Further Analysis of a Real Estate Broker’s Ability to Represent Buyers*

The method by which a real estate agent is compensated undermines the agent’s ability to represent his clients, particularly clients who are buying property. Before I get into the substance, though, I need to define the term “represent.”

Yes, the term is used in the “brokerage relationships” statute, RCW Chapter 18.86. However, I am unwilling to conclude that EVERY agent “represents” his clients simply because that’s what the statute says. In my book, “representation” requires more than the legislature’s decision to use that term in the statute as shorthand for acting as a real estate agent. Rather, I use the term to mean “to manage the legal and business affairs” of the client.

With that preliminary matter out of the way… Representation requires a high degree of loyalty to the client. Loyalty to the client is undermined by any interest that competes with the client’s interest, including self-interest of the person providing the representation (i.e., a conflict of intererst). Agents are paid by a seller, not by the client/buyer, and clearly there is a conflict of interest between the seller and the buyer. Moreover, the agent has no obligation to inform the buyer/client of the compensation paid by any particular seller. This system creates a serious conflict of interest that undermines an agent’s ability to represent a buyer.

Want proof? There is a general consensus that a seller should offer the “full” SOC of 3%. Correct me if I’m wrong in that regard. Assuming I am correct, this “general consensus” is de facto recognition of the reality that a substantial portion of agents put their own interests — getting paid a 3% commission versus something lower — above those of their client. If anybody believes otherwise I’d love to hear the argument, as this seems like a “slam dunk” point to me. There is simply no other explanation other than that an increased fee to a buyer’s agent will influence the agent to convince his client to buy the subject property versus some other. This influence over the buyer derives entirely from the agent’s self-interest to make as much money as possible, regardless of what may be best for the buyer.

The same logic is at work for a “bonus” SOC for a full-priced offer, which is permissible and not that uncommon. How on earth is it in the buyer’s interest to make a full price offer in this market? And in a situation where a full price offer is merited, it is merited because of the needs of the buyer, not the interests of the agent — or at least it should be if the agent is providing “representation.”

Want more proof? It is common for some listing brokerages to send a letter to the Selling Agent when a property is placed under contract. I recently received such a letter that reads as follows:

Knowing that selling a house at competitive market value can be a challenging process, I want to take this opportunity for professionally selling the subject property.

Wow! What an emphasis on “selling”! If an agent is truly “representing” a buyer, how is that agent “selling” the home? Those two terms are mutually inconsistent. A “salesperson” does NOT look out for the interests of the buyer. To the extent a “salesperson” claims to do so, it is — to a degree at a minimum, if not entirely — subterfuge to build a relationship of trust between the buyer and the salesperson, which in turn facilitates the sale. Does anyone really believe a salesperson when they say, “As a favor to you, I’ll…”. Salespeople sell, they don’t represent. Representatives in contrast look out for the interests of the client, they don’t work to convince the buyer to buy. Any decision to spend several hundred thousand dollars should be made by the client uninfluenced by the representative.

These are built-in conflicts of interest that undermine an agent’s ability to represent buyers. But even worse, these conflicts of interest are concealed from the client! The MLS refuses to reveal to consumers the SOC being offered on any property. Thus the buyer has no way of knowing that his “representative” may have a powerful self-intererst that is counter to the buyer’s.

Finally, I must note again one other example of how the system is inconsistent with an agent’s “representation” of a client. The client/buyer should have the right to select his/her own “representative.” After all, “representation” must arise out of a relationship built on trust. However, the seller’s SOC can be paid to ANYONE who sold the home, regardless of whether that person provided any representation at all. In other words, the fee paid is totally disconnected from the service ostensibly provided. Indeed, the fee is paid for a service — selling the home — that is INCONSISTENT with the service that the agent claims to provide.

In the final analysis, this state managed to get halfway to “buyer representation.” RCW 18.86 was a big step forward for buyers because agents now have at least some limited legal duties to their buyer clients (in the “good old days” EVERY agent worked for and had a duty ONLY to the seller, even if they only worked with a buyer). But they didn’t fix the underlying system. And that system seriously undermines the ability of agents to “represent” buyers.

___________________________________________________

* Following “competing” posts by me and Ardell, Seattle Bubble asked its readers to weigh in, framing the issue as “Real Estate Agents: Advocates, or Dead Weight?” Both Ardell’s “rebuttal” and SB’s “poll” muddied my point significantly. I recognize that there are really great agents out there who do fantastic work for their clients and who hold themselves to an ethical standard that far exceeds what is required of them by law. My point is that there are substantial flaws in the system in which agents operate, and these flaws undercut an agent’s ability to truly “represent” his clients, particularly on the buyer side. Consumers should be able to rely on a fair SYSTEM and should not be charged with responsibility for finding one of the “good” agents. Similarly, its unfair and inaccurate — and overly inflammatory — to suggest that agents are EITHER an advocate or dead weight. That’s hyperbole, not a fair comparison, and serves only to inflame the passions of the audience, which again obscures my point. So from here on out, its “clinical” titles for me only.

