It’s amazing the stories I hear about the self-policing that occurs on the MLS (some of it seems more like snitching, in my opinion). One of the big no-no’s is listing any reference to an open house in a listing’s marketing remarks. The reason for this rule seems clear enough; with so many of the big guys subscribing to feeds of all the listings, the MLS doesn’t want to bite the hand that feeds it. The Windermeres and John L Scott’s don’t want prospective clients to go to open houses on their own, they want their agents to represent these prospects.
On the more creative side, an agent I know had her hand slapped after she tried to emulate an auction situation, using her MLS listing to attract buyers. She is also an investor, having bought the home in question on a lease-option. The previous owner did a beautiful rehab job, but ran out of money and needed out fast. She stepped in, leasing the place (the lease payment covering holding costs for the owner), with a year option to buy for what was owed by the seller. She also took a chance and put another $15K into the home to finish it out (a risk since she didn’t own the home). With her large equity position given the market value of the home, she decided to test the waters, and create a situation that would attract more offers.
First, she offered a buyer’s agent commission of 4%. Then, in her creativity, she made her first mistake. In the agent-only remarks, she explained that the 4% would be added to the highest bid price. This was also clearly stated in the auction rules posted at the property during the open houses, available to all potential buyers. Her thinking was to put walk-in buyers on the same footing as buyers with agents (there were two open houses over the course of a weekend, then bids were accepted – no time for lockbox enabled agent visits), thereby creating an apples-to-apples comparison when reviewing competing offers. In other words, the final bid price would be the net (of commission) price. If a buyer with an agent offered the highest bid at (for example) $100,000, then price would be grossed up to $104,000, with the investor/agent/seller paying out the $4000 commission to the agent at closing. If a walk-in buyer offered the highest bid, then no commission is necessary (since she is the owner of the house, there’s no need to pay herself a commission…she’s getting all the profits anyhow). I can understand why she got in trouble for this. The MLS is for agents, not joe consumer. Agents would naturally prefer that the buyer’s agent commission is included in the final cost of the property. With this gross-up method, savvy buyers (even dumb buyers) would realize that they would have saved $4000 had they gone directly to the open house without an agent.
The other creative step she took was to include the word ‘auction’ in the agent remarks. She listed the home at her acquisition cost, knowing that it’s true market value would grab the attention of agents. Her objective was not to deceive, thus the reference to an auction (all bids would be reviewed at the end of the second open house).
However, on both counts, other agents snitched her out. I think each of her creative marketing ideas went against the traditional thinking of the industry.
In trying to offer a grossed up commission (and super-sized at that!), she was bringing the bright light of transparency to the transaction. Though her intent was not to ‘out’ agents who don’t discuss compensation with their clients, this is clearly the first thing many agents thought about. The agents would publicly claim that ‘it isn’t fair’ to raise the price 4% after a final bid has been made. On the contrary, as long as the this is known from the beginning, there should be no problem. If buyer’s agents openly discussed compensation with their clients, then clients would have a better chance of understanding that grossing up the offer to capture commission is not a big deal.
As for trying to market an auction, I think agents didn’t understand what the investor/agent/seller was trying to accomplish, or they were thinking of a Sotheby’s style of auction, which would be uncomfortable for agents and buyers alike. In either case, it was just strange enough to be deemed out of place on the MLS.
I’m guessing that some agents reading this are thinking, “yeah, this seller/agent should burn in hell for what she tried”. However, being an investor myself, I applaud her creative approach to trying to maximize the price she can fetch for her property, and for trying to structure the commission so that agent represented buyers and walk-ins are treated equally.
Very interesting, Eric. I may have to read it three more times to totally “get it”. What complicates it is that she is the owner, and not acting on behalf of a third party. Would the whole concept make sense if she were not the owner?
As an owner, she can do whatever she wants. As an mls participant, she is an owner using the mls primarily as a means to advertise her own wares.
I have to pretend that it was not her property to evaluate the ethics of noting that the cooperative offer was 4%, and then saying that the 4% is NOT in the asking price.
Kinda like “now you see it…now you don’t”. Kinda like…”well you could have 4%…hell you could have 10%!!…as long as you’re not getting it from ME”.
Think of it this way. You show a property and when you bring an offer to the seller, they say thanks. They say more than that. They say thank you VERY, VERY MUCH! They take your offer, sell their house and wave bye, bye…doesn’t seem quite in the spirit of the mls offer of cooperation…but then I’m still on my first cup of coffee and it’s only 7:17 a.m.
Interesting article, for sure! Anything that makes me think real hard has some MEAT in it 🙂 I’ll have to chew on this one for awhile.
