The 6% Real Estate Commission Bubble - Part III (sales, credit)

[slo1318]

^^You'd be better off doing FSBO or listing only.

[DMenscha]

Originally Posted by bubbleboy

Don't mind the real estate professionals comments.

Because we all have no idea what we are doing. Fans of the scientific method, where a premise is postulated and then tested for results, apparently has no bearing on the premise made by the OP.

[mateo45]

Maybe not so much now with such a limited supply on the market, but I recall back in the sub-prime heydays, where agents could afford to frequently "pick and choose" which offers received their limited attention... and which didn't. And if many of them preferred to ''cherry pick'' just the inquiries on the higher-priced properties, you can be damn sure they didn't waste their time on any listings offering less than the standard 6% commission (professional ethics or no)!

So it was just a fact of life then that the busier they were, the more inclined they were to blow off inquiries on the cheaper properties (where they would make less commission... duh)!

[lvoc]

For those who are actually interested in this stuff here is a reference that actually states what the CA law is...

http://www.dre.ca.gov/files/pdf/refbook/ref10.pdf

The agency chapter is the one you want.

[mateo45]

Thanks. Though in practicality, it would be difficult to prove that, among other things, even a listing agent was violating their "fiduciary responsibility" to their clients, by simply "cherry-picking" which calls or emails to respond to, and for which properties... ("dang, that's the second email this week that musta disappeared into my spam folder")!

[lvoc]

Competition is always an interesting thing. Just came across a listing today that really illustrated the point. New listing nice tract...$399,900 and 2.5% commission. And an agent number that indicates less than a year in the business.

Would I show it? Sure. In fact I might feature it with an eligible client. I would suggest we have an inexperienced agent and might want to play around a bit and see if we could not get a good buy. I might even point out the low commission and suggest they might want to compensate me a bit if I pull it off for them.

I then draft a low but not absurd offer and insist that I get to present it. ***** and moan...but it is my right unless they have a predated exclusion. Then I get a crack at the owner and point out how difficult it is to sell in that price range and all that. Better than 50/50 I can get them to buy a low offer.

Might even get more than I lost from my client.

RE is actually a fun sport if you approach it right.

[oldtrader]

When I was in the business for a lot of years up till retirement as a broker, here is how I handled it.

The agent is responsible to their client. I had my client pay my fee (3% on a sale listed by another broker). Then I had no fiduciary responsibility to the seller. I was no responsible to the buyer only. I will assure you, that having no duty to the seller, I could drive the priced etc., down to where the buyer saved more than my fee. I always put in the contract, that I was an agent only for the buyer, and was receiving no part of the commission paid by the seller. I knew many better agents, that did the same. As I was a commercial broker, I did the same on all types of transactions and large exchanges, some of them quite large.

Under this arrangement, the buyer came out of the sale far better off than if I was being paid by the seller. The seller got more hung up forcing the selling office to re-negotiate the sellers commission as they did not split it, than they did trying to counter the offer we made.

[behindthescreen]

Originally Posted by oldtrader

When I was in the business for a lot of years up till retirement as a broker, here is how I handled it.

The agent is responsible to their client. I had my client pay my fee (3% on a sale listed by another broker). Then I had no fiduciary responsibility to the seller. I was no responsible to the buyer only.

That's the problem now a days ever since the MLS became public "why is it public to begin with when we pay the fees?". Buyer's don't want the buyer's agent to be paid a commission PERIOD. They feel that since they can search properties online, they are doing all the work. A lot of buyer's feel that the agent isn't doing enough work for them to be paid such an "absurd" amount of money to draw up contracts. Even when the SELLER is the one who agrees to pay the commission out of the proceeds, they try to twist it and say THEY are paying the commission since the money that is paying for the house is coming from them "usually the bank".

Originally Posted by oldtrader

Under this arrangement, the buyer came out of the sale far better off than if I was being paid by the seller.

That is typical of what happens. A lot of buyers like to play agent but really don't know what they are doing as far as strategy and pricing a home. They will use irrelevant comps, comps that are too old, comps that are across town that have no bearing on the neighborhood, etc. You try to educate them about it without giving them too much free information but they usually won't listen to you anyway because a) they think they know more than you b) you make too much money c) you are trying to rip them off.

Agent: Sir, there is no inventory. The seller already has over 20 offers on the house. They are not going to accept this lowball offer. If you really want the house, you need to come in at LEAST at asking price if not MORE or else you risk not even being countered.

Buyer: All you agents are all the same. All you care about is the commission. That's why you want me to raise my asking price so you can make more money. You know, I'm thinking about getting my real estate license. I heard it's easy to get anyway

[mateo45]

Originally Posted by behindthescreen

That's the problem now a days ever since the MLS became public "why is it public to begin with when we pay the fees?".

That is typical of what happens. A lot of buyers like to play agent but really don't know what they are doing as far as strategy and pricing a home. They will use irrelevant comps, comps that are too old, comps that are across town that have no bearing on the neighborhood, etc. You try to educate them about it without giving them too much free information but they usually won't listen to you anyway because a) they think they know more than you b) you make too much money c) you are trying to rip them off.

Agent: Sir, there is no inventory. The seller already has over 20 offers on the house. They are not going to accept this lowball offer. If you really want the house, you need to come in at LEAST at asking price if not MORE or else you risk not even being countered.

Buyer: All you agents are all the same. All you care about is the commission. That's why you want me to raise my asking price so you can make more money. You know, I'm thinking about getting my real estate license. I heard it's easy to get anyway

Exactly right, things have changed enormously. The accessibility of MLS info on ''the internets'' has really ''empowered'' the buyer now (and not always for the better)! Then throw in the relatively recent addition of so many REO's and Short Sales on the market, which many agents initially had little knowledge of or real experience dealing with, and sometimes those agents even avoided them because of it!

So all too often, many realtors started giving the impression of simply being the "information gatekeepers", if not actual "obstacles" to increasingly savvy and motivated buyers. Then of course, the proliferation of amateurish part-time agents hasn't exactly helped the public perception either, that ''heck, I can do this myself, what do I need an agent for?''.

[Musa O]

Real estate agents deserve to be paid for their work just like everyone else and anyone suggesting that this is wrong is not being genuine and should not be trusted.