?
When an agent brings a buyer over to see ONE OF WA-LAW’S listings that is for sale…are you complicit in “the trap”.
It is a business arrangement, and one that YOU BELONG to. One that YOU utilize to operate your business.
So you are calling yourself “a trap”.
Ardell, you do such a great job of defending the indefensible. Its really a joy to behold. You’d make a fantastic criminal defense attorney…
Yes, it is fair for me to call this a trap because:
(A) It is, in fact, a trap. You have yet to address the point squarely and instead obfuscate wildly (did I mention you’d make a great lawyer?). At a minimum this particular practice is a gross injustice to consumers, including the consumer discussed in the post. Really, I don’t see how you can debate the point — other than, of course, by not debating the point.
(B) My listings avoid this trap. The number on my signs? Its the number of the owner/client/seller, and that person does NOT get a claim on the commission simply by opening the door. If an agent brings a buyer, there is a much, much lower chance of the buyer being duped into thinking that the agent works for and will be paid by the seller via the listing commission. On top of that is the AMOUNT of this fee — nearly 1% of the purchase price under common practice! ONE PERCENT!! Its stunning. And yes, my listings do not set up consumers to fall into this trap.
(C) Just because I am a member of the NWMLS does NOT mean that I have to agree with or approve every aspect of the organization. That’s like saying that every Catholic has to believe that the Pope is infallible and birth control is morally wrong. Absurd.
The fact of the matter is that the MLS sets the marketplace. That’s why the DOJ is so concerned about unfair restraints on trade/monopolies in the industry. In order for my model to provide a viable alternative for consumers, it absolutely must be a member of the MLS. Would I prefer an organization that is better suited to providing buyer representation? You bet. Does that system exist now, or will it in the near future? You answered that one yourself above…
First of all…the Pope IS infallible. 🙂
Second…I love you and you crack me up.
Third…You are absolutely kidding yourself if you think that you are not part of what you are calling “a trap”. YOUR LISTINGS that are “in” the MLS carry with them a promise to pay that is governed by the mls system and its rules, including Procuring Cause Hearings, if and as needed.
Not conjecture. I CHECKED and I SEE your company’s promise to pay on your listings IN the mls.
YOU are “the mls member” who is promising to pay that, not your seller clients. You are promising to pay that to whomever the mls deems to be the ” procuring cause” that culminates in a sale of that home via a chain of events leading up to that sale. You are not “merely” promising it to the agent who writes the contract to purchase the home. If you don’t “get that” then you need a class on what the mls IS and what you have agreed to abide by when joining said system of listing and selling homes.
That is NOT about the seller of the home. He promised all commissions to YOU, and you promised it to…whomever for whatever. If the buyer of YOUR listing is NOT represented by “the agent deemed to be the procuring cause”…then YOU, Craig of WA-LAW, will pay for a buyer to be not represented by someone. LOL!
I don’t care if agents call you or they call the seller or they call The Pope! When an agent SHOWS your listing YOUR seller has put in place the PAYMENT for his home to be SOLD! ALL agent commissions were promised to YOU, Craig, WA-LAW and YOU promised to pay someone else when you put it in the mls and “offered” an amount to other Members OF “the mls”.
If Agent A shows your listing a couple of times, and Agent B brings you an offer, YOU and the mls will “protect your seller from claims from two different agents” via a Procuring Cause resolution. You agreed to that when you joined the club, Craig. You agreed to that to protect your seller client, not to protect Agent A and Agent B.
You are “it”. “We have met the enemy and he is US”. LOL! “The mls” is ITS MEMBERS, you and me and all the other “members of the mls” ARE the mls. And if one agent shows your listing and a different one writes it up…it is YOUR obligation to pay “the procuring cause” of the sale of your listing. You don’t get to change that to “He who writes it gets it”. The Procuring Cause Panel gets to make that determination…not you, and you agreed to that by joining the club, and rightly so, to protect your seller client.
Right back at’cha! <3
I won’t bother for any attempt at last word because you’ll win that battle every single time….
Craig, if you would take the time to read your reply to me you can see it is really confrontational.
I did read your post slowly. It is obvious that you want to portray yourself as a victim when it was you, as a broker, who who let his clients, as you call them, remain free to choose who ever they want to represent them.