Ardell, you bring up a good point. I consider myself as much an investor (if not more) as an agent. This commentary was the investor part of me speaking up. In examing how agent/owners manage the transactions of their own properties (investment or owner occupied), it’s like a truth serum that gets to the root of what they feel about the “system”.
She made it clear in both SOC comment area and agent remarks how the gross up worked. This would give agents plenty of time to figure out how to explain this to clients.
Assuming that a property fits the profile of a client, is an agent refusing to show a client a property because the SOC is 2% and an agent refusing to show a property because he/she refuses to explain how a grossed up commission would work in the same ballpark of ethics?
Ardell, you bring up a good point. I consider myself as much an investor (if not more) as an agent. This commentary was the investor part of me speaking up. In examing how agent/owners manage the transactions of their own properties (investment or owner occupied), it’s like a truth serum that gets to the root of what they feel about the “system”.
She made it clear in both SOC comment area and agent remarks how the gross up worked. This would give agents plenty of time to figure out how to explain this to clients.
Assuming that a property fits the profile of a client, is an agent refusing to show a client a property because the SOC is 2% and an agent refusing to show a property because he/she refuses to explain how a grossed up commission would work in the same ballpark of ethics?
Eric, can you clarify? If the sale price accepted is $100K, for example, then the parties mutually agree to increase the price to $104K to offset the commission?
Correct. For an owner/agent, in a multiple offer situation, especially one involving both agent represented buyers and non-agent represented buyers, this would allow the owner/agent to maximize the return from the sale of the house.
I agree this is unusual,and I don’t know if I would try it, but in a future world where more and more buyers have the info they need to bypass agents, a shift to grossing up vs. netting down might make sense.
Assume that this was standard practice. Assuming a 6% total commission split, the listing agent commission is ‘netted’ in the purchase price. If a buyer’s agent comes along, the other 3% is grossed up. However, if a direct buyer comes along, the listing agent needs to gross up the price to capture any of the SOC 3%. This might force a conversation with the seller, and lead to an adjustment in compensation for that listing agent. Who knows.
Correct. For an owner/agent, in a multiple offer situation, especially one involving both agent represented buyers and non-agent represented buyers, this would allow the owner/agent to maximize the return from the sale of the house.
I agree this is unusual,and I don’t know if I would try it, but in a future world where more and more buyers have the info they need to bypass agents, a shift to grossing up vs. netting down might make sense.
Assume that this was standard practice. Assuming a 6% total commission split, the listing agent commission is ‘netted’ in the purchase price. If a buyer’s agent comes along, the other 3% is grossed up. However, if a direct buyer comes along, the listing agent needs to gross up the price to capture any of the SOC 3%. This might force a conversation with the seller, and lead to an adjustment in compensation for that listing agent. Who knows.
Thanks Eric. I’d like to post on this topic on RCG this week or next, when I can find the time. We see similar scenarios very frequently in the transactions our office closes, where the seller increases the price over list price to offest closing costs. The ramifications of this practice on price escalation is quite interesting–not to mention the efficacy of how the homes are being appraised.
ooops. “offest”=offset closing costs.
🙂
The woman broke the rules. The rules are there to provide a level playing field. If she wants to do something that is not allowed in the MLS rules, then she shouldn’t participate in the MLS.
And as far as other agents “snitching her out”, I think that the MLS must be self-policing, as there are so many listings out there, it’s impossible for the MLS staff to catch every rule-breaker.
Believe it or not, many agents LIKE the MLS and WANT to cooperate with other agents and to follow the rules. The rules may be cumbersome at times, but realize that, without firm rules, there would be anarchy and the system would dissolve.
Perhaps that’s what some would want, but membership in the MLS is purely voluntary.
The woman broke the rules. The rules are there to provide a level playing field. If she wants to do something that is not allowed in the MLS rules, then she shouldn’t participate in the MLS.
And as far as other agents “snitching her out”, I think that the MLS must be self-policing, as there are so many listings out there, it’s impossible for the MLS staff to catch every rule-breaker.
Believe it or not, many agents LIKE the MLS and WANT to cooperate with other agents and to follow the rules. The rules may be cumbersome at times, but realize that, without firm rules, there would be anarchy and the system would dissolve.
Perhaps that’s what some would want, but membership in the MLS is purely voluntary.
The MLS is voluntary…that’s rich. There’s no real competition to the MLS; therefore, if the vast majority of broker members want a 6% commission (for example), do they just structure the rules to make it as difficult as possible to vary from this…and then if you don’t like it, call it voluntary?
Sorry for the rant. I see where the DOJ is coming from.
Marlow – clearly an orderly marketplace brings confidence to those who would dip their toes. However, there’s no real alternative organized market which could offer a different way of matching sellers to buyers.
