Tag Archives: commissions

I FEEL LIKE A DOG!!

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[photopress:collie.gif,thumb,alignright]I feel like a dog this week. Four times this week I went into people’s homes to tell them what they needed to do to get top dollar for their home. The last two times I turned people’s homes upside down and sold them quickly for top dollar, I had no problem at all. I told them to give me the key to their home. Told them to go to work. And when they came home they were amazed at the difference and were happy, happy, happy!

But this week…I had four experiences that just make me feel like a dog!

Generally, when I stage an occupied home before putting it on the market, there is little to no cost at all. So I have no “bad news” that hurts them financially. I often do most of the work myself as part of the commission, so there’s no added expense and people are happy. So why was this week so different?

Mainly it was because of the people. The last two times the owners really wanted to move. This week, everyone who was selling “needed” to sell and “needed” to move, for reasons beyond their control. When someone really wants to move, they have no trouble when I move their stuff around. This week, as I pulled things off of the wall that people bought from “home interiors” back in 1983, and stacked all the chatchkis in a big pile, I could feel the pain of the memories coming down with the chatckis.

Tonight it was Roosters. Roosters, roosters everywhere I turned. Two days ago it was 3D Cherubs peeking at me from every wall, most of them with gold filigree hanging from their chinny, chin chins. The toughest one of all was a dear friend of mine, a guy, and I swear he had tears in his eyes when I told him the “schocking blue” walls had to go!! He had just painted it that color to get it ready for market.

This is why most times I just have to go in and take it all down myself. I have an “eye” for getting the home just right and I’m not attached to the chatchkis like they are. It hurts them when they come down, but they don’t put them back up after I take them down and it hurts them more if they take them down themselves. It hurts them much less if they just leave and let me do it, and they come home to the “new look”.

“Detaching” from the home is a very big part of of the home selling process. The closer they are to detaching from the home, by the time they get an offer, the more likely they will get a higher price and handle the negotiating with less emotional charge.

I would never put someone through this if it didn’t make them more money. And sometimes I think I feel worse than they do when I’m done. And I know I’m not doing them any favors if I allow them to “leave money on the table” by “being nice”, and letting the house go “live” into the mls, before it is ready to be shown.

Representing “people” rarely means telling them what they want to hear, or stroking their egos. Most often it means having the guts to tell them what they need to hear, and rolling up my sleeves and just doing, what they can’t bring themselves to do.

I know in my heart that I’m doing the right thing, and helping them get the most money they can for their home. But I still feel like a dog.

Once in a Blue Moon

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[photopress:blue_moon.jpg,thumb,alignright]Once on a Blue Moon, I need to insist that a buyer, if I am going to work with them, sign a buyer agency agreement.

1) When assisting them in their home search requires that I go inside every property to ascertain if the property has what they need.

Example: must have first floor bedroom that is NOT the master bedroom, but is large enough for two people to be comfortable and have it’s own bath and be on the same floor as the washer and dryer. This is a common request for multigeneraltional families whose parents live with them and do their wash 🙂 I can’t tell all of this from mls data and have to preview lots of homes quickly and all new on market homes to make sure the first floor bedroom is not tiny and to make sure it is in reasonable proximity to the washer and dryer.

2) When I am asked to find property that is not for sale.

Example: Must live on the SE corner of the Newmark Blding on any floor higher than the 12th floor. When someone wants something that is so very specific that it requires that I contact all owners of those properties. Waiting for this to come on market is not in the best interest of the buyer, unless they are willing to wait five years to buy something (which sometimes is the case, and that’s OK). If they won’t buy anything else until they realize they can’t have what they really want, and they need a place within 6 months, then I have to contact every owner of that “commodity” and ascertain if it is a dead end and no one is thinking of moving this year. P.S. I rarely negotiate a lower commission for this type of home search. I need a written Buyer Agency contract to establish for the seller’s benefit, that I do NOT work for them, but the buyer, and so need a written contract saying that.

