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Lest many forget that the US is one of the only places in the world where the seller pays the buyers agent fee - normally that is borne by the buyer.
It works this way because of lenders. I know you've been involved in those discussions.
Quote:
Originally Posted by illtaketwoplease
Simply don't - and don't deal with buyers who won't pay the fee you want for working. But if a house is listed with a 3% co-broke fee (and noted as sliding scale) - are you not going to show that to your buyer?
I use buyer agency agreements so I don't care what the listing agent offers, but one of the rules of most MLS's is that the offer of compensation can't be conditional. The sliding scale would violate the rules of most MLS co-ops.
Quote:
Originally Posted by illtaketwoplease
commissions are negotiable - a seller can offer anything they want. Heck, someone could list your house and offer $500 and a 22lb butterball turkey as a coop fee.
My MLS the co-op has to be a number of at least $1. Not sure about other MLS rules, but I'm sure they require a monetary offering. You could offer the $25 it would cost for said turkey on sale.
Quote:
Originally Posted by illtaketwoplease
I could list dozens where this makes slam-dunk sense.
Brandon - I don't respond to stupid scenarios such as you propose.
What's stupid about it? It doesn't disincentivise buyers agents as they receive a fixed co-broke, unlike your plan. The agent is taking a reduced pay for reduced risk as the house is more likely to sell. The seller pays less in commission which seems to be your goal. Makes perfect sense.
Or is that the bottom line is indeed what the seller is concerned about and you think it's stupid because the sellers bottom line is less? On other threads you've encouraged people to try to get a listing agents commissions reduced because you care so much about the commission the seller pays instead of just making an offer that works for the buyers bottom line. So which is it that matters, the commission or the bottom line? Either way you just became a hypocrite.
For those not willing to read all the previous posts in this thread, here is a summary of the OP's plan:
As the seller, if my house is not worth as much as I think it is, then my real estate agent should supplement my sale price by reducing his/her commission so that I can sell my house closer to what I think the house is worth rather than what it is actually worth.
Quote:
Originally Posted by Silverfall
My MLS the co-op has to be a number of at least $1. Not sure about other MLS rules, but I'm sure they require a monetary offering. You could offer the $25 it would cost for said turkey on sale.
There was a listing that came on the market in my town with a limited service agent (a/k/a entry only) and initially they offered a $0 co-broke. Our MLS informed them that was against the rules and they raised it to $1 for a while. The house sat and sat and sat which I found very telling. So many sellers think all we have to do is put a house on MLS and it magically sells. This is clear evidence to the contrary. I believe the co-broke on this house is now up to what most listings offer but they've missed the incredibly hot spring market because of their foolishness and clearly put a bad taste in a lot of people's mouths.
"For those not willing to read all the previous posts in this thread, here is a summary of the OP's plan:
As the seller, if my house is not worth as much as I think it is, then my real estate agent should supplement my sale price by reducing his/her commission so that I can sell my house closer to what I think the house is worth rather than what it is actually worth."
For those who may not have read this entire thread - what this previous poster said is wrong. In fact the proposal for sliding scale commissions is to fully pay an agent for their services IF they bring in an offer at fair market value - and where that market value is supportable by comps.
Over and over and over on these message boards it has been argued time and time again that sellers must use agents because they know how to sell houses for the best possible price. And that they know how to negotiate better than us common folk. Except when that logic is used in the context of this proposal - the tune changes since some argue that agents really can't tell a seller what their home is worth. Really? CMA's generally tend to define the list price of most homes.
No one is saying that agents should not get compensated for their work. However, commissions are supposed to be negotiable, and just because the system works the way it does now does not mean alternatives can't be introduced. As a seller, IMHO, it is only fair that a buyer pay for their representation if they are going to try and knock down the price they are going to pay me (with the help of an agent) if their is clear evidence that my price is in line with the market. Anyone who thinks it makes sense to pay someone else to work against you in a sale has a screw loose.
What SS commissions do is make the cost of using a buyers agent more transparent by requiring the buyer to pay a portion of it or negotiate with an agent for a lower fee. Agents don't like this idea because it upsets the apple cart, but for a seller it makes perfect sense.
for Silverfall - here are 3 examples that benefit the seller:
- Current FSBO seller asking realistic price realizes that agents control many of the buyers in the market by convincing them that it costs them nothing to use them - and decides to offer a SS buyers agent fee. Seller wants to retain as much equity as possible but will pay an agent if they bring in a buyer for a determined price with the compensation decreasing in relation to the offer. Buyer can make up any difference to agent if they so choose.
