[photopress:brokenmask.jpg,thumb,alignright]Tim’s Comment: “What many do not realize is the extent and frequency in which commissions are reduced via credits to the parties at closing. It is very common.’While Tim raised this subject as if these credits were commission negotiations, and sometimes they are, more often these credits are how agents help the buyer and seller accomplish their true objective. The true objective of a seller is to sell his house. The true objective of the buyer is to close on their new home.
Often during the home inspection negotiations, people get all upset. The buyer is really ticked that “the seller won’t fix…:and the seller is really ticked that “the buyer is being so petty as to want him to fix…” For many, many years, agents have used a portion of the commission to keep everything together and throw money at the problem that the buyer wants fixed and the seller won’t fix. With commissions being reduced, and so many agents paying referral fees and bottom feeder site fees and lead generation fees, there is less and less money available to keep these sales together, so more and more are falling apart.
It will be very interesting to see if the new business models that cut the commission down to the bare bones, have a higher rate of sales falling apart at inspection time, with not enough commission in play to fix what the buyer wants fixed and the seller won’t fix. The first time I saw an mls listing that required the buyer agent to submit the offer directly to the seller, one of the $500 mls only listings, the poor sellers were on their third round with two sales falling out of STI. They had even lost the house they were going to buy because of the failed efforts, and were on their third try at getting a buyer that would “stick” to the end. So my guess is the less money on the table to hold everything together, the more sales will fall apart.
When I negotiate with a buyer or seller, I make sure based on the type of property and price range, that I am not leaving the client so short, that the objective cannot ever be attained.
Good post Ardell. I have some thoughts about the influx of inexperienced people into our business and how this situation would be less of a problem if the clients were given more preparation on both buyer and seller sides.
http://jimkimmons.typepad.com/transforming_real_estate/2006/07/commission_give.html
Good post Ardell. I have some thoughts about the influx of inexperienced people into our business and how this situation would be less of a problem if the clients were given more preparation on both buyer and seller sides.
http://jimkimmons.typepad.com/transforming_real_estate/2006/07/commission_give.html
Ardell,
Actually, in classic blogging misunderstanding (I’m amazed how many times a comment can be taken a different way), I didn’t have commission negotiations, per se, on my mind at all.
I brought this up to prop up and DEFEND agents commissions and to give credit to agents AND loan officers who help chip in to make a deal happen. Nothing creates more goodwill to a customer, I believe, than for clients to see everyone chipping in to make things work. I don’t think agents receive ENOUGH credit for this practice. It’s my impression that agents participate in this act for the most part on their own volition, not after being asked to chip in by the client.
Did I misunderstand your interpretation of what I said?
🙂
Ardell,
Actually, in classic blogging misunderstanding (I’m amazed how many times a comment can be taken a different way), I didn’t have commission negotiations, per se, on my mind at all.
I brought this up to prop up and DEFEND agents commissions and to give credit to agents AND loan officers who help chip in to make a deal happen. Nothing creates more goodwill to a customer, I believe, than for clients to see everyone chipping in to make things work. I don’t think agents receive ENOUGH credit for this practice. It’s my impression that agents participate in this act for the most part on their own volition, not after being asked to chip in by the client.
Did I misunderstand your interpretation of what I said?
🙂
Excellent Blog, Jim. So excellent that I added it to my favorites to be sure I go back and read it all when I have time.
Your wording in the comment above, “inexperienced people” (agents) is slightly different than the more on target wording you used in your correlating blog “BUSINESS-inexperienced” agents.
In my experience, how LONG someone has been in the business does not separate “The Men from the Boys” with regard to the issue of having good business sense, when it comes to playing the commission into the transaction at the right time and to the right degree, so that it is a true win-win for everyone.
An agent with 15 years experience is just as likely, often more likely, to hold onto a commission, like a dog with a bone. Making the good and correct”business”decision to make a problem go away with commission dollars, is just as likely to be done by a newer agent as an experienced agent.
When the buyer loses the house and the seller loses the sale, because the agent won’t step in between them BEFORE they hate each other, and “give” the buyer that new garbage disposal, and in doing so “be the glue that holds everything together when it starts falling apart”, it is just as likely to be an experienced agent as a new agent making that bad business decision.