You are trying to change your attorney hat, to broker, then back to attorney as an excuse. Even if you were drafting a contract for a buyer, for you to present, you should have a buyer’s agency agreement.
We are an agency state. That is the system that is in place. That is the frame work you should be working within.
David,
I NEVER use Buyer Agency Agreements. Yes, we ARE a “buyer agency state” which is why we DON’T need written agreements to “represent” a buyer. The law provides for that representation without the need for a written contract.
Yup, its confrontational. Forgive me. I’m still a little edgy after Ardell accused me above of “whinning.” 😉
I cannot say that your interpretation of my piece is right or wrong – its your interpretation, not mine. I can say, however, that the point of the piece was about this aspect of the agent system and how it is totally inconsistent with claims of “representation” of the client. Its not about me. And for the record I am certainly NOT the victim. The “victim” — a loaded word, to say the least — is the client who was s*ed out of a $6k rebate by an undisclosed “service provider.”
And once again — I’ve said this at least once if not two or three times above — I did not tell the client about this trap because I was not yet his broker. Had I been his broker, I would have told him, “Do NOT think that the person who shows you the home is doing you or the seller a courtesy, or even — if you obtained the services of that person via the listing agent — doing his/her job in attempting to sell the house. Rather, agents use this circumstance to get their hooks into the SOC, which in turn will reduce your rebate, even though you used that agent for nothing more than to open the door.”
When I am hired as a broker, my clients sign a fee agreement. It is NOT a “buyer’s agency” agreement because I don’t need to “lock in” the client so that I get the SOC regardless of who the buyer eventually uses to buy the home. Again, I work on a flat fee, and I get paid regardless of whether the client closes (in other words, the client and not the agent takes the risk of the client changing his mind about buying).
Believe me, I am working within the system. But I will NOT remain silent about some of the really, really bad practices that are quite common within in the system.
Sorry Ardell, this isn’t about you. This is about the law, and this post.
Craig is making a claim. My attempt is to address that claim.
One of the big problems that I see with with business models that offer discounts (WA Law, and redfin, offer rebates, which in my opinion are the same as discounts) is that buyers may use other agents in a home search with the intent of using a discount, or rebate brokerage.
I don’t mind showing a listing to some one who is up front with me. My problem is being used as a tool to open a door, give information, or even run reports for some one who will never, or has no intention of, compensating me for my services.
A second thing is that the consumer is lead to believe that they don’t need the services of an agent. The business models that are cropping up state that the consumer is doing the leg work so they should be paid for the effort. I find most brokers have no idea of what they are looking at in a property.
I agree that agency needs to be uplifted from being sales people. The claims in this post stem from some one who is attempting to work outside of the system that is in place to address the very concern that is being raised.
Wrong. Craig is relating a true story that illustrates a really, really shady practice of agents that is totally inconsistent with their image — aggressively self-promoted — as a trustworthy “representative.”
TOTAL agreement! The problem, David, is nobody bothers to tell the consumer when they are “spending” some of “their” SOC for a service that is being provided. Any non-agent consumer who reads the story above is going to think, “Gosh, that “showing agent” should have at a minimum made sure that the client knew that “opening the door” would consume a portion of the SOC.” That’s my point. I agree 100% that agents should not work for free. But when a consumer calls the listing agent — whose JOB is to sell the house — for a tour, and that agent sends another to provide that tour, it is very reasonable to assume that the agent giving the tour is working for and paid by by seller’s commission and NOT the SOC.
David, in many instances — and in the instance above — the potential buyer was not attempting to “use” anybody. The buyer rationally believed that the listing agent would, as part of his/her job, show the home to a potential buyer. It was incumbent on the showing agent to disclose the fact that in reality he/she was going to take a substantial portion of the SOC for providing the service. This fact is routinely concealed from consumers in these circumstances.
Well David, surely you agree that a buyer really DOES NOT need the services of an agent to the extent that a buyer did 20 or 30 years ago. I mean, you’re familiar with the history of the MLS, right? Used to be 3×5 cards in a broker’s office? And now each and every one of those “cards” is publicly and widely available via the ‘net?
I have no idea what you are saying in your last sentence….