There are a few other examples, but I think you get the picture.

A very wise Broker once told me that once you have the meeting of the minds with a client that the relationship is exclusive…you don’t need a written contract. So as soon as someone is WILLING to sign one, you simply shake hands and acknowledge the meeting of the minds and don’t insult the client by requiring a contract.

Until there is a meeting of the minds, the contract is inappropriate, since a contract is putting on paper that meeting of the minds.

So either way, I do not need a written contract by and large, with some exceptions.

My$.02…YMMV

Sales that “fall apart” on Home Inspection

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[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.

Wrong Godfather

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[photopress:Godfather.jpg,thumb,alignright]Sellsius has the right point, but the wrong Godfather.

The Godfather of the people outside of “The Family” is the local State Real Estate Commission, appointed in most cases by the Governor of each state, and the protections for the people are in the licensing laws of each state.

The Godfather of the Realtors, the people inside “The Family”, is NAR and WAR and SKCAR and their counterparts around the country.

So in Mafiaoso-speak, Marlon Brando (in the Sellsius article) is the head of “the bosses” and Al Pacino is the Godfather of “the neighborhood”. (To be really accurate, I’d have to switch over to Sopranos…so I took a little license there, for the benefit of the non-purists, on the analogy.)

Point being, DOJ against NAR may help the Banks, more than the people, and local Departments of Licensing, and Real Estate Commissions, etc…make changes to affect the public at large. There are ripples to each that affect both…

but don’t go to the wrong Godfather on the day of his daughter’s wedding, or you may get the wrong wish granted, or no wish granted at all! For those not tuned in to “mafioso-speak”, it’s called “Barking up the Wrong Tree” 🙂

Discounters, FSBO’s and Redfin – Oh MY! And why they shouldn’t matter

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So many recent articles and posts have focused on these “new” real estate practices and how they are all reducing commissions, going to drive the stodgy old guard out of business and revolutionize the industry. I’ve also both read and listened to a lot of “traditional

New Book – Must Read!

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Editor’s Note: I’m excited to introduce Seattle Eric as a new contributor on RCG. It must be six months ago that I first approached Eric to see if he would be interesting in coming on as a contributor because I really liked the writing style he demonstrated on his blog about life as a Seattle real estate investor. Now that he’s bitten the bullet and switched to a career as a real estate agent, I’m even more excited to have him on board!

For my first post on the RCG, I’d like to promote my new book, which so happens to also be a topic of much interest recently. All proceeds will benefit…well..me.

[photopress:agent_commissions_for_dummies.jpg,full,centered]

(available while supplies last….shipping and handling extra…)

You Have to Wonder….

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And some ask why the government is so fixated on organized real estate. It is because of this mindset and the audacity to shout it out to the world…

I tactfully tell my sellers if I reduce my commission to 4 percent or 5 percent, the buyer’s agents will show my listings last only after showing the full-commission listings. Whether it’s ethical or not, that’s what happens.

Full article on Inman (subscription required after a day)

-Russ

Negotiating the Commission vs. “Discounting”

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[photopress:album2.jpg,thumb,alignright]My very first entry here on RCG discussed the manner in which a buyer and their buyer’s agent negotiate the buyer agent commission. Being a “Discount Broker” and Negotiating are not one in the same. A “Discount Broker” usually has a set fee or menu of services with set prices. Many traditional brokers have a set range within which their agents cannot deviate. “Negotiating the commission” is a simple phrase for no carved in stone set amount. It means sitting down with a client and determining a fair and reasonable price for this client given this particular client’s needs and expectations. The end result being an unknown factor until the end of the interview. The end result could be higher than the client’s desire, lower than the client’s expectation and in many cases no change at all from the agent’s expectation. Negotiation is about an intelligent discussion with a mutually agreed upon end result.

Last night before I went to sleep I popped over to Greg’s excellent blog and his article that referenced my feelings on the topic of buyers and buyer’s agents. I was a little surprised to see a “nastygram” comment there aimed at me personally and my feelings on this topic. It amazes me that agents who sit down with sellers every day to negotiate the commission, become absolutely outraged at the suggestion that buyer’s should do the same with their agent.