- Owner decides to sell and gets 3 CMA's from local agents. One actively promotes that their listings sell for 98% of list and usually within 30 days. That agent recommends a 30 day sell price. Seller holds them to this and says they will pay them what they want if they sell it for 98% of list and if not, SS kicks in.
- Seller lists home at agent recommended price of $325k and within 2 days a cash offer comes in at 5k below asking. Seller counters at list but buyer refuses to budge and agent can't get them up. Seller decides to take offer under SS model and does not lose equity nor have to wait. Not sure MLS would allow this according to comments made above, but not sure if that is universal.
Many sellers would gladly take any one of these scenarios over the current model as long as agents don't conspire to boycott their home. Buyers can negotiate fees with agents and pay them with their credit card if they want. That's better than rolling the agents fees into mortgage and paying them over 30 years. The demarcation between the "list" side and "sell" side is growing as consumers learn about the process. Realistically this is a good tactic to use for FSBO's and those wanting to use flat fee companies to save money.
BTW - this SS commission idea is not mine. It was pitched at a startup weekend business competition by a real estate broker who wanted to change the system.
For those who may not have read this entire thread - what this previous poster said is wrong. In fact the proposal for sliding scale commissions is to fully pay an agent for their services IF they bring in an offer at fair market value - and where that market value is supportable by comps.
Over and over and over on these message boards it has been argued time and time again that sellers must use agents because they know how to sell houses for the best possible price. And that they know how to negotiate better than us common folk. Except when that logic is used in the context of this proposal - the tune changes since some argue that agents really can't tell a seller what their home is worth. Really? CMA's generally tend to define the list price of most homes.
No one is saying that agents should not get compensated for their work. However, commissions are supposed to be negotiable, and just because the system works the way it does now does not mean alternatives can't be introduced. As a seller, IMHO, it is only fair that a buyer pay for their representation if they are going to try and knock down the price they are going to pay me (with the help of an agent) if their is clear evidence that my price is in line with the market. Anyone who thinks it makes sense to pay someone else to work against you in a sale has a screw loose.
What SS commissions do is make the cost of using a buyers agent more transparent by requiring the buyer to pay a portion of it or negotiate with an agent for a lower fee. Agents don't like this idea because it upsets the apple cart, but for a seller it makes perfect sense.
for Silverfall - here are 3 examples that benefit the seller:
- Current FSBO seller asking realistic price realizes that agents control many of the buyers in the market by convincing them that it costs them nothing to use them - and decides to offer a SS buyers agent fee. Seller wants to retain as much equity as possible but will pay an agent if they bring in a buyer for a determined price with the compensation decreasing in relation to the offer. Buyer can make up any difference to agent if they so choose.
- Owner decides to sell and gets 3 CMA's from local agents. One actively promotes that their listings sell for 98% of list and usually within 30 days. That agent recommends a 30 day sell price. Seller holds them to this and says they will pay them what they want if they sell it for 98% of list and if not, SS kicks in.
- Seller lists home at agent recommended price of $325k and within 2 days a cash offer comes in at 5k below asking. Seller counters at list but buyer refuses to budge and agent can't get them up. Seller decides to take offer under SS model and does not lose equity nor have to wait. Not sure MLS would allow this according to comments made above, but not sure if that is universal.
Many sellers would gladly take any one of these scenarios over the current model as long as agents don't conspire to boycott their home. Buyers can negotiate fees with agents and pay them with their credit card if they want. That's better than rolling the agents fees into mortgage and paying them over 30 years. The demarcation between the "list" side and "sell" side is growing as consumers learn about the process. Realistically this is a good tactic to use for FSBO's and those wanting to use flat fee companies to save money.
BTW - this SS commission idea is not mine. It was pitched at a startup weekend business competition by a real estate broker who wanted to change the system.
Here's the issue with your proposal, and much like most of your comments in this and other threads, the main flaw in your logic is that you are focused almost exclusively on the selling side of things. You completely ignore and/or dismiss the very real financial side for the buying side of things. I agree with you that buyers should be responsible for paying for their own representation out of pocket and having sellers pay the buying agent's commission is ridiculous; unfortunately, unless you change lending standards, that just is not going to happen.
The main flaw here is that you assume buyers are going to pay for any shortfalls to their agent's commissions out of pocket. The reality is that buyers, especially first-time buyers, are generally strapped for cash and simply don't have the funds to do so. So they won't be looking at those listings that offer a sliding scale commission, which kind of defeats the point, no? The offer of a sliding scale commission would serve to make the house more unattractive, as opposed to more desirable.