Yes, it seems to me that the regular authors and commenters here on RCG at least recognize the problem: We have shifted the role of agents from “salespeople” to “representatives” particularly on the buyer’s side. That is a MASSIVE shift that will require a huge cultural change. My problem is that, as illustrated by the post, agents really have not tried to meaningfully change the culture. Rather, its in there self-interest to CLAIM that they are “representatives” and to put on a matching veneer; but scratch the surface, dig a little deeper, and you’ll see many instances of how they really are still salespeople.
I am not working “outside” the system. I am very much inside of it. But that doesn’t mean I won’t speak up about some of the system’s very serious flaws.
“Craig is relating a true story that illustrates a really, really shady practice of agents that is totally inconsistent with their image — aggressively self-promoted — as a trustworthy “representative.
OK, Let me relay a story, one of many.
A woman was referred to me. She had $100k to put down on a house. She came in with a stack of listings she had seen on line that she wanted to see.
We looked, but I said these properties are over priced, you can do better. I found several for less. She is a student who will be moving when she has a degree. She could either rent the property out, or sell when she was done.
We put in an offer, it was accepted, the inspection went brilliantly, but she was obviously dissatisfied with the transaction. The house was in excellent shape, good location, so there was no discount on the price.
Instead of closing she wanted to see other properties, which I showed her. She liked one house that had been on the market for over six months that was listed by the girl friend of the owner. It was way over priced. I suggested an offer $60K less than asking, called the agent, and the agent said, I quote, “Sure write it up, I’m sure the seller will accept that.
You know the end of the story. I get a phone call from a single woman brokerage who is writing the offer, and she wants me to rescind my Buyer’s Agency Agreement.
What do you do?
So I rescinded the offer she had made, and that place immediately went back under contract for $7K more. I rescinded my Buyer’s Agency Agreement, and the one woman brokerage wrote it up, for a discount.
Of course the buyer has since lost all of her down payment money in a loss of equity, and the building, it’s new construction, has some issues.
You raise a good point there, David. Not all buyers WANT “representation”. Some want to do whatever they damn please. THAT is why we need “rebate companies” so they can “opt out” of advice from agent. 🙂 I offer a flat fee similar to Craig’s for that service. But they don’t pay up front and they don’t pay if they don’t buy. But otherwise, very similar.
The best answer is for every licensee to offer about 10 options. I have tried it. Works fairly well.
Expecting one see commission and service to fit all isn’t realistic. We need more options under one roof.
Worth noting. Craig can and should collect the entire Selling Office Commission. Anyone thinking they have a claim to all or a portion of it can file a claim with the NWMLS and ask for a hearing on the topic.
No one can hold Craig over a barrel during the transaction, and historically claims are to be made AFTER closing so as not to inconvenience the transaction itself, or the best interest of the Parties in Interest.
You close with the understanding that whether you are advised of that claim or not prior to closing, a claim can be made post closing. Sometimes the agent with the claim does not know until the closed sale is recorded and shows the name of their client as the new owner of record.
I expect the reason Craig addresses this up front is because once the money is given to the buyer, he doesn’t want to assume the risk of having to pay it back to the agent with the claim. But that is NOT the norm. Normally the agent for the buyer (Selling Agent) collects the full amount offered, and the claim is determined by a hearing, not negotiated between agents or their brokers before the offer is written.
When you write an offer with a client who has seen the property via some other means, you identify and assume a potential risk, and you proceed knowing it MIGHT be a risk.
It is very common for buyers to switch agents, and generally if they buy a completely different house after the switch that they had NOT seen with the previous agent beforehand, it is a complete non-issue. Not always, but most often.
It looks like in David’s example(s) the client chose a different agent and a different house. That would generally not warrant a claim.
In Craig’s they bought the same house, but the assumed risk of writing it would likely be small, and so most agents do not address the issue in the manner described in this post. I’m assuming Craig has some reason why he does it this way, but it is not the norm.
Reserving that 30% at closing, and telling the agents to make a claim if they think they have one, would more likely be the best course of action, as the odds they might get it…or even make the claim, are slim to none.
Once you call them and ask “What do you want to remove the potential claim?” you give the impression you are willing to give something to them. When they answer 30%, it is because you asked. If you just wrote the offer without asking, or by ignoring any unsolicited verbal claims prior to a formal claim and hearing…you do so assuming a potential risk that anyone involved in the sale of the house may file a claim…or not..