I meant no offense with my last post (I can see how it might have come off that way).
Marlow – clearly an orderly marketplace brings confidence to those who would dip their toes. However, there’s no real alternative organized market which could offer a different way of matching sellers to buyers.
I meant no offense with my last post (I can see how it might have come off that way).
The “creative advertising” is really a strawperson. The issue is that the forum is being misused.
MLS as a “neutral” space. Some competitor may arise, but the MLS is the best, central place to market homes because of its connection to agents. (Or in your words “The MLS is for agents, not joe consumer.”) In order for that space to function for that constitutuency, self-policing and “brokerage-neutral” conventions are required.
Craigslist, eBay, etc. have their own culture and conventions to create incentives for the kind of participation they seek. The MLS has a different constiutuency.
The MLS has achieved critical mass BECAUSE it is connected to agents. If you sever the connection to agents by minimizing their incentives to share this information, then the MLS splinters and some other way of aggregating listings will emerge.
THAT is the creative marketing. The scenario you are talking about is just feeding off somebody else’s business model. It’s kind of like walking up to a Starbuck’s counter and announcing to all the patrons that you are selling coffee for less across the street. It might be creative outside the building, but in that space it seems to me like it’s not very creative.
The question should be how to move to a more open system but still maintain brokerage participation. Your story sounds to me like a rationalization cuz the community where you were inserting your creative marketing doesn’t care for the model.
Have you tried advertising your book on Craigslist yet? Has your publisher?
Excellent analogy with Starbucks. Furthermore, I don’t have any book to publish, but if I did, I could market it more freely and creatively within the ‘box’ of the publishing world than in the box of the MLS.
You are right, the MLS is a box with its rules and regulations. Am I calling for a grand revolution? No. Am I discussing issues that have some validity and perhaps market value if not for the rules of the MLS? I think so.
I really like the discussions that occur in the comments following posts. It’s fun to hear these very different points of view.
Greg Swann at Bloodhound Blog has some great alternatives to the MLS…..(http://www.BloodhoundRealtyBlog)
LOL…looks like some rules “were meant to be broken”. Time for some rules to be changed!!
I totally agree with you, Eric, on the “Sunday Open House should be allowed to show in the public remarks section”. I have done that WITHOUT having my hand slapped by the mls.
Seems MLS hand slapping is somewhat “selective” 🙂
What was the MLS # for the owner/agent scenario? I need to see it from the “inside” to see if there was a “violation” or not.
LOL…looks like some rules “were meant to be broken”. Time for some rules to be changed!!
I totally agree with you, Eric, on the “Sunday Open House should be allowed to show in the public remarks section”. I have done that WITHOUT having my hand slapped by the mls.
Seems MLS hand slapping is somewhat “selective” 🙂
What was the MLS # for the owner/agent scenario? I need to see it from the “inside” to see if there was a “violation” or not.
Eric,
This is the same scenario as I have right now on one of my listings. Buyer comes direct to me with one offer, and another is submitted by an agent. The one direct to me has more net for the seller and the other agent screams NOT FAIR!!
In other mls systems around the country, there is a place to check “variable rate commission” which warns buyer agents that the listing agent has an “unfair advantage”, because they don’t accept the full mls offering if the buyer comes to them direct.
Who out there has an mls that warns buyer agents that the listing agent can play with the fee, if the buyer comes to them direct without a buyer agent? Actually, I think all of the ones I’ve belonged to in the past have had the “variable rate” warning to the mls members at large.
Eric,
This is the same scenario as I have right now on one of my listings. Buyer comes direct to me with one offer, and another is submitted by an agent. The one direct to me has more net for the seller and the other agent screams NOT FAIR!!
In other mls systems around the country, there is a place to check “variable rate commission” which warns buyer agents that the listing agent has an “unfair advantage”, because they don’t accept the full mls offering if the buyer comes to them direct.
Who out there has an mls that warns buyer agents that the listing agent can play with the fee, if the buyer comes to them direct without a buyer agent? Actually, I think all of the ones I’ve belonged to in the past have had the “variable rate” warning to the mls members at large.
Eric,
Sheesh:) I misread the book thing. Very funny;)
There are some problems with the Starbuck’s analogy, but my point is that the “creative marketing” is successful because the brokerages are at the table. If the “creative marketing” drives them away, then it isn’t sustainable. By analogy, without Starbuck’s participation, those customers wouldn’t be there for you to yell to.
So does that make guerilla marketing in line at Starbucks a good idea? Is it reasonable to expect that sort of business practice to go over well among particular constituents?