About Craig Blackmon

I am an attorney in Seattle with a practice focused on residential real estate. I am also an owner and the designated broker of Quill Realty, a new model real estate firm. Quill provides its clients with both an agent and an attorney, so you can Sign with Confidence. And Quill charges less than a typical agent, so the client saves money as well. Craig on Google+

Comments

  1. I can fix it: just call it a “representation” commission vs. Selling commission. Or, maybe a “the agent working with a buyer” commission.
    ;)

    • Some mls systems call it a BAC “buyer agent commission” vs an SOC.

      One of the States, Michigan I believe, tried to make it mandatory for a buyer to hire a representative before being able to see homes. It didn’t work. Buyers by and large chose to be unrepresented and the common practice went back to same old, same old. You just can’t force a buyer to WANT representation when what they WANT is…a house.

  2. Hmm, OK let’s see where that goes. We’ve now renamed it (the “Representing Office Commission” or ROC). Great, now at least the name matches consumer expectations.

    Nonetheless (a) its still paid by the seller upon closing, (b) the amount of the ROC is concealed from the buyer, including increases in the ROC for certain properties or under certain conditions, and (c) any agent, not just the Representing Agent, may be entitled to the ROC.

    Moreover, the new name actually does a BETTER job of concealing the problem from the old name. So actually you didn’t solve the problem, Tim, you made it worse. At least before the name was inconsistent with the ostensible service thus perhaps tipping off a savvy consumer. With the new name — ROC — there is NOTHING to suggest that the fee is totally and completely unrelated to, and inconsistent with, the ostensible service.

    All of that said, I’m thinking your comment was tongue-in-cheek. But you know me, no sense of humor whatsoever.

  3. Question: I have many clients who after I get to know them well enough for us all to get the total picture, usually after viewing many homes in the process, we conclude that they should not buy at all for the foreseeable future.

    If the client pays you $4,000 whether they buy or not…how do you tell them part way in that they shouldn’t be buying at all? Do you make $4,000 to tell them that after they see homes for 4 or 5 weeks?

    Often the story unfolds into rent vs buy OR stay in the house you currently own, and that is my advice. How would you help them with that decision as their “representative”…and still make $4,000? Would there be no pressure that they “must” buy because they have to pay $4,000 whether they do or they don’t?

  4. Given your unrelated comments above, Ardell, it appears you agree with me: The current system seriously undermines the ability of agents to “represent

  5. A&C- There are (at least) two ways
    of looking at anything, especially in RE. J-

    • Sure, the right way and the wrong way. If I’m wrong, would SOMEBODY please explain why?

      • The system is correct as it is. The only needed change is in the mindset, to view the SOC as a “retainer”, vs a given as to payment. A good example would be an attorney who requires a $5,000 up front retainer. If at conclusion of the service the cost is $1,500, then $3,500 is returned to the client.

        That is how the SOC is supposed to function today. The seller “sets aside” the max of 3% (usually) within the asking price for the buyer to “use” to see houses and buy a house. If the buyer hires you (and actually buys a house), he uses $4,000 of it for that service. If the buyer hires Redfin they “use” $6,000 or more of it.

        How much the buyer and their choice of representative “use” of it is between every buyer and the people they “use” OR hire. Sometimes they “use” people without “hiring” a representative. But the portion of the 3% “used” by the buyer is still within the buyer’s control or lack thereof via their actions. If the buyer doesn’t choose to “take control” of “their side of the fence”, then the system accommodates that as well, by paying it to whomever the buyer “used” without “hiring” a representative.

        The change that is needed is NOT in the mls system. The change that is needed is in the Agency Law materials. The Agency pamphlet should explain the advantage of hiring separate representation and should require the signature of the buyer acknowledging that IF they do not CHOOSE a representative, one is provided for them OR the person they do not hire, but do “use”, will be paid the SOC to represent the seller and not them.

        The issue is not the system…the issue is whether or not the buyer WANTS to hire someone to represent them…early enough in the process.

        The system is not broken…how buyers “use” the system is all that needs to change…and it is changing. It is changing because buyers better understand that to have a choice of who represents them, they must hire that person. The next step is for them to understand that they need to do that, hire their choice of representative, before they go out to look at houses to buy or, at minimum, before they find the house they want to buy.