Any time I have done that with a valid risk assessment…a claim was never even filed. Buyer’s are absolutely free to use any agent they want to represent them in a real estate transaction. The agent they select needs to weigh the risk and decide whether to accept the client…or not.
For some reason, and possibly good reason of his own, Craig determined he would take the client IF he could resolve any potential risk prior to writing the offer, and that is what he did. But that is NOT “the normal way” to handle this scenario. It is only the way to get rid of the potential risk that they MIGHT file a claim, if that is a condition of Craig accepting the client, which is his right. A buyer can choose any agent they want…an agent is not obligated to accept that buyer as a client. That is always true.
Perhaps the client instructed Craig to determine if there were any potential claims and resolve them in advance. That is between Craig and his client.
Just to be clear, I did show her the house she bought, and had the initial contact with the listing agent. I determined the offered price which was verbally accepted. The client went with the discount, single woman office, because she felt that broker had her interests more in mind than I did.
I’m the one who didn’t get her a discount on the first property, because, in my defense, it was really well priced. The sellers had bought non contingent.
The buyer was referred to me by another client who I had gotten a very good price for on a property in Shoreline. My ability to negotiate was tarnished by not getting her a reduction in purchase price on the offer she made. It was, and still would be, an excellent value, in my opinion.
I have gone after other commissions in the past where the buyer went to another broker to write that Purchase, and Sale. I have been successful, but Real Estate is a small community. You have to pick your battles.
In this particular case I had every right to go after the full commission, and bring this one woman office up before the NWMLS. I worked at Windermere, at the time, and they were not inclined to get involved. It was one of several times in that office where I felt both my clients, and I, were hung out to dry.
I agree you have to choose your battles. But I have never had this problem. I did have to file a claim for an agent once, as her broker. It was interesting. It was not a Procuring Cause claim though. It was one where the listing agent altered the SOC. I think that was rule 101 at the time. It’s funny that you can get 10 agents in a room and get 10 different answers sometimes. 🙂
We are far afield of the topic so I’m going to limit my comments – plus I’m on the iPad (they call this a keyboard??).
I am contractually obligated to rebate the SOC to my client at closing. My income per transaction is no where near large enough to take the risk of rebating the SOC only to have to “disgorge” it thereafter. So I need to identify and resolve any SOC claim before closing when possible.
Yes Ardell asking somebody whether they will assert a procuring cause claim on the SOC is tantamount to asking for it but I see no alternative if I’m going to rebate at closing.
Over the years, the manner in which claims are determined has changed over time, and local “panels” whose members change from time to time also “rule” differently.
When I worked in L.A. – they basically felt inclined to pay whomever wrote the offer, period. The lingo for that thinking is “He who writes it gets it.”
In CA some year’s back, the local C.A.R. almost had CA Legislation enacted that whomever had the Buyer Agency agreement would get paid, regardless of who wrote the offer. I believe NAR nixed that before it got anywhere. This idea was spearheaded in whole or in part by an Attorney in San Francisco who had a business similar to Craig’s back in the mid to late 90s, who was also a dear friend of mine, even though we did not agree on this measure being pushed through the Legislative process. His name iswas Leo Rodriguez and the writings of his thoughts on the matter can be Googled. I believe the keyword is Blackstone along with Leo or Leopold.
The “archaic” thinking was called “The Threshold Rule” meaning whomever crossed the threshold of the home purchased with the buyer first, got paid. That has pretty much been abandoned, and somewhat the thinking applied in the instant case.
NAR came out with revised guidelines shortly after the CA incident noted above suggesting that Procuring Cause Hearing Panels weight the Buyer Agency Agreement heavily. It is not a hard and fast directive. Just an urging to recognize some validity to a Buyer Agency Agreement. I believe that is why some Brokerages have a Buyer Agency Agreement signed with the offer and sometimes limited to the property in the offer. I agree with David that Craig should use this in addition to his other contract arrangements to secure some right to the SOC.