Furthermore, your proposal of having consumers put thousands of dollars on their credit cards is just, frankly, ridiculous and financially stupid; why would someone pay 4-5x the interest, at a minimum, by placing that amount of money on a card as opposed to rolling it into a 15 or 30 year loan at significantly lower interest rates? Not to mention what that would do to most prospective purchasers' DTI ratios, along with their creditworthiness; as well, the added side effect is that by not including commissions, the sales price is going to be lower. As currently constituted, a sales price today includes that commission cost; someone offering a sliding scale deal would realistically have to lower their sales price accordingly, which seems counter-intuitive to your end goals for the seller.
As well, you still haven't addressed the very real dichotomy of concocting a system wherein the better someone performs at their job, the less they get paid. Do you honestly believe that a buyer's agent is going to negotiate as strongly as they could, in that kind of scenario? I'm not talking about what an agent's fiduciary duty is supposed to be, I'm talking about real-world human nature. The reality is that you're disincentivising both sides from strongly negotiating, period; the seller's agent has no incentive to come down on their price and the buyer's agent has no incentive to fight for a huge discount in price.
The argument that lending standards require the system to operate in the fashion highlights a fundamental problem. Same with saying putting it on a credit card is financially stupid. It promotes the payment of fees that are for the most part hidden to a consumer, but ones that the consumer are responsible paying for. That is a crux of the issue and when it is brought to light the fireworks start.
The real facts are that the current system is setup to pay buyer agents the fees that they want, while at the same time reducing the control the seller has to retain their equity. You continually point out that buyers will have to make up shortfalls, but if a property is priced right they won't.
If there is an inherent problem with a buyers agent working to reduce the sales price for the buyer, while the seller is paying their fee - that does not serve the sellers best interests if their goal is to sell for market value. I can't see where agents can say with a straight face: "use us because we know the market and can get you the best price", and then argue that they can't, and need to be able to negotiate against the seller who is paying their fee.
Honestly if this type of system gained traction I think consumers (both sellers and buyers) would find a way to make it work to their liking irregardless of what the agent community thought or wanted. Likely FSBO's and Flat Fee sellers would gravitate toward it. This is why other alternative models have been introduced and serve a segment of the market.
The argument that lending standards require the system to operate in the fashion highlights a fundamental problem. Same with saying putting it on a credit card is financially stupid. It promotes the payment of fees that are for the most part hidden to a consumer, but ones that the consumer are responsible paying for. That is a crux of the issue and when it is brought to light the fireworks start.
The real facts are that the current system is setup to pay buyer agents the fees that they want, while at the same time reducing the control the seller has to retain their equity. You continually point out that buyers will have to make up shortfalls, but if a property is priced right they won't.
If there is an inherent problem with a buyers agent working to reduce the sales price for the buyer, while the seller is paying their fee - that does not serve the sellers best interests if their goal is to sell for market value. I can't see where agents can say with a straight face: "use us because we know the market and can get you the best price", and then argue that they can't, and need to be able to negotiate against the seller who is paying their fee.
Honestly if this type of system gained traction I think consumers (both sellers and buyers) would find a way to make it work to their liking irregardless of what the agent community thought or wanted. Likely FSBO's and Flat Fee sellers would gravitate toward it. This is why other alternative models have been introduced and serve a segment of the market.
"The argument that lending standards require the system to operate in the fashion highlights a fundamental problem." I agree with you there but you have yet to address how to resolve that issue; and without that fundamental issue being solved, your sliding scale scheme has major flaws inherent in it, seeing as how it's set up to be so lopsided in favor of the seller's side of things. Your proposal is set up as to encourage a seller's agent to not budge on the listing price, and for a buyer's agent not to perform their fiduciary duty to their client and negotiate to bring down the listing price; I'm not sure how you don't see anything wrong with that. The fact that buyers can't finance the commission owed to a buyer's agent has nothing to do with the agent community but with lending institutions; get them to change those rules and I'd bet you'd see a system that's more to your liking.
Many agents are willing to throw in part of their pay to make a deal work. That is less likely to happen with a butthole client who demands a concession, at least with me. Not rational but pride often trumps common sense.
I have a closing tomorrow (mentioned earlier in this thread) where the listing agent and I conceded four figures each to make the deal work. Neither client suggested we take a pay cut to make it work. Had they, I probably would be fishing tomorrow instead of closing.
TLDR; I'll take 2% (in some cases). Just don't ask for it.