Emergence of a competitor to the MLS will not come from individual agents disrupting from within…those agents need MLS exposure. (imho)
Actually I think a centralized space for listings is INCREDIBLY valuable and stabilizes market values by providing some degree of transparency to pricing and value. Technology will help this, but the larger social practices are key. And we are still using the historical tools of “real estate agents.” The inertia/privlige of the status quo is large.
These are definitely issues worth talking about. Thanks for posting.
Eric,
Sheesh:) I misread the book thing. Very funny;)
There are some problems with the Starbuck’s analogy, but my point is that the “creative marketing” is successful because the brokerages are at the table. If the “creative marketing” drives them away, then it isn’t sustainable. By analogy, without Starbuck’s participation, those customers wouldn’t be there for you to yell to.
So does that make guerilla marketing in line at Starbucks a good idea? Is it reasonable to expect that sort of business practice to go over well among particular constituents?
Emergence of a competitor to the MLS will not come from individual agents disrupting from within…those agents need MLS exposure. (imho)
Actually I think a centralized space for listings is INCREDIBLY valuable and stabilizes market values by providing some degree of transparency to pricing and value. Technology will help this, but the larger social practices are key. And we are still using the historical tools of “real estate agents.” The inertia/privlige of the status quo is large.
These are definitely issues worth talking about. Thanks for posting.
Eric,
There are Hundreds of other MLS type solutions out there if someone doesn’t want to play by the MLS rules. There is craigslist, ebay, yahoo, fsbo.com, trulia and many more. The difference between these systems and an MLS is the amount of chaos. Imagine if the MLS had no rules would you pay to be part of it? Go look at properties on craiglist anyone can post anything now imagine taking someone over to a property that wasn’t even really for sale. Try getting into that property with no keybox system.
The rules of the MLS were made by the members of the MLS. I personally prefer to play in an arena where there are rules. You don’t have to agree with all the rules you just have to play by them. If you don’t like the rules there are methods of changing them. If you are in the minority you are just plain in the minority. It’s because of rules that agents can work with some level of confidence.
Eric,
There are Hundreds of other MLS type solutions out there if someone doesn’t want to play by the MLS rules. There is craigslist, ebay, yahoo, fsbo.com, trulia and many more. The difference between these systems and an MLS is the amount of chaos. Imagine if the MLS had no rules would you pay to be part of it? Go look at properties on craiglist anyone can post anything now imagine taking someone over to a property that wasn’t even really for sale. Try getting into that property with no keybox system.
The rules of the MLS were made by the members of the MLS. I personally prefer to play in an arena where there are rules. You don’t have to agree with all the rules you just have to play by them. If you don’t like the rules there are methods of changing them. If you are in the minority you are just plain in the minority. It’s because of rules that agents can work with some level of confidence.
Eric, no real competition for the MLS… for who?? Agents or buyers and sellers??. I’m asking, I’m not sure what you mean.
As a layman, this looks like a completely unnecessary situation that stems from having the seller withhold the money the buyer pays to their agent. The seller shouldn’t need to have any knowledge of what the buyer is paying to purchase a property, only what the seller will receive for the sale of the property. Also, by eliminating withholding you’d eliminate the standard withholding rate and I’d think that would make agent commissions more fluid and hurt accusations of collusion.
Considering that change improbable, the agent sounds foolish for being so explicit. She could have effectively done the same thing without any MLS problems if she wasn’t so transparent. Buyer’s agents will almost always howl at something that reminds people of their commissions. What she should have done is listed a date for reviewing offers (which seems like a standard practice), started the review process by determining her net proceeds for each offer, and gone on from there. There’s no reason to tell the agents – it’s not like they want the process to be transparent or fair. The only people to tell would be serious walk-ups, so they know they’re getting a fair shake.
This is definitely a topic of interest as I’m planning on selling in the spring and have no real use for an agent. I know my specific neighborhood and my comps better than any agent, I know how to stage, I know the overall process and I’m willing to lose some negotiation skills to ease the transaction and hopefully find a buyer I like and that my neighbors will like. The only advantage a seller’s agent might give me is bringing in buyers whose agents are less concerned for their clients than making sure two agents get a cut from the sale. I’m not sure if listing with a service like Redfin entails that kind of discrimination but I plan on listing with the MLS because that’s effectively the only game in town.
As a layman, this looks like a completely unnecessary situation that stems from having the seller withhold the money the buyer pays to their agent. The seller shouldn’t need to have any knowledge of what the buyer is paying to purchase a property, only what the seller will receive for the sale of the property. Also, by eliminating withholding you’d eliminate the standard withholding rate and I’d think that would make agent commissions more fluid and hurt accusations of collusion.