Lots of discussions on this in the 20+ years of Buyer Agency. Any conclusions however that are relatively firm on the matter vary from one mls to another. Our mls is not governed by NAR, and so the current guideline to weight the Buyer Agency Agreement heavily, is not necessarily and imperative for our local mls. Though I see no reason why they wouldn’t give it weight, since NAR’s request was simply to weight it…not make it “the be all end all”.
As long as Ardell has stepped in with a lot of information that is diversionary to the topic at hand, because we are in the State of Washington, I’d just like to make a clarification.
The commission is handled between brokers who are members of the North West Multiple Listing Service.
There is a distiction that is being blurred between agents, and Brokerages. Agents are now called Brokers, but they work under the direction of a Brokerage, like Windermere, John L Scott, Coldwell Banker, RE Max, WA Law, or redfin. My license is currently with SkyLine Properties, but have worked at different brokerages at different times. We are allowed to move when we choose. One of my big things is that the individual agents are what matter, but Brokerages do offer services that are available by collective purchasing power that most agents/brokers can’t match. Web site, and online searches come immediately to mind.
The Brokerage collects the commissions, and splits those commission dollars with the agent/brokers. You see a bunch of single person brokerages who are choosing to save the fees, or splits, with the bigger brokerage companies. Then you also see teams of agent/brokers within bigger brokerage companies.
The Brokerages are the only ones who have voting rights in the NWMLS, they make the rules. Craig, as an owner/broker has the right to go to meetings, and vote, or raise concerns. It’s true that big brokerages, like Windermere, dominate the process, but there is a process.
The current rules have a Buyer’s Agency Agreement. It would be like, in my opinion, signing a Listing Agreement for a seller. As Ardell has pointed out she never has a buyer sign the Buyer’s Agency Agreement. Craig doesn’t use one because he charges a flat fee.
Many buyers refuse to sign the Buyers Agency Agreement because they want to be free to roam. Many buyers are looking for a deal, on thier own, and don’t want to be tied to a Real Estate Broker.
The reality is when agents don’t use the systme in place is that most buyers end up in this “trap” that Craig is describing. Buyers are getting less service, and less representation than if they were simply educated on how the commission system works.
David,
Kim and I are like Marc and Craig. So no, we don’t split, and yes we are Owner-Broker members with voting rights the same as Craig.
The only agents I have met, and I’ve met quite a few in 20 years, who talk to me about using Buyer Agency Agreements, are those who are afraid the buyer will walk from them. Usually newer agents. Guess what, as you have discovered, the buyer can still walk. You shouldn’t need to chain a buyer to your leg.
I believe that buyers SHOULD roam free and the agents should handle the fallout (without whining about it). That is why I believe in the system. Buyers have to go through a learning process, and take their time, and not be pressured in any way, shape or form. So I like the system just the way it is. I think buyers are better served by having this freedom. It only creates a problem for Craig because of his business model of giving the SOC away. For most all other offices, it is appropriate and has worked well for a very, very long time.
A minor point, yes NWMLS is separate from the Realtor Association, BUT Members sometimes have the right to make a claim via the mls OR the Board of Realtors, but not both at the same time. I don’t remember the specifics, and it does not currently apply to me. But you should note that there is some duplication and sometimes the agent via their brokerage can choose to make the claim via the Board of Realtors IF both brokerages involved are Realtor Members in addition to NWMLS Members.
You cannot hope to “educate” all buyers of homes in the Country. Rules are not for consumers to “conform” to, they are for US so that buyers can roam freely. As long as a buyer is not trying to rip someone off, and they are acting in good faith (as most do), the system works just fine the way it is.
Buyer Agency is an important tool for buyer’s to have. No buyer is going to educate themselves to a point of being profecient at knowing the Real Estate business without working in the business, and having an equal footing with other agents.
You don’t like that because you, Craig, redfin, and thousands of other small independent brokerages, that includes redfin, lack the ability to provide resources.
You’re not able to compete in the world of Real Estate. You are hoping, as in Craig’s example, of catching that free roaming fish, and put them under contract.
Illussions of internet presence are a trick agents use to reel in those free roamers.
The fact is a buyer needs to work with an insider, the same today, as they did fifty years ago, to ensure they are getting the best value from the home buying experience.
