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New to this board...but it seems that no one really answered the question that was asked that started this thread.
Interestingly, I just had a client make a proposal to me that, in exchange for my services as his exclusive buyer's agent, he would pay me a flat fee (I won't name the amount)...of which $1000 would be a non-refundable retainer paid in cash when we signed the agreement.
I spoke with my Principal Broker about it and we agreed that while the "flat fee" was fine, we weren't comfortable with the advance, non-refundable retainer. Additionally, any 'selling agent' compensation would have to be accounted for in the earnest money agreement as reducing the sales price, passing that amount on to the buyer. As a REALTOR I get paid when the transaction closes...for services provided.
I'm not sure what the motivation was on the part of the buyer to make this offer...but he obviously saw it as advantageous for him...to me; my job is to serve my client's needs. I provide (imho) exceptional services, and I value my self and my time...but this is a commission business and, by necessity commissions are NEGOTIABLE (between the agent and the seller)...and in some cases between the agent and the buyer.
Thanks.
Dave
The OP is of the conviction that RE Agents cost too much and is working approaches that would allow him to limit those costs. He expects a high quality job but believes he ought to get in much less expensively.
I disagree with you and your principal on flat fee with advanced payments. The are in fact common in some areas. I have no problem and see no ethical problem with a front end fee. The details are left to the specific deal but are quite doable. Often done on high value transactions.
New to this board...but it seems that no one really answered the question that was asked that started this thread.
Interestingly, I just had a client make a proposal to me that, in exchange for my services as his exclusive buyer's agent, he would pay me a flat fee (I won't name the amount)...of which $1000 would be a non-refundable retainer paid in cash when we signed the agreement.
I spoke with my Principal Broker about it and we agreed that while the "flat fee" was fine, we weren't comfortable with the advance, non-refundable retainer. Additionally, any 'selling agent' compensation would have to be accounted for in the earnest money agreement as reducing the sales price, passing that amount on to the buyer. As a REALTOR I get paid when the transaction closes...for services provided.
I'm not sure what the motivation was on the part of the buyer to make this offer...but he obviously saw it as advantageous for him...to me; my job is to serve my client's needs. I provide (imho) exceptional services, and I value my self and my time...but this is a commission business and, by necessity commissions are NEGOTIABLE (between the agent and the seller)...and in some cases between the agent and the buyer.
Thanks.
Dave
Hello Dave -
These issues are a bit difficult to discuss, simply because the laws of agency vary by state. I believe, for instance that your agency laws and practices are different from ours in VT.
But I can tell you I've taken a retainer on several occasions, when the circumstance suggested. Typically I reimburse the buyer client out of commission dollars at closing. But in most cases I don't need a retainer, practices being what they are here in VT.
I've never had somebody suggest an arrangement in which I'd take a retainer but get less at closing.
[quote=CouponJack;2016760]tomocox ya know, I took a look at the Realtors' code of ethics and found the following....
"When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01)"
Thanks for posting some of the REALTOR® code of ethics. It makes pretty fascinating reading I think.
First of all regarding ethics, I personally have never taken the big bucks vs the other property. Quite frankly, more often than expected, I have left money at the table that was rightfully mine to get a contract closed.
You are sadly mistaken when you take one part of a deal and make it the whole issue. There are many properties that I earn far less than profitable margins to represent, and far more buyers have rolled on my tires, spent my gas, and my time, and then bought from a FISBO, even with a buyer agency contract.
Get off your high horse, do as I suggest, pay a higher commission to a better listing agent, allow that agent to offer a higher commission to a buyer broker, and see what happens. First of all, you will see your house sell faster. Secondly, you will see it sell for more, and third, everyone including the buyer and seller will be much more satisfied. So, when everyone wins, that is character, integrity, and joy all rolled into one. Or, you can continue to pay taxes and interest on a property that is not growing in value. Who lost? And the HUD-1 will always detail at closing who gets paid how much prior to the closing and deed transfer.
I was thinking more along the lines of $1000-$2000 down, and $1000-$2000 at closing.
As far as narrowing it down to two houses... I'm not sure I understand that. It sounds like you're saying most of the work involves showing houses?
Because that's not really the part of having an agent that's valuable to me.
I was just throwing out some examples. The point was, if you help out with some of that stuff, and you know what you're doing, you've lessed the workload and upfront cost of the agent.
I was just throwing out some examples. The point was, if you help out with some of that stuff, and you know what you're doing, you've lessed the workload and upfront cost of the agent.
True. In a free market, profits flow toward those who fashion deals that are advantageous to everyone involved in the arrangement.
