Traditional Realtor vs. Flat Fee Listing - Fountain Hills

[Captain Bill]

Originally Posted by makeitagreatday

...it's too bad when buyers approach their agent to see a home that they've seen online and have fallen in love with, and the agent bows out. This inadvertantly creates another negative to an already suffering housing market situation in that the buyer doesn't get the house that they desire working with the agent whom they have entrusted with their needs, wants and time.

I work very hard for my buyers and they understand that I will do everything possible to get them the best deal possible, and to keep them out of legal trouble. They need to understand also, that I will not place myself into a position where I risk getting my company into legal trouble.

I have a fiduciary duty to follow all my clients legal instructions. If a buyer wishes to see a home being sold by a non-represented seller, I will show them the home, but if they are interested in buying it, then I would ask them to use another Realtor. The commission is just not worth the risk to me.

We have the buyer sign and date a realtor designed legally binding document, if they tell us they are not working with an agent, to ensure that months down the line, a realtor or realtors do not approach us wanting a commission. This keeps buyers honest and gives us, as sellers, legal peace of mind.

I agree you should do what you can to protect yourself. Are you saying that a Realtor drafted this document for you, and not an attorney? I'm curious as to why you had a Realtor draft it instead of an attorney.

[oldtrader]

As someone that first went into the real estate business as a commercial real estate broker till I retired after a lot of experience I will give you my opinion.

1: If a property is listed, advertised, promoted in the MLS, etc., you have every agent in the valley working for you trying to sell it.

2: If it is listed by a flat fee agency, then you do not get this same cooperation. Agents only show those properties, when there is nothing else the buyers will accept. The complications involved, are just too much to waste a lot of time on the flat fee listings.

3: People can have access to the MLS and find the home themselves, but they do not have an agent waiting to work for them, and potential buyers just do no want to waste their time on these properties.

4: Odds are vastly against you, that you will get as good a price when sold by a flat fee agency type sale. You don't have an agent fighting to get you the best price, but if a buyers agent only is involved, then the only agent is required by state agency law to work for the buyer only and to try to get them the lowest price possible. You will usually have to take a price lower enough to more than cover the money you save in commission.

When I sold property I owned, I made it a practice to pay a full commission to the selling agent as I found I got more people working to sell my property at a top price. I found I came out ahead doing it. I was in commercial income property, specializing in exchanging, and often ended up with a single family home to 6 homes as part of a running exchange, and had to sell them to go to the next step.

I did not pay the extra commission for any reason, than in the long run I came out ahead doing it. It costs money to run an office, or to be a salesman for an office. Your time is valuable. As an agent, you are going to be looking how to get the best commission, while making your client happy with your service so they come back when they want to do more business, and recommend you to their friends.

I often paid 1% above the going rate of commission, if I got a full price offer. I always got a higher price and faster sales when I did this. I got back far more back in getting a higher price, than trying to cut the commission some salesman would get. You are already looking at having to cut the price. Instead of looking to cut the price, list with a good office, offer 1% more than standard in the area commission if it is sold at full asking price. They may have to get a lower price to get the sale, but the agent will work so hard to try to convince the buyer to pay the full price for the extra 1%, the final price they offer will be higher than what you may have to take otherwise, more than paying the difference you may have to take to get a sale otherwise. Especially if you go the flat fee listing route trying to save money.

Compare trying to save money on commission, to having your employer asking you if you would like to take a 25% cut in salary and still do the same level of work. You would be looking for another job. The salesman treats the flat fee sales the same way. Instead of looking for another job, they show the buyers another property.

[makeitagreatday]

...with liability, Captain Bill, and I do thank you for your input and well wishes.

However, I suspect the mention of realtors not wanting to be involved in their clients' desired perspective house purchase due to an unrepresented seller hits a bit too close to home.

I have mentioned commission as it is relevant in comparing both the traditional agent and flat fee listing agent. So what is the current commission rate?

As for oldtrader, I understand that not all agents are receptive and if we were in need of a quick sale...we would not even be contemplating between the two. As for the agent punching it out...not so since they simply present the offer and you either accept, deny or counter claim.

[Captain Bill]

Originally Posted by makeitagreatday

...

I have mentioned commission as it is relevant in comparing both the traditional agent and flat fee listing agent. So what is the current commission rate?...

There is no "current commission rate". Commissions are not allowed to be universally set, except that a broker may (within his/her office) set a commission that all of the agents in that office must charge.

The commissions are negotiable and I'm aware of listing agents charging from 4 to 8%, with a part of that going to the buyers agent.

You're aware of flat fee agents; there are also agents who will work by the hour, or by the activity, both of those will require a retainer and a monthly payment. The listing agent gets paid whether the home is sold or not.