Considering that change improbable, the agent sounds foolish for being so explicit. She could have effectively done the same thing without any MLS problems if she wasn’t so transparent. Buyer’s agents will almost always howl at something that reminds people of their commissions. What she should have done is listed a date for reviewing offers (which seems like a standard practice), started the review process by determining her net proceeds for each offer, and gone on from there. There’s no reason to tell the agents – it’s not like they want the process to be transparent or fair. The only people to tell would be serious walk-ups, so they know they’re getting a fair shake.
This is definitely a topic of interest as I’m planning on selling in the spring and have no real use for an agent. I know my specific neighborhood and my comps better than any agent, I know how to stage, I know the overall process and I’m willing to lose some negotiation skills to ease the transaction and hopefully find a buyer I like and that my neighbors will like. The only advantage a seller’s agent might give me is bringing in buyers whose agents are less concerned for their clients than making sure two agents get a cut from the sale. I’m not sure if listing with a service like Redfin entails that kind of discrimination but I plan on listing with the MLS because that’s effectively the only game in town.
Ben,
One of the benefits of agents in a diverse area like Seattle, is that buyers are not subject to “sellers who want to find a buyer they LIKE, and that my neighbors WILL LIKE.” What if you and your neighbors don’t “like” gay people, or people who don’t speak English. Not YOU personally, but clearly there could be abuse if sellers were “hand picking” only people the “liked” and that the neighbors “liked” as well.
” I’m not sure if listing with a service like Redfin entails that kind of discrimination but I plan on listing with the MLS because that’s effectively the only game in town.”
Entails that kind of “discrimination”? Sure you can discriminate against all kinds of people. You can discriminate as long and as far as your conscience allows.
But if we catch you, you’re screwed, because we WILL report you to HUD and the Office of Fair Housing and Equal Opportunity.
And by “we”, I mean every decent and law-abiding real estate professional reading this.
We may disagree about a lot of things, but we will not tolerate discrimination and Sellers hand-picking who can and can’t buy their house and move into their neighborhood.
” I’m not sure if listing with a service like Redfin entails that kind of discrimination but I plan on listing with the MLS because that’s effectively the only game in town.”
Entails that kind of “discrimination”? Sure you can discriminate against all kinds of people. You can discriminate as long and as far as your conscience allows.
But if we catch you, you’re screwed, because we WILL report you to HUD and the Office of Fair Housing and Equal Opportunity.
And by “we”, I mean every decent and law-abiding real estate professional reading this.
We may disagree about a lot of things, but we will not tolerate discrimination and Sellers hand-picking who can and can’t buy their house and move into their neighborhood.
Ben-
I appreciate your feedback, whether people agree with you or not. I think it’s great that consumers outside of the industry would chime in on this blog–hope more & more do so.
If you read this, I’d like to know what led you to the idea of not using a traditional agent to help you with your sale. Have you had poor experiences with agents before? If so, describe, if you would, the details. One of the hot topics in real estate is value received for commission paid–did I get my money’s worth. Perhaps the Realtors who frequent this blog could learn about your approach and thinking regarding this issue.
– Tim
Eric,
When someone obtains a real estate license without the intention to assist others in buying and selling property, it doesn’t feel right. When someone joins the mls just to use it as a vehicle to buy and sell their own property, it doesn’t seem right.
I’m open minded, but it feels like someone who joins the Catholic Church to get a “taste” every Sunday, because they have the best wine in town.
What I’ve learned from this discussion:
1) The MLS has rules by which members must abide. Many are there for good reasons, to ensure a stable and fair marketplace, which allows it to grow and become more ‘efficient’.
2) Many of these rules give advantage to the agent over the consumer, even though the MLS is more visible to the consumer than ever (thanks to feeds, discounters, Redfin’s, etc.).
3) The tension between the original agent focus of the MLS and the higher consumer visibility is increasing (as evident in the various commentaries on disintermediation, etc. found on this blog).
4) People getting their licenses to sell their own houses may not seem right, but is allowed under MLS rules and state laws, and these individuals represent a growing (albeit small) bridging influence to the MLS since their mindsets are closer to the consumer mindset than are full time agents, since they are selling their own property.
Fun discussion all!
Ardell –
Ouch. I think you picked the worst simile, given the metaphor. Agents as god worshippers? MLS as church/God? What does that make the consumer? Bound for hell without the guidance and grace of the MLS? 😉
Ardell –
Ouch. I think you picked the worst simile, given the metaphor. Agents as god worshippers? MLS as church/God? What does that make the consumer? Bound for hell without the guidance and grace of the MLS? 😉
Eric –
I think your angle on these discussions is really interesting. And the responses, even moreso. You purchased homes prior to getting a real estate license and then joined the profession of sales agents. Working in both realms exposes difficulties, taboo’s and probably some eye-opening experiences. Perhaps you could find the time in the future to comment on this.
