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It would be that for an agent looking out only for their own pocketbooks rather than their client and their own reputation. Know any of them?
It was an academic question. Actually, I applaud you for offering replies that indicate you have engaged your gray matter.
One of the common themes on this forum is the perception of conflict of interest created when brokers are paid by the "opposing" side and make more money the more their client pays the other side.
You are indicating that you have created a scenario that you believe offers a more attractive conflict of interest.
There are interesting dynamics at play, worthy of conversation, IMO.
Reasonable questions:
How would you propose to compensate a buyers' agent who gets the buyer the house at full price, but with $5000 in closing costs? Would you penalize the agent, who currently would receive commission at the full contract price of the house?
How would you compensate the agent who helps the buyer succeed, when the seller underprices the house to get multiple offers, and the buyer pays over list price, but under appraisal price?
#2 raises another good point. Would contract price vs. appraisal value not be a better basis for compensation? Appraisal reflects comparable sales. List price all too often represents mood, love, listing agents "Buying the Listing," and dreams.
Honestly, I think your plan is too complicated for many "Real World" situations.
(Disclaimer for the trolls: I am not "defending" the current most common model of compensation, nor any commission, nor any commission rate.)
I "grade" properties for clients' preferences and needs. I tend not to initiate showings on properties that get less than an 80/100. (Of course, I will show them upon client request.)
Often, I may have 2, or even 3, clients looking for similar properties.
Let's say a house is well-priced to the market, will have hot interest from buyers, and will go fast near list price with multiple offers.
The house is a 90 for Joe and I expect a 2.4% commission from the listing agent.
Same house is a 90 for Joann and I would have a calculated commission, and little chance of success.
Ethically: Who should I show it to first?
Does my choice matter?
Realistically:
Did Judy or Joe build a stronger profile for success in purchase?
(Disclaimer for the trolls: I am not "defending" the current most common model of compensation, nor any commission, nor any commission rate.)
Really? Find me a consumer who wants to pay more for a product than he has to and then pay a representative more for the privilege. If a scaled pay system rewarding the results of successful negotiation is too difficult to understand, perhaps the agent is in the wrong business.
Your formula makes negotiation the primary function of the agent and the payscale becomes weighted for you as such. Not everyone has your same mindset. Many people feel they can negotiate just fine on their but want the agent to assist in showings, scheduling, and knowledge in other areas.
In my opinion, my value and most agents value comes in the knowledge of the process, contract, and area. I help put people in homes at a price they chose, reduce their risk, and manage the process for them. That's my value.
Interestingly enough, and I appreciate your thought process, but as an agent I feel your process punishes the agent for something mostly out of their control.
If we're paying strictly for performance, I would also want to be rewarded for (real world example) interceding with a condo association who isn't carrying the insurance coverage that the underwriter requires and finding a carrier willing to write that policy and arranging an emergency Board meeting to vote on the purchase of said policy against stiff opposition. Or maybe, for getting quotes and meeting contractors at the property for repairs in order to negotiate a credit in lieu of repairs from the seller and negotiating those credits. Then there's meeting with the City about the variance and/or permits or just discussion about what might be possible. That's got to be worth a few bucks. Or maybe, some little crumb for writing offers that failed along the way for whatever reason; inspections, lender, bad dreams, etc. How about just a reimbursement for the parking ticket when we had to double park to see that unit on Easter Sunday.
The more I think about it, the more I like this whole pay as you go for what you do model. Might be worth paying me for what I know, too, if it saves you money.
I guess I would also add in that much of Kokutty's proposal is subjective. When dealing with a complicated pay structure anything subjective should be removed. Even an appraisal is subjective as it is an opinion of price from an appraiser.
Really? Find me a consumer who wants to pay more for a product than he has to and then pay a representative more for the privilege. If a scaled pay system rewarding the results of successful negotiation is too difficult to understand, perhaps the agent is in the wrong business.
I do it ALL THE TIME. My sellers are offered the opportunity to pay me hourly (paid monthly), flat rate (50% upfront, 50% at closing) or a higher commission, all or nothing. I can tell you from personal experience of doing this for 11 years, that consumers overwhelmingly choose to pay me a much higher fee in order to not have to pay me money before closing. It is true.
Most consumers are NOT like you. Maybe 10-15% of home buyers and sellers think like you. It is very hard for this more savvy group of consumers to understand that the rest really, truly, don't think like you do.
The scaled pay system isn't hard to understand. It just doesn't work in hot/neutral markets. I, personally, would want to spend time sitting down and haggling over a baseline comp. I am sure there are agents that would, but it isn't me. Find the agent that will. They are out there, but you would be looking for an indie. The big companies won't flex like that.
Yes, you are right in some cases. But my point remains: the general public think all we do is open doors and stick a sign outside a house. It's not their fault, but they don't have a clue how much work it is and what a huge responsibility it is.
That is because there are agents that do just that and consumers don't have a means to determine which agent is good.
But you can't see houses without an agent, so it's a moot point.
Yes you can. You can call the listing agent to see a house. If there is no listing agent, then you would call a seller directly to see a house. Are you saying you need an agent to go see a FSBO?
Believe it should be a flat cost for services vs. % of house value.
Are you willing to pay part of that flat rate upfront at the time of signing the listing agreement? So if the flat rate for a $400,000 home was $5,000 for the listing portion, would you write a personal check for $2500 as you sign the listing agreement?
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