Listing agent and seller will discuss and agree on how much to offer a buyers agent. On most of the mls sheets I see 3% offered to the buyers agent. Sometimes it's 4%, and recently I saw an offer of 2%.

Many agents will steer their clients away from a home paying only 2% because it could be a signal that the listing agent and/or the seller are going to be difficult to work with, and problems can develop during the transaction. I will show my buyer any home, and I'll work with them with any represented seller home regardless of the commission amount, because (absent the potential legal liability of unrepresented sellers), I must put my buyers interest above mine.

The listing agents do a lot more work for a client than most people realize because most of the work is behind the scenes, and the client is not aware of the marketing expenses of a listing agent. I'm not going into details here about what a "good" listing agent does, other than to say a good listing agent will save the seller money.

Regarding the commission, which people think is too high. Remember that the commission is a "contingency" fee. That is, it is contingent on the home being sold. If the home is sold, the agent gets paid.

If the home is not sold, the agent does not get paid, and they are out of pocket the marketing expenses, and the labor time. In the case of a buyers agent, s/he may have spent 60-70 hours with a client and put hundreds of miles on her vehicle.

Since not every house sells, and not every buyer ends up buying a home, it's obvious that the financial "risk" is all on the agent. The seller and buyer are not risking any money at all. Anytime one person assumes all the financial risks, then the financial reward must be greater.

The pay by hour or by activity was developed by some in order to give clients an alternative to the contingency fee. Those fees will be less than the contingency fee because the seller is sharing the risk by paying as they go.

Now, as to what you may expect to pay a full service listing agent. My suggestion is that you not put weight on the fee. Put more weight on how effective you feel a listing agent will be in getting your home sold in minimum time at the best price.

You mentioned this to Oldtrader:

As for oldtrader, I understand that not all agents are receptive and if we were in need of a quick sale...we would not even be contemplating between the two. As for the agent punching it out...not so since they simply present the offer and you either accept, deny or counter claim.

Oldtrader is a pro, with many years experience and he knows what he's talking about. He is being straight forward with you, but what he's saying is not what you want to hear. He and I disagree on his opinion of the Phoenix market, but I respect his knowledge of real estate, and he's telling you like it is.

You said "simply present the offer and you either accept, deny or counter offer".

With all due respect, that is a misconception. There is much more to it than that. A lot of negotiation between the agents goes on from the moment the buyers agent talks to the listing agent. Much of the negotiation is subtle, and with two good agents the negotiation is very strategic and kept on a friendly basis so as to keep the negotiation moving along.

Any time there is a counter offer, there is a chance of losing the deal. Therefore, the seller or listing agent must be able to read the buyer and their agent so they can develop a counter strategy to make sure and keep the buyer in the game. That is where a really good listing agent is worth his/her weight in gold. People with no negotiating training and experience are not aware of this.

One more thing, when you put your house up for sale, put it up with the intent to sell it within 30 days. The longer the house is on the market today, the more it will be perceived as something wrong with it, and the showings will slow down and perhaps stop.

I'm going to suggest that you go to the professional forum //www.city-data.com/forum/real-...professionals/ and ask how one should go about choosing a listing agent. You can also ask how you should determine a fee.

There are some really sharp agents on that forum who will be willing to offer some good advice.

You may still choose the flat fee option, but you'll have more objective information to use.

[Craig C]

I think there are some interesting thoughts going on in this debate. Does a person potentially save a bunch of money with a flat fee listing, or go the traditional route? The comments about representation & who looks out after the buyer & or seller are important issues. An unrepresented seller can potentially loose thousands of dollars without even knowing it, especially with a semi-custom or custom home where value is not that easy to estimate. Thus washing out all their savings. Likewise, a buyer can potentially loose thousands by overpaying on a hous if they are not represented by a well experienced professional who really knows how to read reliable value. In our world, I think everyone should be represented at least to some degree.
Real estate agents vary widely in their experience & training & in what they offer to clients. Many are very traditional. Some are little more than order takers that do some paperwork, sorry but it's true. Some are very green, with little experience. And some have many years of experience. I have read that most people hire the 1st agent they talk to, I suppose in the thinking that most agents are the same. Wow, what a misconception!
I've sold & valued a lot of houses over the years, both as an agent & as a certified appraiser, & I can tell you, that according to AZ, commissions are supposed to be negotiable. What does that mean? It means, I think, that just about anything between the low flat fees & the full traditional can be negotiated under the right situation. What are a sellers or buyer needs? What are the agents business needs, & can a meeting of the minds happen that allows both parties to get a job done. Maybe in some cases, the question is not just either a flat fee or a full traditional, but may also be some negotiated compromise in the middle.
Think about it, would you show up to court w/o a lawyer? But depending on the case, you might need the very best defense, or maybe just minimal representation.