        The system allows for a buyer OR a seller to change their mind as to buying or selling…at no cost to them. To replace that system with one that forces them to pay whether they actually buy or sell…is not a change for the better.

  6. Bob Smith says:

    I agree completely that the buyer’s agent compensation structure is broken. Consider the following scenario:

    Buyer wishes to purchase a house. Buyer contacts Agent and begins looking at houses. Agent while conducting MLS search finds the perfect house for Buyer.

    Problem: Seller is offering a very low SOC (or the house is for sale for very cheap)

    Result: Agent either never presents the house to Buyer, or Agent tells Buyer about the listing but says he will not represent Buyer on this transaction because Seller will not pay Agent enough.

    The model of buyer’s agent compensation is broken. They are incentivized to get Buyer to pay the most possible. Which of course makes sense when you consider that they are getting paid by Seller.

    • Thanks for the comment Bob — no argument here! Practically speaking, though, the NAR ain’t going away anytime soon. The flaw that you identify would be cured if buyers hired their own representative directly, and there’s no doubt the world would be a much better place if that happened. But I don’t see brokers agreeing to that change, not as long as they have a pulse. After all, how can you finance the exorbitant professional fee if its not paid by seller at closing?

  7. This has all been said for nearly a decade now when Google expressed their intentions of a new way to buy and sell real estate thereby eliminating the archaic MLS system as we know it and the horrendous golden carrot.

    It went like this:

    a. Owners and Buyers pay a joint fee to one data base (Google) at the time it was 1000.00

    b. agents become much fewer in number and are now facilitators and work for both Buyer/Seller in merely opening doors, setting appointments, and originating offers and obtaining signatures. There are small fees to submit and small fees to accept. This is collected at time of origination by facilitator.

    c. Attorneys are left to close the transaction( upon mutual acceptance) working closely with title/escrow.

    d. facilitators transfer keys at close.

    Done!! Google/MSFT/? will change real estate. They all have the platform but unfortunately it will continue to take many years because so many rely on real estate sales now for sheer survival. Companies like PCLN & AMZN will lead the way into a new era of buying/selling and their success illustrates volumes.

    The sheer insanity of the MLS system will come to a crashing end but this novel has been written so many times. This housing crash maybe enough to trigger implementation because home owners/sellers/banks can no longer aqfford to feed this BUFFET of fools.

    • Ray,

      For those people who need an agent, which by and large are MOST, that does not work. BUT if the future of real estate does not educate and train agents to the point where there are NO good ones…then what you say is a foregone conclusion, and may in fact BE the end result.

      But don’t kid yourself into thinking that is BEST for most home buyers OR home sellers. It is not. Agents not being “good enough” is the problem…not the mls system. Buyers being irresponsible with regard to choosing a representative appropriate to their needs is the problem, not the system.

      To leave virtually NO representation for those who need it most would be like eliminating medicare, social security, food stamps and welfare. Sounds good to those who don’t need those “services”…but clearly not a good result for those who do.

      • Ardell, you underestimate Google’s model of real estate and representation they have outlined many years ago.

        Buyers and Sellers need minimal guidance in this new age and within the parameters set forth by the BIG G buyers or sellers can choose the amount of assistance they need and pay for it accordingly.

        3 % to selling agents is INSANE.
        1-3% TO LIST remains the BIGGEST RIP -OFF in America right next to Movie-Theatre popcorn, Hotel mini-bars, and cereal…

        • Some agreement here, Ray. That said, I think you underestimate the staying power of real estate brokers and the system that they created. There is an awful lot of money at issue, the status quo benefits brokers, and the only way to force change is through further government regulation. Under these circumstances, the entrenched interests will not go quietly into the night.

          Also, I think you seriously undervalue the benefits of representation when entering into a transaction worth hundreds of thousands of dollars. Buyers and Sellers are not inherently on the “same page.” Sellers want to sell for most money possible, while buyers want to make a sound buying decision while paying as little as possible. If you think that everyone will be best served by “dual agent facilitators”, with lawyers to “close” the transaction — i.e. fulfill the instructions of the parties as set forth in the PSA — then you envision a world of rainbows and butterflies that simply does not exist outside of perhaps a muppet movie. You are overly naive.

          With those criticisms out of the way, I agree that a “non-MLS” system, where the each party pays for their own representative, would be an improvement and may be in our future. But its more complicated than what you portray.

          • Don’t shoot the messenger! This was Googles plan for real estate in the future. I just summed it up VERY briefly to tell you that YOUR story has been told for many moons and I’m hoping this housing CRASH brings about BIG change in real estate in the years ahead.