Regards,
Tim
Eric –
I think your angle on these discussions is really interesting. And the responses, even moreso. You purchased homes prior to getting a real estate license and then joined the profession of sales agents. Working in both realms exposes difficulties, taboo’s and probably some eye-opening experiences. Perhaps you could find the time in the future to comment on this.
Regards,
Tim
LOL Eric, “if the shoe fits” as they say. Sometimes the wino has to be shown the door 🙂 The history of the real estate industry, the carved in stone that is now shifting principles, are indeed, older than some churches!
Marlow, the “discrimination” I was referring to with that term is agents who discriminate against listings by discount services or against listings with low or no withholding – ie., fallout from the type of agents I mentioned in the sentence just before that one. Even a good and honest agent can unintentionally put a cloud over the property if they mention to the buyer that compensation will be an issue.
Ardell, I think a seller that’s a determined racist or sexist or anti-gay person could pretty easily find a way to discriminate against potential buyers without ever meeting them. It may not be as foolproof as meeting potential buyers in person but, being that a determined bigot is a fool, they probably don’t care. Besides – if a hypothetical potential for bigotry is an apt reason to prevent buyers and sellers from meeting, then all brick-and-mortar stores should be closed down. 😉 As it is, they’re ruled by anti-discrimination laws and I believe and hope real estate transactions have similar laws in place.
I understand a seller meeting potential buyers is unorthodox and I wouldn’t hold it against buyers unable to do it. My goals are to make the process more humane, give the potential buyers a chance to get better informed about the house and neighborhood before making an offer, and to let me be more socially responsible. My idea isn’t for terrifying interviews but something closer to a casual introduction if they seem seriously interested at an open house. They can ask whatever they want about the property, the neighbors, nearby attractions, maybe get some tips and tricks, etc. In return, I’d like to get a sense of what they appreciate about the property or why they want it. I’m absolutely not interested in giving preference to someone based on their race, gender, sexual orientation, ethnicity, age or religion. The most important thing I’d like from meeting them is to feel I did my best to find a buyer that’ll respect the history of the immediate area and that, however severe the changes they make to the property, they’ll be informed with that respect. That’s enough to make myself and (hopefully) my neighbors satisfied. If there’s something else remarkably positive about them – e.g., a long history of volunteering at shelters – I think it would be irresponsible of me not to take it into account. That written, all of this is putting the cart before the horse for now.
Tim, I’ll respond to your post before I’m gone for the weekend.
Marlow, the “discrimination” I was referring to with that term is agents who discriminate against listings by discount services or against listings with low or no withholding – ie., fallout from the type of agents I mentioned in the sentence just before that one. Even a good and honest agent can unintentionally put a cloud over the property if they mention to the buyer that compensation will be an issue.
Ardell, I think a seller that’s a determined racist or sexist or anti-gay person could pretty easily find a way to discriminate against potential buyers without ever meeting them. It may not be as foolproof as meeting potential buyers in person but, being that a determined bigot is a fool, they probably don’t care. Besides – if a hypothetical potential for bigotry is an apt reason to prevent buyers and sellers from meeting, then all brick-and-mortar stores should be closed down. 😉 As it is, they’re ruled by anti-discrimination laws and I believe and hope real estate transactions have similar laws in place.
I understand a seller meeting potential buyers is unorthodox and I wouldn’t hold it against buyers unable to do it. My goals are to make the process more humane, give the potential buyers a chance to get better informed about the house and neighborhood before making an offer, and to let me be more socially responsible. My idea isn’t for terrifying interviews but something closer to a casual introduction if they seem seriously interested at an open house. They can ask whatever they want about the property, the neighbors, nearby attractions, maybe get some tips and tricks, etc. In return, I’d like to get a sense of what they appreciate about the property or why they want it. I’m absolutely not interested in giving preference to someone based on their race, gender, sexual orientation, ethnicity, age or religion. The most important thing I’d like from meeting them is to feel I did my best to find a buyer that’ll respect the history of the immediate area and that, however severe the changes they make to the property, they’ll be informed with that respect. That’s enough to make myself and (hopefully) my neighbors satisfied. If there’s something else remarkably positive about them – e.g., a long history of volunteering at shelters – I think it would be irresponsible of me not to take it into account. That written, all of this is putting the cart before the horse for now.
Tim, I’ll respond to your post before I’m gone for the weekend.
Ben
I think that Ardell has on several occasions said that a Seller meeting a Buyer is actually a good thing in a real estate transaction. When this happens, of course, you introduce the human element to the transaction.