I would like to dispell the myth that I am a “Buyer’s Broker” who exclusively works with buyers only. Not because there is anything wrong with that business model, but because it simply isn’t true. The only reason I highlight buyers with regard to commission negotiations is because agents negotiating with seller clients is a given. There is absolutely, never a listing appointment with a seller, that does not include the topic of commission. Consequently there is no reason for me to evoke change or explain the parameters within which the seller consumer can negotiate with their agent.

One of the main reasons to highlight the difference between “discounting” and “negotiating” is the fact that Buyer Agent Bonuses are on the rise. Every night I receive emails and “Zip Your Flyers” from agents around the Puget Sound offering “$5,000 EXTRA Buyer Agent Bonus!” and “4% SOC!”

The mere concept that a Buyer Agent will be enticed to lead a buyer to one house over another, because of the amount of money that Buyer Agent will make when it sells, shoud be offensive to every single agent in this country.

The Buyer Agent represents the Buyer. The Buyer Agent is not “Selling a House to Make Money”. The Buyer Agent, in representing the Buyer’s Best Interests, should never be offering advices based on the fee structure of each property. That doesn’t mean that a low fee doesn’t infiltrate and influence the thought process. We are human. It would have to be a perfect match for my client and a great house for me to truly buckle down and recommend a house that is paying five bucks or nothing. But there have been times when I recommended a house and walked away with absolutely nothing, just as there are times when I have represented a seller and found that my walking away with nothing was the only way to achieve the objective. It happens once in a while the same as a lawyer does a pro bono case once in a while. I don’t make a business model out of it, but I don’t rule out the possibility of that end outcome either.

As for the jab at the end of the “nastygram” comment “NOTE: Ardell is NOT a REALTOR”, it is absolutely true that I “stepped out of the pew” after having been a member for 14 years or so. I have given NAR over ten years of those 14 years I was a member, to raise the status of the buyer to CLIENT level. I am disappointed that Buyer Agency has not progressed further than it has, and clearly I have given them sufficient time to meet my expectations.

Does anyone really think it matters if I go over and slap my $500 or so over at the Board of Realtors on Monday to “become a REALTOR”? Does taking five minutes out of my day and $500 out of my pocket really make any difference in who I am or how I do business with my clients? I think it is more honest and ethical to be true to myself, and stay out as long as I agree with the DOJ’s position. I think it is more honest and ethical for me to stand outside the fray until our basic thinking is more in line, than to be a member who dissents from within. I’m the one who has to look at myself in the mirror in that regard, and make a personal choice. At present, this is the one I can live with.

As long as the buyer is not expected to discuss commissions when they meet with an agent, the same as a seller – no more, no less, I will remain where I am. Discussing commissions with a seller does not automatically translate into discount nor does discussing commissions with a buyer automatically translate into discount. It is a matter of equal treatment and respect, pure and simple. How can that possibly be wrong?

ON A LIGHTER NOTE – THERE WILL AGAIN BE A PRIZE, ON BOTH SITES, FOR NAMING THE BAND AND ALBUM TITLE OF THE PICTURE IN THIS POST. Same era, late sixties, fabulous Rock and Roll band from the West Coast that might have done better on a different label. Not a One Hit Wonder, with many albums in our collection, and one of Kim’s favorite bands of all time. There are other clues to the band’s name in the photo itself, but this one should not be an easy ,”googleable” answer. Good luck!

Negotiating Fees with the Buyer Client

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I was quite encouraged by a phone call I received yesterday from an agent wanting to discuss how to approach fee negotiations with a buyer. Not how to object to the subject. Not how to respond if a buyer raises the topic. But how to introduce the concept of negotiating the fee to a buyer, without the buyer being the one to first broach the subject.