Plus, when an agent gets an up-front fee, she's insured against the loss she otherwise sustains when the client doesn't wind up buying anything.
My own preference would be to pay a flat fee, rather than to pay hourly. With a flat fee, there's no obligation to produce billing statements, or for the client to review them, or to keep track of phone calls, or every other little thing. Less paperwork means less aggravation for everyone.
The main advantage to a buyer, though, of paying a flat fee (or hourly) is that it eliminates the seller's ability to manipulate the buyer's agent, through incentives, or bonuses, or just by varying the co-broke, as a percentage of the sale. Or just by paying an agent a percentage of the sale in the first place.
The main things I want from a buyer's agent - consultation, and objective, unbiased advice - are exactly the things that incentives and commissions are designed to prevent me from getting.
If I can't get unbiased advice, it's hard to see what value an agent brings to the transaction, at all.
tomocox ya know, I took a look at the Realtors' code of ethics and found the following....
"When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01)"
Let me ask you a question? When you show all your homes to your clients, do you tell them up front that your showing the ones first that fatten your wallet the most, or do you hide that dirty little detail?
As the 'greenie' around here, I've always wondered the same thing. I've only seen a handful of listings that offered above or below 3%, or a bonus to the buyer's agent. IMHO, offering above 3% is tantamount to bribery, and is against the Code of Ethics. However, I do think that most agents would refund the excess to the buyer - at least, I would. If the seller wants to offer something to sweeten the deal, they should offer it straight to the buyer, such as help with closing costs, etc. The only issue with this is that it could possiby weaken their negotiating position.
Quote:
Originally Posted by GregTraub
Well, in my limited experiments with offering more than the "normal" 3% to buyers agents, I did get one or two extra showings, but unless the house is priced right it didn't sell the house. Builders use this tactic quite frequently, and since they are still doing it, I guess it works.
Personally, if a builder is offering 10%+ commission to me, I stay away and warn my buyer, there is usually a reason the builder is offering so much....usually because they can't sell, bad product, bad location, or bad price. Alot of times though they just use this tactic as a advertising gimmick for a few weeks or a month, then return commissions to normal levels once awareness in the realtor community has been created.
Right on - if you think a higher split is bad, the builders are the worst. I've seen 7% AND a $10K bonus to the agent. They tend to do this on the houses that are sitting, but the only builders I've seen do this are the higher-end ones that have built out the 'popular' new communities. And if that $10K house was the buyer's choice and the inspection was good, I would refund that bonus and part of the commission at closing. To me, it's just the right thing to do. And I would absolutely disclose that.
Many non-agent posters to this forum have the mistaken notion that an agent's marketing efforts should be directed at buyers.
They are incorrect.
After a brokerage split and taxes, the listing agent is looking at around $4000 on a typical $250,000 house - if it sells. At $150 - $250 for a weekend ad in most newspapers and $300 - $500 for a small ad run once in a weekly or a monthly magazine, consumer marketing efforts are not economically viable.
Most agents target their marketing at other agents. MLS listings, broker showings, flyers at other offices and, yes, bonuses...these are not only economically viable marketing efforts, they're smart. After all, over 90% of all potential buyers will utilize the services of an agent once they make the committment to purchasing a home. A particular advantage of offering a bonus to the buyer's agent is that the listing agent is only out of pocket if the property closes.
Last year, I was looking for a home for a couple that worked opposite shifts. The husband and I would go out during the week to look at everything on the market and narrow it down to five or six that we would show his wife every Saturday. This went on for about seven or eight weeks.
The husband always knew what the commission was that I would receive--it was right on the listing sheet with the directions that he would read to me as we went house to house. It never mattered to me if it was 2% or 3% or 4%. A percent or two is nothing compared to the value of a happy client that refers their friends to me.
One night, as I was planning the next day's showings, I came across a home that was about three or four miles out of the area we had been looking in, but it looked perfect...and it had a 5% commission.
When the guy and I were done looking at homes the next day, I showed him the out-of-area listing and said, "Would you mind if we took a quick look at this one? It actually looks pretty good and it's got a huge commission for me."
He laughed and said sure...after riding around together for eight weeks, we we had gotten to be pretty good friends - and it was only seven or eight minutes away.
When we walked in the house, we knew immediately that his wife would absolutely flip over it. It was exactly what they had been looking for and the area was even better than the one in which we had been looking.
We brought his wife the following Saturday. She did love it and we wrote the offer that night. Two counter-offers and 25 days later, they moved in.
Was my action ethical? It certainly seems so - I disclosed the commission and my motivation before we even went to the home.