If the Seller does not “like” a particular Buyer, they may choose not to sell to them AS LONG AS the dislike does not involve a protection under Fair Housing laws. For example, a Seller cannot “like” a certain Buyer who may not have children in favor of another Buyer who does because ‘familial status’ is a protected class under Fair Housing laws. On the other hand, if a Seller does not “like” a Buyer because they are a raging A&%hole, then Seller may choose not to sell to that Buyer. Last I looked, raging A&%holes were not a protected class.
Discrimination occurs every day in real estate. I personally know of many situations where agents have written glowing letters about their Buyer clients in multiple offer situations. These letters do not generally refer to the T’s and C’s of the contract. Instead, they are designed to humanize the Buyer so the Seller will “like” them more than the others. Agents must do this because it works, at least from time to time.
Are there any agents out there that have written such letters? What has been your experience?
Russ
Ben
I think that Ardell has on several occasions said that a Seller meeting a Buyer is actually a good thing in a real estate transaction. When this happens, of course, you introduce the human element to the transaction.
If the Seller does not “like” a particular Buyer, they may choose not to sell to them AS LONG AS the dislike does not involve a protection under Fair Housing laws. For example, a Seller cannot “like” a certain Buyer who may not have children in favor of another Buyer who does because ‘familial status’ is a protected class under Fair Housing laws. On the other hand, if a Seller does not “like” a Buyer because they are a raging A&%hole, then Seller may choose not to sell to that Buyer. Last I looked, raging A&%holes were not a protected class.
Discrimination occurs every day in real estate. I personally know of many situations where agents have written glowing letters about their Buyer clients in multiple offer situations. These letters do not generally refer to the T’s and C’s of the contract. Instead, they are designed to humanize the Buyer so the Seller will “like” them more than the others. Agents must do this because it works, at least from time to time.
Are there any agents out there that have written such letters? What has been your experience?
Russ
CHB, I think not wanting an agent is a natural evolution for me. Buying this house was my first real estate transaction and, with it being such a huge life decision, I became extremely involved in the process. I was on top of the listings on a daily basis and after much effort and learning I found the right place. Then I told my agent where it was. 😉 In my eyes, she earned her pay with her patience over that long period of time but from that I developed a lot of independence and knowledge in the space.
In conjunction with that independence and my experience, “value received” is indeed the key to my lack of interest in a traditional agent. If I sell with a traditional agent and standard rate, each agent involved will receive roughly $18,000. What am I getting for that money? The selling agent may work the equivalent of two weeks full time for me. For their two weeks’ worth of work, I give them over two months’ of my gross income – assuming a few thousand in expenses. Perhaps more striking, it would currently take me over two years to save up the money I’m supposed to pay them for two weeks of work. Considering I know the comps and the pricing cold, I stay current with the market, I watch plenty of shows on staging and have friends around for advice, what would a traditional agent give to me that is worth sacrificing so much? Many of their services are worthwhile to me but not at the price. If I pay such extraordinary wages, I need to know the seemingly-unreasonable portion of the fee is money I wouldn’t have otherwise received from the sale. Unfortunately the profit motive for listing agents is in a quick sale, not in getting the best offer for their client.
I hear similar thoughts as well when we close real estate transactions. Some clients never bring up commissions and others won’t let it die.
When you break it down into components such as you have, it seems to make a lot of sense. It sounds like you’ve put a lot of thought into your reasoning for saving $36,000. No matter how you cut the pie, it’s a lot of money. I don’t know that many would fault you for that. I certainly wouldn’t. With access to sold data on John L Scott’s web site or Zillow.com, for example, it makes it much easier for consumers to get a handle on sold data and price your home competitively.
I’m sure you’ve researched companies that can put your home in the Northwest Multiple Listing Service,including traditional brokerages, but if you need resources there are many people on this blog that can assist you. And don’t forget the free online exposure at Google, CraigsList, among a slew of others.
– Tim
I hear similar thoughts as well when we close real estate transactions. Some clients never bring up commissions and others won’t let it die.
When you break it down into components such as you have, it seems to make a lot of sense. It sounds like you’ve put a lot of thought into your reasoning for saving $36,000. No matter how you cut the pie, it’s a lot of money. I don’t know that many would fault you for that. I certainly wouldn’t. With access to sold data on John L Scott’s web site or Zillow.com, for example, it makes it much easier for consumers to get a handle on sold data and price your home competitively.
I’m sure you’ve researched companies that can put your home in the Northwest Multiple Listing Service,including traditional brokerages, but if you need resources there are many people on this blog that can assist you. And don’t forget the free online exposure at Google, CraigsList, among a slew of others.