            It has already changed ALOT since we opened in 2007. We are no longer bashed and with Red Fin making 60 Minutes and the continued success of MLS4Owners people now are beginning to understand who fuels the transaction and they finally GET the 3% Listing and the 3% selling fees that they have been victims of so long. With the IPO of Zillow people are becoming even more educated and who knows maybe it will be AAPL that takes us away from this archaic nightmare of transferring property.

            Technology will lead us and those who do NOT adapt will be left far behind. We see it every month with the closure of more and more brick and mortars. This Crash will take a decade to unwind and I think all of you will be shocked at what emerges.

          • Ray — do you have a link to this “Grand Plan” formulated by Google many years ago? Any idea whether its still on Google’s plate today? I’d like to learn more — directly from the source.

          • If you dig I’m sure you could find it. It was placed in articles in I believe 2003-4 before they had their IPO. It was part of their strategy to compete in the “search” arena back then. They believed the landscape was going to become littered with Google type competition.

  8. Craig,

    Not sure if our mls system can do this, but I have seen many attempts at using the current system AND making “the correction” you want. Just hasn’t worked.

    One had no minimum limit to the SOC (not sure if ours currently does or not) and one company tried listing property with a $1 offering, leaving the payment for Buyer Representation services up the buyer and their choice of representative. That did not work. In fact I received a call yesterday from someone who did something similar, and when the bill was handed to the buyer at closing for their chosen representative, they didn’t have the money to pay it. Does it close when the buyer is short of “cash to close”?

    What you are asking for HAS been tried, many times and in many ways…it just has not worked when the seller does not allow a sufficient reserve for the buyer’s use to hire a representative. The buyer CAN choose…we simply cannot mandate that they do so…and the seller MUST provide the funds with which they can hire someone (or not)…or the closing fails. We can not have a system that leads to the failure of a closing. The one we have is the best there is, as has been proven time and again over the years. Buyers and agents who “show” property, simply have to use the system better and best.

    Taking that 3% OUT of the price, and reducing the price accordingly vs having the seller “offer it”…just does not work. We tried it…it failed…back to square one.

  9. Ardell, you still don’t address my point, that conflicts of interest inherent to the system undermine an agent’s ability to represent a buyer.

    That said, you make some interesting comments:

    The change that is needed is in the
    Agency Law materials. The Agency
    pamphlet should explain the advantage
    of hiring separate representation and
    should require the signature of the
    buyer acknowledging that IF they do
    not CHOOSE a representative, one is
    provided for them OR the person they
    do not hire, but do “use

    • Craig,

      Read up on the duties of The Real Estate Commission…in most States THAT is the consumer education process via the required Agency Law disclosures and materials. I totally agree that someone is asleep on the job…but it is not the mls. That said…various States HAVE tried and failed in many and varied ways because the consumer simply does not want to HIRE an agent. This is NOT about NAR or an mls system.

      If you go to a restaurant they may have 12 waiters. If you sit at any table…you will “get a waiter”. If you want Javier to be your waiter, then you have to sit at Javier’s table…or at least ask for Javier.

      Real Estate is no different…if you want to be waited on by someone special…you must ask for someone special by name…otherwise someone will “open the door for you” and if you choose your representative BEFORE you find THE house you want to buy…you are still OK! The system lets you try agents by seeing homes you DON’T want to buy with them before choosing an Agent.

      Asking a buyer to CHOOSE a representative before they find THE house they want to buy…is really not too much to ask. Seriously, Craig…you can’t believe that is too much to ask. They can see 50 houses with an agent, or 10 agents, and still CHOOSE their agent from testing and trying. They simply cannot see the house they want to actually BUY before choosing their representative. That’s a lot of leeway for a buyer…

  10. The system is not “broken” Craig. Your biz model of promising someone money that is not yours to give is broken. Get real.

    • Interesting “comment,” Ardell.

      Its not about me, or my model, or my “promises” to my clients. Its about the underlying systemic problems when “representation” is grafted onto a sales system. Its using salespeople as representatives, and the resulting harm to consumers.

      The irony is, I know you understand. You’re open and honest about flaws in the system. Heck, you LONG AGO recognized that the terms “selling office” and “selling broker” were offensive and inconsistent with being a good, ethical, and professional real estate agent. That’s a great point and 100% with my criticisms of the broker system as it exists today.

      I am sure I’ve been beating a dead horse for some time now. Forgive me. I’ll play this thread out, but next time you hear from me I’ll have a real and legitimate proposal for a change in the system. One, Ardell, I suspect you’ll support — because after all we’re really not that far apart.