Did the big commission cause the buyer to buy a house that they shouldn't have purchased? Absolutely not...they love their house and they're totally glad that they're in the neighborhood they are in rather than one of the ones in which they had told me to look.
Did the big commission cause me to recommend a negotiation strategy that was less agressive than I otherwise would have? Tough to prove either way, but the fact that it took two counters is at least indicative that we weren't patsies.
Do my buyers have any regrets or resent that I received a higher percentage than I would have had they purchased one of the other 80 homes that the husband and I had looked at? Not at all. Their downpayment came from the sale of their condo - in which I gave the buyer's agent 4% and kept 2% for my side. And, yes, they have referred their friends to me.
Did the big commission cause me to show a property that I otherwise would not have? Clearly, the answer is yes, in that the property was outside the area they had instructed me to look.
The financial incentive offered to buyer agents was a smart marketing decision on the part of the listing agent and the seller because it resulted in a showing that would not have otherwise occurred.
Incentives targeted at agents are neither inherently evil nor do they necessarily result in unethical behavior. It is simply part of the marketing arsenal that we have available to us.
Last edited by Eric Young; 11-16-2007 at 05:47 PM..
Many non-agent posters to this forum have the mistaken notion that an agent's marketing efforts should be directed at buyers.
They are incorrect.
After a brokerage split and taxes, the listing agent is looking at around $4000 on a typical $250,000 house - if it sells. At $150 - $250 for a weekend ad in most newspapers and $300 - $500 for a small ad run once in a weekly or a monthly magazine, consumer marketing efforts are not economically viable.
Most agents target their marketing at other agents. MLS listings, broker showings, flyers at other offices and, yes, bonuses...these are not only economically viable marketing efforts, they're smart. After all, over 90% of all potential buyers will utilize the services of an agent once they make the committment to purchasing a home. A particular advantage of offering a bonus to the buyer's agent is that the listing agent is only out of pocket if the property closes.
Last year, I was looking for a home for a couple that worked opposite shifts. The husband and I would go out during the week to look at everything on the market and narrow it down to five or six that we would show his wife every Saturday. This went on for about seven or eight weeks.
The husband always knew what the commission was that I would receive--it was right on the listing sheet with the directions that he would read to me as we went house to house. It never mattered to me if it was 2% or 3% or 4%. A percent or two is nothing compared to the value of a happy client that refers their friends to me.
One night, as I was planning the next day's showings, I came across a home that was about three or four miles out of the area we had been looking in, but it looked perfect...and it had a 5% commission.
When the guy and I were done looking at homes the next day, I showed him the out-of-area listing and said, "Would you mind if we took a quick look at this one? It actually looks pretty good and it's got a huge commission for me."
He laughed and said sure...after riding around together for eight weeks, we we had gotten to be pretty good friends - and it was only seven or eight minutes away.
When we walked in the house, we knew immediately that his wife would absolutely flip over it. It was exactly what they had been looking for and the area was even better than the one in which we had been looking.
We brought his wife the following Saturday. She did love it and we wrote the offer that night. Two counter-offers and 25 days later, they moved in.
Was my action ethical? It certainly seems so - I disclosed the commission and my motivation before we even went to the home.
Did the big commission cause the buyer to buy a house that they shouldn't have purchased? Absolutely not...they love their house and they're totally glad that they're in the neighborhood they are in rather than one of the ones in which they had told me to look.
Did the big commission cause me to recommend a negotiation strategy that was less agressive than I otherwise would have? Tough to prove either way, but the fact that it took two counters is at least indicative that we weren't patsies.
Do my buyers have any regrets or resent that I received a higher percentage than I would have had they purchased one of the other 80 homes that the husband and I had looked at? Not at all. Their downpayment came from the sale of their condo - in which I gave the buyer's agent 4% and kept 2% for my side. And, yes, they have referred their friends to me.
Did the big commission cause me to show a property that I otherwise would not have? Clearly, the answer is yes, in that the property was outside the area they had instructed me to look.
The financial incentive offered to buyer agents was a smart marketing decision on the part of the listing agent and the seller because it resulted in a showing that would not have otherwise occurred.
Incentives targeted at agents are neither inherently evil nor do they necessarily result in unethical behavior. It is simply part of the marketing arsenal that we have available to us.
Pass the grain of salt. After 8 weeks of twice a week showing I would jump through hoops at anything that sounded like a good match within the county. The boundaries on the search area would start to expand after 3 or 4.
I would have suggest a split of the additional two. But if I got any static the buyer gets it all. Don't care much for the ethics of all this. And I am going to disclose in writing that I got the additional commission.
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