LOL…David…after 21 years, I think I’m “an insider”, and I clearly have more clients than some Big Company agents. So get off it. You are full of crap, and you know it. I have as many clients as I can handle…given the way I do business. And I spend ALL of my time working for them vs “prospecting for clients”. EVERY one of my clients that needs repeat business comes back to me for it, and I don’t have to “drip on them” for them to remember me. One of my newest clients is 4th in a string of friends who have all referred one another to me.
I make my money the old fashioned way. I EARN it…and you know it. What’s up with you today?
You need to read the Washington LAW of AGENCY, David. ALL buyers HAVE Buyer Agency by our LAWS! They don’t need a freaking contract to GET “Buyer Agency” in the State of Washington. We are Buyer Agency by Default State…one of the ONLY ones, I might add.
I’ve worked for RE/MAX and Coldwell Banker many times over the years, and even recently. What “resources” do they have for my clients, David? Come on. Name them. What do YOUR clients lack because you are not at Windermere? Once in awhile I go get the big name again…but you know what…my clients get NOTHING. I’d rather give that money to the client than a Broker. YOU call that “discounting”. I call it “good business”.
If you think EVERY new agent is an “insider” if they sign up with a big name…well, get off it…I KNOW you DON’T think that. There’s nothing “inside” that I don’t put “outside”, David. The days of pretending there is some secret insider information are OVER, Pal.
AND, AND, AND…MOST of my clients are NOT from this Country. Many have been in the USA for a very short time. So stop it with the “who you know” crap, becaue that is discrimination against the people who don’t “know” someone in the business. That CRAP has to stop.
In my business EVERYONE gets “the friend and family” discount. Because that is FAIR HOUSING.
You made my point.
You, get clients from the internet. That’s your relationship.
Agents are themselves insiders, but Brokerages can provide resources by the relationships they make between each other. Brokerages also work on providing tools for clients to use. In my opinion Windermere has the network of agents, while John L Scott spends more time, and money, on the internet.
We all benefit from Brokerages.
The post is about representation. My comments have to do with a buyer establishing a written agreement to work with an agent. In my opinion that would address Craig’s concerns here. I also think that buyers should have an agreement to work with an agent they think can best represent them.
In that way Craig’s right, he’s describing a “trap” that buyers fall into. I’m not required to, no agent is, required to freely give information to a person they are working with, just ‘cuz. Agents can pick and choose the information they give because they aren’t under contract with that person who might “some day” become a buyer.
This discussion is one of the reasons most agents don’t work with buyers, they don’t work for buyers, and rely on the “trap” Craig has described.
In practice I do not see that to be the case, David. The written agreement is often used by a substandard agent who believes that having a written agreement will “solve that problem for them”. The answer to that problem lies in the mirror…not a written agreement.
The most notable NATIONAL legal case on why buyers must be able to “roam free” was The Seinfeld Case. in NYC. The offer needed to be written on a Saturday with only a couple hours notice, and the Seinfeld’s agent was not available. She was not even available for them to ask what they should do. They HAD to go find another agent to “write it” to get that place (which they did). Buyers MUST be free to do that.
Say a buyer signed up with Craig and then walked into an Open House. The agent was closing the Open House because she had 3 offers in hand and was presenting them to the seller at 7 p.m. That means the buyer needs an offer to get in before 7 p.m. when the seller is going to sign one of the offers.
REGARDLESS of “written contracts”, that buyer MUST be free to act in their own best interests. The “system” must provide for that buyer to be able to do that.
A written contract does not determine “representation” nor is a buyer bound if the contract does not serve their purpose. That buyer can come to me to write that contract…because the buyer NEEDS it and nothing, no rule, no contract, can prevent that buyer from getting that house. It is up to me and Craig to work out the fallout after the fact.
The NUMBER 1 issue is…Buyer gets to make an offer on that house. THAT is why the system works the way that it does. THAT is why we have procuring cause…so that WE cannot prevent a buyer from buying or a seller from selling to that given buyer.
The system FAVORS the consumer…not the agent, in that regard.
“Most agents . . . relyon the ‘trap’ that Craig has described.”
David, while I love the sentiment – !!! – I gotta note that you are almost certainly wrong. MOST agents do not obtain “clients” in this fashion. Or, at an absolute minimum, the vast majority if not all agents acquire clients in many ways and this is one of the less common.