  11. This post is the most over the top you could have made. You put a link to the RCW concerning Brokerage, then go on to ignore it.

    redfin, WA Law, 500 Realty, and Ardell all have Real Estate business models based on the promise of the commission being paid.

    People need real help to build a Real Estate. No two situations are the same. Real Estate is an investment, so the contest of who can fill out the blank form the best seems frivilous.

    Analysis is about product, location, and economic trends. After the analysis it comes down to the price, and negotiation of terms.

    It’s always been my opinion, Real Estate agents don’t make enough for what they do. The rest of the world seems to think that if Real Estate agents get paid less, the consumer will get better service. The argument makes no sense.

    It would be better to discuss how to offer a greater degree of excellence.

  12. David – I’ll respond as best I can:

    This post is the most over the top you
    could have made. You put a link to the
    RCW concerning Brokerage, then go on
    to ignore it.

    “Over the top”? Thanks! I don’t follow about ignoring the law…

    redfin, WA Law, 500 Realty, and Ardell
    all have Real Estate business models
    based on the promise of the commission
    being paid.

    Agreed, but with a slight twist: Redfin, WaLaw, 500Realty and Ardell all have business models based on the promise of financial compensation, which currently is almost always via commission.

    People need real help to build a Real
    Estate. No two situations are the
    same. Real Estate is an investment, so
    the contest of who can fill out the
    blank form the best seems frivilous.

    I need to paraphrase here to confirm I understand: People need help in building a real estate investment portfolio (and prudent financial planning requires such investing). Everyone has unique investment needs and opportunities. Given the importance of investing in real estate, it doesn’t matter who fills out the contractual forms.

    Assuming I got that right: Agreed as to everything but the downplaying of the contract.

    Analysis is about product, location,
    and economic trends. After the
    analysis it comes down to the price,
    and negotiation of terms.

    Agreed!

    It’s always been my opinion, Real
    Estate agents don’t make enough for
    what they do. The rest of the world
    seems to think that if Real Estate
    agents get paid less, the consumer
    will get better service. The argument
    makes no sense.

    I disagree, I think agents are well compensated for the work that they do. The successful ones are successful because they are adept at getting the work.

    It would be better to discuss how to
    offer a greater degree of excellence.

    Ironically, that’s exactly what I am trying to do. By calling out the flaws in the current system, I am attempting to change the system for the better, thus “offer[ing the public] a greater degree of excellence” from real estate brokers.

    • Craig you are falling into the abyss of David’s mind. Ardell, seems to do it regularly and engage relentlessly.

      You are far better off (in maintaining your own sanity) watching Donnie:

  13. How’s that brokerage business Ray?

    How about those auctions?

    I’m sorry, but you are in that odd place, at the wrong time.

    You are correct about the Google Real Estate platform. There has always been that push for a national listing system. Zillow is the closest because they are consumer driven.

  14. You don’t need to respond, it’s not a debate.

    The RCWs are clear to me. I think most people who are in the business of Real Estate understand the law, and how it applies to them. If they don’t understand, they are affiliated with a Brokerage that should understand, and take steps to protect the Brokerage.

    • Not a debate? So what — this is a bulletin-board for unrelated comments? That doesn’t sound right.

      It may not be a debate but it is a “conversation” and therefore there needs to be a degree of back-and-forth between participants. Otherwise its not a conversation. And if its just a bunch of blow-hards spouting off about their thoughts, without referencing or discussing the thoughts of others, then there really isn’t too much value here.

      • Well, it’s not a debate. It is a conversation, so dissecting a comment is counter productive.

        The RCWs are clear. You can interpret them differently, but we have a well defined frame work here in Washington State.

        From what I gather, you don’t like the commissioned sales approach any better than I do. The problem is that once you begin consulting by the hour nothing seems to get done. It’s been tried.

        The commission seems to keep people engaged. I’m always happy to hear other ideas, but I still think good Real Estate agents are under paid, and under appreciated.

  15. Ray:

    I’ll take your comment:

    If you dig I’m sure you could find it.
    It was placed in articles in I believe
    2003-4 before they had their IPO. It
    was part of their strategy to compete
    in the “search

    • Nope…I’m not as smart as the Big G but YOU can take the time do dig into the prospectus and look at their models they had planned. It wasn’t just Real Estate either. They had many ideas on how to spend their IPO money. Appears they did quite well with them .

      Surely you know how to do this. But, I will offer you this…For 75.00 an hour I will find you the info from 2003-4 prior to the IPO and I will hand deliver it to you. But, first I want $500 to be paid UP-FRONT and I would like a minimum of 10 hours compensation.