- Current FSBO seller asking realistic price realizes that agents control many of the buyers in the market by convincing them that it costs them nothing to use them - and decides to offer a SS buyers agent fee. Seller wants to retain as much equity as possible but will pay an agent if they bring in a buyer for a determined price with the compensation decreasing in relation to the offer. Buyer can make up any difference to agent if they so choose.
So you are assuming that the buyer has the funds or is willing to make up the difference. So the question remains...if buyer after buyer walks away from the seller because they don't want to make up the difference does this system work in the best interest of the seller? Is it better for the seller to have potential multiple offers from different buyers who can wrap that whole fee into their loan, or one offer from the buyer that has the cash to do so. Which scenario do you think will get the seller a higher net?
Quote:
Originally Posted by illtaketwoplease
Owner decides to sell and gets 3 CMA's from local agents. One actively promotes that their listings sell for 98% of list and usually within 30 days. That agent recommends a 30 day sell price. Seller holds them to this and says they will pay them what they want if they sell it for 98% of list and if not, SS kicks in.
A seller could certainly try and negotiate that with an agent. The buyer compensation needs to stay the same, but the listing agent's fee can fluctuate. So the question with this scenario is does the listing agent purposely underprice?
So who is the better agent? The agent that prices a home at $200,000, gets three offers in three days and ends at $210,000 or the agent that prices at $220,000 and gets an offer at $215,000 in 30 days. I think you are way too focused on listing price.
Quote:
Originally Posted by illtaketwoplease
Seller lists home at agent recommended price of $325k and within 2 days a cash offer comes in at 5k below asking. Seller counters at list but buyer refuses to budge and agent can't get them up. Seller decides to take offer under SS model and does not lose equity nor have to wait. Not sure MLS would allow this according to comments made above, but not sure if that is universal.
This works as long as the buyer agent compensation doesn't slide. The listing side can slide as much as the agent and seller negotiate.
Quote:
Originally Posted by illtaketwoplease
Many sellers would gladly take any one of these scenarios over the current model as long as agents don't conspire to boycott their home. Buyers can negotiate fees with agents and pay them with their credit card if they want. That's better than rolling the agents fees into mortgage and paying them over 30 years. The demarcation between the "list" side and "sell" side is growing as consumers learn about the process. Realistically this is a good tactic to use for FSBO's and those wanting to use flat fee companies to save money.
I think the number of agents that boycott listings is very, very small. I don't think sellers understand the lack of desire by buyers to pony up more cash for representation when they are typically paying out huge closing costs and down payments. Recently, some buyers asked me about 8 properties. Two were below the minimum compensation offering I have in buyer agency agreement. They knew what shortfall they would have to make up and elected to not see those homes. No boycott by me. Really, buyers control this process.
As buyers become more aware of the process, they are taking control. Just not in the way that sellers are expecting them to.
Quote:
Originally Posted by illtaketwoplease
- this SS commission idea is not mine. It was pitched at a startup weekend business competition by a real estate broker who wanted to change the system.
This idea is not new and was around 11 years ago when I became an agent. It has always been a tactic to get listings.
I think the argument made by agents here is that their compensation rate needs to remain the same. At least that is what they want.
If agents establish a system which encumbers buyers to pay them set fees which would dissuade them from seeing certain properties, is that in the best interest of the buyer.. or seller? The process then becomes more about an agents needs and desires over their clients even though the buyer is supposed to know what they are signing. Yes agents should get paid but there is the age old discussion of just how much. I will continue to argue that buyers should be paying for their representation and determine how much they want to pay - as in many other countries. Should it be 3%? Should it be 2%? Should it be $2500 ?
There isn't a buyer alive that wouldn't want to see a house that they think fits their needs perfectly. I can't speak to shortfalls on existing offers of compensation, but under this SS proposed, that wouldn't be the case and only be required if it they didn't pay fair market value. If you are going to side with them and try and knock down the price on the seller - let them pick up part of the tab for your work.
The number of agents that boycott listings from flat fee companies or lower co-broke fee offerings is sizable. They don't come out and say this but I have researched it and talked to many agents and sellers. Sellers look at this as the CARTEL controlling the buyer pool - which it does by the continual sales pitch that using a buyers agent costs nothing. We know this isn't true since you don't work for nothing and the Realtor orgs provide listing and agency agreements written primarily to benefit agents.
So this SS concept is not mainstream, but is an alternative that can be used by sellers who want to adopt it. Ultimately they hold all the cards because without properties to list or sell - agents have no business.
Regarding the arguments that more offers would come in if the seller pays the agents fees as they do now because they all can be rolled in - that might be true in some cases, but when a seller has priced it right and is concerned about their NET, - this SS makes perfect sense.
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