This practice is however a very unsavory practice that is woven into the system in which agents operate.
It is woven into the system, and I certainly don’t want to make broad strokes, that’s just the way the thread developed.
You have advanced a very great topic that has grown a lot of legs.
There is a solution in here, some place, that has been elusive for at least twenty years. I think the frenzy of the bubble years diverted attention from the very real need for some reforms in how agents are compensated, and what is expected.
Let me also clarify that when I say most agents rely on this “trap” I’m specific in the idea that most agents never have a buyer sign a Buyer’s Agency Agreement. Some agents are very proud that they just don’t need one, because the clients they have are so loyal.
It’s been my experience with attorneys that I sign an agreement to retain them. In my opinion there should also be a contract for Buyer Agency the same as there is for a Listing. You don’t really know that you’ll get until you get started, but again, in my opinion, both a Listing Agreement, and a Buyer’s Agency Agreement should carry the same weight.
David,
I actually leave that up to the client. I offer a written agreement because it is in their best interest for me to do so, as my charge is often not what the SOC is. So if and when I offer to give them some of that money, and I evaluate each case up front as early as possible, they should want a contract that states I will be giving them X dollars toward their closing costs.
Uniformly…and pretty much without exception, they choose to trust me…and I them.
A wise Broker once told me, “Ardell, at the point they are ready to sign a Buyer Agency Agreement, that should be the point where you have a true meeting of the minds…and don’t need one.”
This advice has served me well, and whatever the client wants is what I do. Generally that is no signed Buyer Agency Agreement. A relationship built on trust is the best. It serves me well. Your mileage may vary.
I would do the same for listings, but I can’t due to the fact that the seller in my agreement is agreeing to many things involving the mls and other agents who show his home. For me and my clients, I would never need a written contract. In fact I usually start working for a client WELL before the Listing Agreement is signed because of the “24 hour rule”.
David,
You made this statement about small brokerages. BACK IT UP! Not fair to say Craig’s business or mine or Redfin’s “lack resources” that LARGE Brokerages have. Name them? You are leading people to believe this claim.
“…small independent brokerages, that includes redfin, lack the ability to provide resources.”
I have not found that to be true, in fact, quite the opposite. If it were true I would go back to a large brokerage. It takes about 5 minutes to do so. So tell me…HOW is this “true”…or NOT true at all.
I ALWAYS do what is in the best interest of my clients, and I find that Large Brokerages hurt them vs help them.
As a consumer:
It doesn’t really surprise me that someone could make $6,000 for unlocking a door and hanging around for a while. That is one of the wonders of the commission system: sometimes you get a lot of money for almost no work and sometimes you get no money for an insane amount of work. The hope is that it would average out somewhere reasonable.
What did surprise me in this story is that the potential homeowner contacted the seller and somehow, unknown to them, got themselves a “buying
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Hello RCG Team-
In this string, Ardell lists out the general buckets earned by the Listing and Buyer’s agent. We’ve received an unsolicited offer on our home- we had been thinking about listing it this spring, but had made no moves to get a Listing agent inside to run a price analysis, etc. The agent who approached us wants to be dual agent and the Buyer is the agent’s cousin. We ran our own comps in the area (based on last 6 months sold) and know that our neighborhood is experiencing a boom and the comps support the price we think the house could fetch on the open market. IF, (and it is a big if) we went with a dual agency and the Buyers are willing to give us the price we want, what do you think the appropriate compensation for the agent should be? If we pulled in another agent, should the Buyer’s agent be entitled to any finders fees?
And the argument goes on. A listing agreement is between the seller and listing “FIRM”. The broker is appointed by the firm because the Firm can’t walk or talk.
If a discount broker wishes to give away his or her lively hood then so be it. Stick with what you know.
My business cost money to operate and I spend money to help clients sell, find and close sales.
Personally I have only discounted my commissions when doing multiple properties or sides with builders while working plats.
I know what I am worth and my clients are happy to pay me for the value I offer.
In my decades I’ve seen the discount brokers come and go. I’m still here.
I don’t even understand your comment, other than to brag about the fact that you’re still doing it the old fashioned way. Whatever works for you. It doesn’t change – or even address – the point in the post. But thanks much for taking the time.