      Surely, you have no problem doing this for information you request…Correct?

      David, brokerage business is doing great but unfortunately my time is now spent at the Auctions or preparing for the Auctions. We both know the real money is spent on our own investments or partnerships. However, MOST of my time is spent Coaching youth Bball and Soccer. Not sure why I’m at the wrong place at the wrong time. I always seem to know where I’m going….at least I think I do……….

      • Ah, no. Frankly, I’ve looked at your web site, I’ve followed your comments on various blogs, and at this point I don’t think you bring $75/hour worth of value to anything. Now those guys at WaLaw — that’s a different matter! ;-)

        Call me crazy, but if its your point you have the obligation to prove it.

        • I think we would both TRULY agree neither of us are worth 75.00 an hour for SQUAT in/re to Real Estate.

          However, if your ever on my operating room table and you look up at me before we put you under you would surely be thinking ” Ah…That Ray guy …He deserves more then 38.90 an hour………………you may even say I’m worth 75.00 after your gassed up…Who knows..

          • Get bent, Ray. I guarantee you I am worth $75 per hour IN LIEU OF ANY COMMISSION.

            And you’re just a nurse, Ray. I’m a lot more concerned about the surgeon. ;-)

          • But, we nurses will remind the doctor ALWAYS when if he/she is “off” or having a bad day. Lord knows they have many off days..Without a good nurse you r TOAST no matter how good the Doctor is. You gotta take my word on that.

            So you see why Craig that your 75.00 an hour is absurd. Your life is in my hands at just under 40.00. Albeit working nights I do push 50 but in the end you know your not worth 75.00..Come on now..An Atty? The glut we now have…..? Please..

    • Craig,

      What Ray and David are alluding to (though I think it was Yahoo Real Estate and not Google) is the desire for there to be a National Real Estate site that is not connected to the Board of Realtors or a commission structure. Kind of like a “Craigslist” for real estate.

      It started some years back when a San Francisco Anti-Trust Attorney, David Barry took aim at dismantling NAR and most notably CAR. After two decades of lawsuits, he was sued by NAR and CAR for “malicious prosecution”. A little background in this Realty Times story.

      http://realtytimes.com/rtpages/20070525_barrynemesis.htm

      “Two decades” is not an insignificant timeframe, as the original suits were brought against NAR and CAR for favoring sellers vs buyers of homes shortly after Buyer Agency first came to be. Most notably NAR’s treatment of agents who exclusively represented buyers of homes. I love the line in Blanche’s article “at some point litigation is supposed to be conclusive”. Barry took on a series of different Plaintiff’s against the same realtor machine. Pretty much hammering on the same point, but with different different complainants against the same defendants. I lost track of him back in the late 90s as to whom his Plaintiff of the day was.

      Zillow and Trulia are both vying for the position of “National Real Estate Site”. Realtor.com is of course a strong contender, but there is some confusion because of their name that they are actually a realtor owned site, which they are not.

      However all of those places ultimately not only use agents as the end run for people to see and buy houses, but also as their income source. So I don’t see any viable alternative to the system we have in the making anywhere. All of those places use, indirectly, a part of the current commission structure to fund their efforts. So not only do they not progress toward an alternative, but they are each and all a means of keeping commissions higher vs lower.

      Zip was likely the first force to be both an RE Brokerage AND a Lead Generator, and they recently ditched their discount structure. Redfin started out thinking no minimum was needed and a 50% discount was warranted as a means to “bring commissions down to a realistic place”, primarily from the buyer side. They found out that $6,000 as a minimum was warranted. That trial and error path indicates that for a transaction of $200,000 or less, the 6% commission structure is likely warranted without much variance for discount. They also decided that for most transactions at most any mainstream price level, 2% vs 3% might be appropriate, but ONLY if there were a sufficient volume of transactions to support the discount. They initially thought a 2% marketshare would be a sufficient volume to sustain that model, and that was likely true until overall transaction volume dropped significantly. With volume at half-mast their minimum volume needed to increase to 4% or 5% to sustain the original concept.

      Watching what everyone is doing, and learning from their experiences, is of value to all in the real estate arena. Your model, which is one of the only I have seen that trades an actual cost for a contingent fee, relies on a buyer being willing to pay for their part of the equation BUT is predicated on a GETTING vs a GIVING as in “get $12,000 and give $4,000″ with the giving coming from the commission structure in place. So still not a viable alternative to the realtor machine.