– Tim
On the listing side, you have it down pat. On the selling side, you’ll be limiting your market by not offering some sort of commission to buyer’s agents. If your market is so hot that any house would sell within days based just on it being for sale, your way makes a lot of sense.
Given your apparent knowledge of preparing a house for sale and pricing it correctly, by all means, go with a discounter (just get it on the MLS). However, to maximize the number of potential buyers that come through, offering some sort of commission will increase your traffic.
As we discussed many times, and however sickening it makes you (or me) on principle, many agents won’t show a house if it offers less than 3% (this is the case especially where comparables offer 3%). You may choose to take a stand and offer less or none, and if your holding costs justify a longer time on market, then by all means, save money! However, if that money you would save by not offering a commission to a buyer’s agent is eaten up by the property sitting on the market for six months, then it’s a poor decision not to offer the commission.
Hell, when I sell my next investment property, I plan to offer 3.5%. Why? Because I know that I’ll get more traffic than if I offer simply 3%. Ethically, should the behavior of buyer agents change by the bump of 1/2%? No. By doing so do I clearly believe otherwise? Absolutely! Is this unethical of me? Am I doing the equivalent of ‘suborning purgory’ by inviting agents to possibly act unethically? Absolutely not. I’m making a decision that best benefits my client (me), whose wish is to sell his house quickly and/or at the desired price.
On the listing side, you have it down pat. On the selling side, you’ll be limiting your market by not offering some sort of commission to buyer’s agents. If your market is so hot that any house would sell within days based just on it being for sale, your way makes a lot of sense.
Given your apparent knowledge of preparing a house for sale and pricing it correctly, by all means, go with a discounter (just get it on the MLS). However, to maximize the number of potential buyers that come through, offering some sort of commission will increase your traffic.
As we discussed many times, and however sickening it makes you (or me) on principle, many agents won’t show a house if it offers less than 3% (this is the case especially where comparables offer 3%). You may choose to take a stand and offer less or none, and if your holding costs justify a longer time on market, then by all means, save money! However, if that money you would save by not offering a commission to a buyer’s agent is eaten up by the property sitting on the market for six months, then it’s a poor decision not to offer the commission.
Hell, when I sell my next investment property, I plan to offer 3.5%. Why? Because I know that I’ll get more traffic than if I offer simply 3%. Ethically, should the behavior of buyer agents change by the bump of 1/2%? No. By doing so do I clearly believe otherwise? Absolutely! Is this unethical of me? Am I doing the equivalent of ‘suborning purgory’ by inviting agents to possibly act unethically? Absolutely not. I’m making a decision that best benefits my client (me), whose wish is to sell his house quickly and/or at the desired price.
Seattleeric, I absolutely agree with you on offering a commission for agents. I’m not sure how I’ll approach it but I may have an initial period where I list at fair price with everything but the MLS (with or without mention of commission) and then list it with the MLS and offer three or four percent. We’ll see. This morning I got great news from my structural engineer and I might change the house enough that comps become harder or I might end up keeping the place.
Auction
An auction type of sale is increasingly more common in the CBA multiple listing system (Commercial Broker’s Association MLS). I have seen several properties listed for $1 with notes indicating a sealed bid auction on a specific date. I would doubt it is against the CBA MLS rules since it is becoming more common. I haven’t read the NWMLS rules to remark if the language in the CBA auction listings would violate NWMLS rules.
SOC
Maybe the buyer should compensate their own real estate counsel in the transaction? This isn’t so outlandish. It is a common practice in the commercial space. The higher priced and larger the property the more likely each party pays for their own real estate counsel rather than a cooperative commssion.
Agent Compensation
“Can free entry be inefficient? Fixed commissions and social waste in the real estate industry”, Chang-Tai Hsieh; Enrico Moretti. The Journal of Political Economy; Oct 2003. the paper discusses many points on the this topic. The RE industry has an incredibly low barrier to entry. (could a box of cabbage could pass the licensing exam?). In high price housing markets, people becomes RE agents when they percieve the commissions earned are more than their “real job” compensation. As more agents enter the market, productivity per agent or transations per agent decreases as the increased number of agents compete for a finite number of transactions. Agent expenses increase to attract business and conduct business. At the end of the day real wages for the average agent remain unchanged from higher prices, fewer transations, and higher costs. In lower appreciation markets the average agent makes the same wages as high price market agents. The lower priced market agents experience a greater number of transations per agent, lower costs of doing business, and fewer new agents. Interestingly, the paper mentioned that the top agents in a high priced market were less impacted by the increased number of new agents entering the industry suggesting that low productivity veteran agents are competing against new agents entering the industry. The top agents continue to make top dollar, while the others began to flounder. the 80/20 becomes 90/10