Tim, what you are saying is a common problem in the FLAT medium of blogs and forum discussions. When someone “bounces off” another’s comments, the person being quoted often comments that they were either “misquoted” or “misunderstood” and responds from a personal perspective.
Every comment, however intended, sparks the juices of the reader, and that spark ignites into its own flame. The “article”, “post”, “comment”, often takes many different turns by the end of 70 comments. This is the BEAUTY of blogs that permit comments, not “classic blogging misunderstanding”.
I did not misread or misunderstand your comment, just thought “DEFENDING” the agent commission or “GIVING MORE CREDIT TO AGENTS WHO APPLY CREDITS” wisely, was an escrow person’s ‘read on it.
From my agent perspective, doing these things is just a good business decision. Not because it promotes good will in the future, thus making more money somwhere down the line for the agent, but because it is the right thing to do for this client, in this situation at this time…and part of the job you were hired to do, today.
The bigger point I was trying to make, from the consumer perspective, was NOT that they should grovel and be grateful when an agent kicks in something to pull eveything together. It is a warning that total negotiations during escrow often do not work, when the agent commission is cut too hard at the beginning, leaving no room for the agent to effect solutions, normal to the everyday transaction.
The consumer often does not know the pitfalls ahead, and doesn’t realize that sometimes being “too smart” at the beginning in negotiating fees, can leave themselves with their toolbag empty, at a crucial time during escrow.
So I might say to a prospective buyer client, “Let’s agree to a commission that is $8,500 less than offered by the seller, but you may need to use some of that at home inspection time, to fix something the seller won’t.” (real life conversation, not a hypothetical). When I make the concession up front, I can’t do it again when the buyer and seller need a referee during a dispute halfway through.
The answer isn’t to “hold on to existing fee standards” ,just in case there is a problem.. The answer is to advise the consumer up front that there may be negotiations between the two consumers at inspection time, and the “agent already gave at the office” 🙂 when you cut the commission at time of hire.
This is not “contradicting” your comment, Tim…It’s going off on a tangent…something I am known to do often and almost always. My tangent goes into my everyday experience, which is just different from yours.
Tim, what you are saying is a common problem in the FLAT medium of blogs and forum discussions. When someone “bounces off” another’s comments, the person being quoted often comments that they were either “misquoted” or “misunderstood” and responds from a personal perspective.
Every comment, however intended, sparks the juices of the reader, and that spark ignites into its own flame. The “article”, “post”, “comment”, often takes many different turns by the end of 70 comments. This is the BEAUTY of blogs that permit comments, not “classic blogging misunderstanding”.
I did not misread or misunderstand your comment, just thought “DEFENDING” the agent commission or “GIVING MORE CREDIT TO AGENTS WHO APPLY CREDITS” wisely, was an escrow person’s ‘read on it.
From my agent perspective, doing these things is just a good business decision. Not because it promotes good will in the future, thus making more money somwhere down the line for the agent, but because it is the right thing to do for this client, in this situation at this time…and part of the job you were hired to do, today.
The bigger point I was trying to make, from the consumer perspective, was NOT that they should grovel and be grateful when an agent kicks in something to pull eveything together. It is a warning that total negotiations during escrow often do not work, when the agent commission is cut too hard at the beginning, leaving no room for the agent to effect solutions, normal to the everyday transaction.
The consumer often does not know the pitfalls ahead, and doesn’t realize that sometimes being “too smart” at the beginning in negotiating fees, can leave themselves with their toolbag empty, at a crucial time during escrow.
So I might say to a prospective buyer client, “Let’s agree to a commission that is $8,500 less than offered by the seller, but you may need to use some of that at home inspection time, to fix something the seller won’t.” (real life conversation, not a hypothetical). When I make the concession up front, I can’t do it again when the buyer and seller need a referee during a dispute halfway through.
The answer isn’t to “hold on to existing fee standards” ,just in case there is a problem.. The answer is to advise the consumer up front that there may be negotiations between the two consumers at inspection time, and the “agent already gave at the office” 🙂 when you cut the commission at time of hire.
This is not “contradicting” your comment, Tim…It’s going off on a tangent…something I am known to do often and almost always. My tangent goes into my everyday experience, which is just different from yours.