      Ultimately the mission to empower the buyer client is in the hands of The Real Estate Commission and the Lending Industry and not the Realtor Organization or any one business model. The Lending Industry would simply need to recognize the buyer side of the commission as a buyer closing cost, keeping ONLY the seller side representation cost on the seller side of the HUD 1. The Real Estate Commission and the DOL materials could then target the buyer consumer education on the part that is included in the buyer cost vs seller cost.

      Given the Lending Industry has never peeped about this issue and has way too many things on their plate for some time to come, there is likely not going to be any movement in a big way on this issue during my lifetime. That’s how I see it at present.

      Real Estate will continue on as this: A Seller wants a Buyer and a Buyer wants a house. The companies and professionals who jump into that simple equation to profit from it are many and varied. A “national mls” without a real estate agent commission machine is not in the cards. That would turn out like the rental industry and Craigslist and do more harm than good.

      • nope..it was Google..then the housing crash in 2007-forward and no peeps since..

        my comments sure do await moderation for a long time…someone is watching me……..

        • I don’t think anyone is “watching you” Ray…except “Askimet”. :) Someone must have labeled you on another site as a “spammer” as we all use the same Askimet filter. Of all the potential sources for that remedy, Google is about 6th on the list of potentials for filling that role.

        • And just because you’re paranoid doesn’t mean that everyone isn’t out to get you. ;-)

          Ray, I barely have time to keep current on the comments, let alone moderate the discussion. I rely on my good friend Mr. Askimet……

  16. Yes, Yahoo had the model, but think it was originally Google. There again it was a long time ago.

    We are a hot bed of Real Estate dissent in the Pacific NorthWest. It was John P Nagle, also an attorney, who hated the NWMLS. I forgot about David Barry, but remember the law suits.

    Just as a complete aside, one of the top agents in Southern California isn’t a member of the Multiple. If you want to know who is buying or selling you should talk with this guy. He is on the phone constantly working his sphere of influence.

    • Who is that in Southern California, David? I agree that Southern CA probably has more “pocket listings” sold than most any other place in the Country.

    • “Sphere of influence” — I love that term! It’s one of those “pull back the curtain” phrases that casts the harsh light of day on agents and reveals them as salespeople.

      • He is an unabashed sales person. Mike Ferry coaches that technique.

        • David,

          Hopefully you do realize that you cannot idolize or emulate agents who work in other States, given Agency Laws differ from State to State. The Agency Laws in CA vs WA are quite different.

          That is one of the reasons NAR cannot have any say in the matter of how buyer clients are treated and how their “rights” are to be handled by agents. Every State enacts different laws governing what rights homebuyers have…or do not have…to being “represented” by an agent.

          That is part of the problem as “realtors” take national curriculum classes, like the ABR Designation course that teaches things that are not true here in WA. The ABR class teaches that buyers are not “represented” as clients vs customers unless they sign a Buyer Agency Agreement. That is not true in the State of Washington. I doubt Mike Ferry changes his spiel to agents based on varying State Laws.

          It’s great to share with agents from other States…but be mindful that they are not governed by the same laws with regard to Buyer Agency as we have here in WA.

  17. He follows Mike Ferry, and it looks like he may have joined a Brokerage, but I can’t really tell from the internet.

  18. I can’t say I agree with everything. I have never sold a home to a client based on the commission. If my clients like the home that has a lower commission then that’s the home we make an offer on. I also have never made a full price offer because a bonus.

    • Jon, you may not have done so. But the point of the post isn’t that you, or Ardell, or any one agent alllows these conflicts of interest to have a detrimental impact on the service provided. The point is that these conflicts of interest do exist and they do impact the behavior of at least some agents. Consumers will be better off if we can eliminate these conflicts of interest.

  19. Yes, it’s true, like in any profession there are people in it for the money.

    The post just muddies the water.

    • I assure you Craig is in “IT” for the money..But, chasing 75.00 an hour touring homes, and filling out NWMLS forms, will get him SQUAT!…not gonna happen in 2011 forward..

      The masses are far too smart now. The jig is up!

      • Anyone who is not “in it for the money” is either (a) independently very wealthy and needs a hobby, or (b) is a liar. News Flash: People need to earn a living. You can’t earn a living without making money.

        Ray, you think the masses “are far too smart” to use an actual lawyer, rather than a real estate agent, and to save thousands of dollars in the process? With all due respect, Ray, you’re looking at the world upside down.

        To date in 2011 — the very year of our alleged demise (Ray, on a related note, when is the world going to end?) — we’ve rebated to our buyer clients $148,717.51. That’s money that most likely (not everyone can use you, Ardell) would have been paid to real estate agents and instead was returned to the pockets of consumers. The “jig” ain’t up, Ray — this party is just getting started!! WaLaw, WOOT WOOT!

