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Yeah, yeah, I know, the old "but the buyer's agent will make more money if they talk the buyer into paying more".
It's a straw man. Here's a more worrying scenario:
The OP is shopping for a home and is working with you as his local agent. He's also working with another agent in a neighboring town. If you don't talk him into buying, he will probably buy in another town through another agent, and you'll lose all your commission. The "buyer's agent's" financial interests are not well-aligned with the buyer's actual best interests. (On the plus side, I think the OP understands this, so no big deal, but it bothers me when flawed, straw man arguments are being made to the contrary, such as in your post)
With the buyer's agent system, the buyer's agent is contractually and legally bound to represent the buyer's interests. Yeah, yeah, I know, the old "but the buyer's agent will make more money if they talk the buyer into paying more". However, if you have a clue about commission structure and commission splits and do the math, you'll quickly find that that doesn't wash, because the difference in most cases (excluding the really high end properties which most agents don't handle) is a matter of a very few hundred dollars at most, and the potential loss in having an unhappy client after one deal can be many, MANY times that.
You are missing (or conveniently overlooking) a more subtle issue with the conflict of interest with BA commission.
I agree that BAs have little to benefit from increased commission from a higher sales price.
For a BA it is more black and white. Close the deal and get 3% or lose everything. Getting your buyer to offer more increases the chance that your buyer will get the home (and agent closes the deal). I would say that is a major potential conflict of interest.
So to quote yourself
Quote:
your lack of understanding of the system encourages you to pass on that lack of understanding.
Again, it's not to my long-term advantage to talk him into buying a house that he won't be happy in. And any agent who doesn't think long-term rather than just this one deal right now isn't going to be in the business for very long at all. If I do a good job and he still, because the other town is better for him, purchases there, and I don't pressure him to make the wrong decision or make a fuss, he's much more likely to think kindly of me and remember me when someone he knows is shopping in my area (maybe more than one someone he knows over time).
This means that not only is it fulfilling my fiduciary responsibility to him to make sure he gets the best deal on the right home (wherever that might turn out to be), but it also stands the best chance of serving my own bottom line long-term. Now, people (whether agents or not) who think only in the short term and expect everyone else, therefore, to only be able to think short term, might be unable to see this or to project what they think THEY would do in such a situation, but that doesn't make it any less true that successful agents think long term as described above.
For a BA it is more black and white. Close the deal and get 3% or lose everything. Getting your buyer to offer more increases the chance that your buyer will get the home (and agent closes the deal). I would say that is a major potential conflict of interest.
Isn't getting the house the goal of the buyer??? I think you're trying so hard to make real estate agents look bad that you've forgotten about the point of the whole exercise. Helping your client accomplish their goal is not a conflict of interest. In fact, it's quite the opposite.
In addition to the problem with the compensation method, agents don't have the right skills and credentials to represent a buyer. They are trained and licensed as salespeople, pretty close to the polar opposite of the skills needed to represent buyers interest. A transactional/dual (or whatever it may be called in your state) could be trained and credentialed to be professionally neutral and could do a far better job of representing both the buyer and seller in a professional capacity. As it is agents, which ever side they allegedly represent are trained and have minimal credential in marketing puffery and sales persuasion. The only credentials most agents possess are entirely aligned with sellers, as such "buyer's" agents do a better job of representing sellers in general than they do representing the buyer they allegedly work for.
The sales/marketing part of agent skills needs to be turned off entirely when an agent acts as a Buyers Fiduciary Representative. "Buyer's" agents are too focused on getting a deal closed to give even marginal representation to buyer interests. I think the only reason "buyer's" agency has been embraced by agents has been to protect half of the commission from negotiation in the face of increasing technology that is creating efficiencies that should be reducing commissions. In other words the state real estate authorities have, through good intentions I'm sure, sanctioned what amounts to fraud when practiced in it's current form.
Boy, there's a lot of people here who are operating on assumptions (and we all know what that does, don't we?) and clearly don't have a clue about the education, initial and, more importantly, continuing, that is required, and the training that goes on on a continual basis. Or even the fact that that what that is varies from state to state - some states have pretty low requirements, others have higher ones. I will say that I have, from early childhood, aced almost every test I ever took (no test anxiety helps a lot), coming in in the 98th/99th percentile on all of them, and I found the real estate exam to be the hardest test I have EVER taken, after all the classroom instruction I had by what turned out to be an excellent teacher, and after a lifetime of a variety of occupations, all of which I did with ease, real estate has turned out to be the hardest, albeit one of the more rewarding in non-monetary terms, of any of them. That's from the perspective of someone who actually does it and doesn't kibbitz from the sidelines. As for technology, speaking as someone who's been messing around with technology and its changes and innovations since I was learning the cutting edge programming language, COBOL (that would be the middle of the last century for those of you who don't remember back that far), I can say that technology is a tool, but it's a tool that can only take you so far and I would never want to rely on it for the largest purchases of my life nor think that it replaces the human brain and experience. Not yet, anyway, except in science fiction (which I read a lot of, too, but don't confuse it with real life!).
What I find is being shown is what those who are so suspicious of agents imagine that they would do THEMSELVES in the various scenarios they represent and assume (there we are again) that everyone else is just like them and would act accordingly. Or, they assume that they know everything that an agent does and everything that is required of an agent, when it's made very clear by what they say that they really don't know anything about it.
Isn't getting the house the goal of the buyer??? I think you're trying so hard to make real estate agents look bad that you've forgotten about the point of the whole exercise. Helping your client accomplish their goal is not a conflict of interest. In fact, it's quite the opposite.
Very perceptive. That's what it looks like from here, too.
Isn't getting the house the goal of the buyer??? I think you're trying so hard to make real estate agents look bad that you've forgotten about the point of the whole exercise. Helping your client accomplish their goal is not a conflict of interest. In fact, it's quite the opposite.
The goal for the buyer is to get the house for the best possible price. If a buyer has to make 10 lowball offers (over a year) to finally find a deal, this may be a win for the buyer. But I bet the agent would prefer a strong offer on the first home.
Not saying that agents cant play a role in helping people get their dream home. Not saying that all agents are influenced by the carrot at the end of the stick. Just pointing out a legitimate conflict of interest with the BA comp system. If you cant see this, then you are in serious denial.
I would prefer working with a "buyer's agent" who would promise his 3% to me, and would instead agree to be paid by the hour. Then I'd know that the perverse incentives are removed, and the realtor would know that he's getting paid even if I decide not to buy. I wonder why this isn't more common.
I would prefer working with a "buyer's agent" who would promise his 3% to me, and would instead agree to be paid by the hour. Then I'd know that the perverse incentives are removed, and the realtor would know that he's getting paid even if I decide not to buy. I wonder why this isn't more common.
How many agents have turned you down on this approach? How many have you suggested it to?
We have (at least) one agent here on CD who offers buyers a choice to pay by the hour, and almost all turn her down.
She has posted repeatedly that people want to pay when they close, and only for the house on which they close, and are willing to pay a premium to put all the risk of the fee on the agent.
Throw in the shell game which most folks willingly accept, "Buyers' Agency doesn't cost you a penny!" and that explains the popularity of the typical commission structure.
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