Clearly, the Buyer Agent truly treating the buyer as a client, is the key to the future of our industry. As long as agents continue to think that the seller is paying their commission, when they are representing a buyer, they will continue to treat the buyer as a second class citizen in the real estate transaction. I am very hopeful that people will start to see that there are two sides to this $coin$ and that the buyer clearly pays their fair share, if not more, for their representation.

Given the huge increases lately in Buyer Agent offerings from sellers, it is obvious that 98% of the industry still does not “get it”, nor do they want to “get it”.

Looking for guesses on that album cover. Prize to be determined by location of the winner who guesses the band and the One Hit Wonder on that album.

Buyer Agent Bonuses

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[photopress:50_50_1.jpg,thumb,alignright]For the purposes of this discussion, let’s assume that in normal market conditions, the division of the total commission agreed to by the seller in the listing contract is divided evenly between the agent for the seller and the agent for the buyer. In the diagram, the blue portion represents the listing agent’s compensation and only the yellow portion will be the subject of this discussion.

When a seller or seller’s agent is having difficulty “moving the product”, that being the house, sometimes they will raise the “offering” to the Buyer Agent as an incentive. For instance, if the price of the house is $350,000, each percent of price equals $3,500. So the seller could offer the Buyer Agent a bonus of 1% or 2% above the area norm, and spend less than a price reduction. Let’s say that it would take a price reduction from $350,000 down to $325,000 to get the property sold. That would “cost” the seller $25,000. Instead, the seller might increase the “offering” to the buyer agent in the mls by 2%, which would only cost him $7,000 in this $350,000 example. Even if the seller doubled the “offered fee”, it would cost him less than the price reduction, as doubling the compensation to the buyer agent might cost him $10,500, and dropping the price to the point where it would sell would cost him $25,000. So increasing the offering makes total sense from the seller’s side of the fence.

OK, now for the tricky part. Click here and read this before considering the rest of this post.

[photopress:33_66_1.jpg,thumb,alignright] The seller is increasing the fee to persuade “YOUR” agent to “SELL you” his house. By doing so, “your” agent can double his money. The idea that increasing the buyer agent fee will be effective in selling the house, is a holdover from the days before buyer agency existed. As the agent for the seller, I would still use this strategy when advising the seller, as it is a more cost effective method of selling a home that isn’t “moving”. However, as a buyer agent, the concept that I might be motivated by a higher fee to me, is insulting. While I generally do not believe in buyers signing buyer agency agreements, this scenario points out one of the advantages to the buyer for doing so. Even if the buyer cannot negotiate the buyer agent fee below the area norm, the buyer can stipulate that any Buyer Agent Bonuses would go to the buyer, and not to the agent. However, a more appropriate strategy might be to ignore them entirely, and simply focus on the attributes and value of the house, without regard to these incentives.

The yellow portion of the fee is the amount that the seller offers “to the person who brings buyers to his home”. It is also, and simultaneously, the amount that the buyer perceives that he is paying to the agent for representing him, the buyer, in the transaction. Until we all agree that it is the latter and not the former, buyers will never truly have equal representation in the real estate marketplace.

This duality of purpose for the same monies, continues to be a problem in the industry. One that should be talked about a whole lot more than it is. So let’s talk. What do you think? While you can comment anonymously, please note if you are responding from the point of view of a seller, a buyer, an agent, or a giraffe.

This odd duplicity of purpose regarding the yellow portion of the fee (the mls offering/buyer agent fee) has been going on for about 15 years. It’s time we began the process of coming to terms with it, by discussing it openly. There are NO easy answers to this one, but engaging in a dialogue might help move the topic out of it’s current “holding pattern”. Until and unless agents all agree that they are in the business of representing people and not in the business of SELLING anything, we can’t get to the appropriate answer. And then the consumers would have to likewise view what is happening accordingly, and not hire an agent “to sell” their house, but to “represent them in the sale of the house”.

But we can, at least, open up Pandora’s Box in the hope that the discussions will begin moving things in the right direction.