        • I’ve been to your type of parties. Let me tell you this. Attorney’s are not people the masses enjoy spending time with. Real Estate Agents and sales people rest in the same category. They want TRUE VALUE and they will seek it out.

          Charging people 4000 when they haven’t even bought a house and then 75.00 an hour for tours is NOT a model that the saavy public will EVER find acceptable.

          But, good luck in cherry picking your clients who already found their homes. The day an Attorney spends time with people showing homes is the day I find a truly worthless Attorney who cannot make money sitting behind his desk or in Court.

        • LOL! What happened to “Work for the work; the money follows.”?

          • Hey, whatever it takes to keep you slaving away in the salt mines, earning a living….. The reality is, if the money does not follow, you’ll find other work.

  20. Woot, Woot!

    People paid way too much for houses this year. Those people you refunded money to should have asked for an economic analysis before they bought.

    Ignoring the fact Congress had a debate about deficit reduction was foolish.

    Since the 1980s there has always been the possibility, in tough economic times, for the markets to stall, or crash. Those that sold this year did well. Some buyers also did well, if they bought well, at reduced prices.

    People pay to know how to buy, and sell property well.

  21. I was at Basketball Camp training 70 kids today in the blazin heat and Craig and Marc crossed my mind. I do not know why but I was obviously thinking real estate while watching the capital mkts collapse on my i phone..

    Anyway, I know personally about 5 Attorney’s very well and would call them close friends. Then I have another 5 that are professional friends. In thinking about each one individually NONE would EVER, and I mean EVER spend 10 hours with a client for FREE showing them homes. In addition NONE and I mean NONE would ever engage in showing homes to clients at 75.00 an hour.

    I guess what I’m trying to wrap my brain around is what kind of Atty are you guys that would spend multiple hours with people driving around looking at homes ? Surely there must be FAR BETTER money out there with your LAW DEGREES then doing this mindless type of labor?

    Or is the economy truly that bad and the GLUT of Attorney’s is causing you guys to really dig deep??…I know I know you charge 500 up front and thats at least 50.00 an hour based on 10 FREE HOURS but isn’t your training and education beyond that of touring homes?? It surely is with the 10 Attorney’s I know.

    • Ray — do me a favor and accept last word graciously, particularly when “last word” has nothing to do with the post and everything to do with your rank bashing of my business. There’s a reason why I didn’t bother to respond to #351575 above, I hoped it would be the last I heard from you (at least in response to this post).

      To answer your “question”: Marc and I are savvy businesspeople and we recognize a great business opportunity (i.e., the real estate broker model is ripe for competition). We are trying to capitalize on that opportunity, which requires us to deviate from the “traditional” law firm model where there are a few well-paying clients. Instead we are building a practice with lots of clients each of whom pays us a fair fee for their anticipated transaction. Yes, we are different than your 10 friends. And yes, we think that this model will eventually allow us to enter the ranks of “successful attorneys,” we will just be taking a different path to that destination.

      You’re correct that our model, in its early stages, requires us to perform work that is generally not considered “attorney-level” work. I wouldn’t call it “mindless” by any stretch, but you’re right its beyond — or by your view beneath — what an attorney normally does. But again, we’re breaking the mold, and hopefully we’ll be big enough that we can hire staff to perform these sorts of tasks, thus allowing us to enjoy the weekends. :-)

      • Craig, you or ANYONE for that matter dictating last word on an OPEN BLOG is as insane as Attorneys opening doors for Buyers or Doctors doing bed baths for patients in hospitals.

        It is for this reason I question why anyone would spend all that time and money in law school to do such menial tasks….

        So do NOT keep calling for people to have the last word and just accept the forum of the blog and those who post will decide for themselves. I know your new to all this but even you will catch on..

        • Ray Pepper lecturing somebody on blog ettiquette? Is that a pig that just flew by my window? And did Satan just order a Flexible Flyer from Amazon.com? The world never ceases to amaze……

  22. OK , Ray, in most civilized countries doctors do bath patients. Even the best doctors here take a personal interest in bowel movements, and urine. It’s a part of the job. It depends on whether the doctor is good, or just making rounds.

    As long as we are talking business models, yours is the oldest trick in the book. A couple of investors get together, usually there is drinking involved, and one says, “if we had our own brokerage we wouldn’t have to pay the stinking Real Estate commission.” The other says, “yeah, but who would we get to run it?” The whole idea is to bring in some other people to get them to pay for the over head.

    I think the WA Law business model is flawed because, as you say, they should charge more. In time that will be the case, but for now they are learning the business.

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