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The one thing that is clear is that you have little awareness of the history of real estate practices. It used to be that all agents were sub-agents of the Listing Broker, working on the Seller's behalf. Buyers were largely unaware of this relationship and, overall, Buyers were at a great disadvantage in the home buying process. The fact that most states have changed their laws to clearly define agency relationships is a good thing! Buyer's Agency reduces the inherent conflicts of interest--it certainly doesn't increase it.
Don't worry, I know the history very well.
Simply introducing a requirement of FR and an agency relationship does not go far enough to address the problems of the past. It does help somewhat in that the buyer has much better recourse now when things go wrong. But the realtor is still incentivized in the same way as always (as a sales person with incentives aligned 100% with the sellers agent). The relationship between the sellers agent and the buyer's agent is still based on the principle of cooperation with the goal of closing the deal and their incentives are completely aligned to this end.
How does the introduction of a buyer's agency relationship reduce issues with conflicts of interest? Normally, the more parties and the more interests that someone needs to look after, the more potential for conflicts of interest there will be. That's just logical. A law of physics, if you will. I'm not arguing that regulations, etc are bad, just pointing out that when you introduce new rules/laws/policies/codes, you need to assess the motivations, incentives, competing interests, or the impact of your changes will be minimal. That's why any discussions of cleaning up wall street and the corporate world almost always explore incentive/motivation structures and it's well accepted that these need to be aligned with the behaviors that you are aiming to encourage. If it were as easy as just putting new laws and ethics codes in place, it would be very easy (in fact in the case of wall street, they are already there).
Finding incentives in the opportunity to hang one on the client and believing that all others fail the character test and would also throw Mama Off the Train for lunch money.
Thank goodness that most people have a bit more moral fiber.
I know... I know... Like Pappy O'Daniel, you might would say, "I invented moral fiber."
you can parse it and carry on for 100's of words however you want. It's been said many times that there are a variety of business models in the real estate transaction, including fee-for-service, and Buyer-expressly-pays-their-own-way.
Go invest in one of those models (or heck, buy a bunch of Redfin stock).
Nah. Not my game.
As Mike pointed out, the fantasy of 'free representation' for the buyer will win every time. As long as that's allowed to persist, clearer and simpler models will not stand a chance. And there is no incentive to change the fantasy.
Buyer's agents love it - they use it to sign up clients and clients expect less when something is free (just human nature), nobody really thinks about it too much because it just gets rolled in the mortgage
Sellers don't really think about it - they care about the total commission that they pay.
Buyers love it - well, it's 'free' - can't really argue with that
Sellers agents like it because they have someone working with the buyer who's also incentivized to get the deal done.
If agents were to do fee for service, they would make much less money and the expectations on them from the clearly paying buyer would be much greater. there would be disruption in the industry which would take time to resolve but it would solve the simple problem that people who are supposed to represent the buyer should not be paid with sales commission. In almost every case that I can think of, people who earn sales commission sell stuff or are on teams that sell stuff. 'Have cake and eat it too' comes to mind: buyers agents seem to want to explain that they are not part of the sales team and not coordinating with the sellers agent to sell the house but at the same time, they want a slice of his commission. Choose one or the other!
As Mike pointed out, the fantasy of 'free representation' for the buyer will win every time. As long as that's allowed to persist, clearer and simpler models will not stand a chance. And there is no incentive to change the fantasy.
Buyer's agents love it - they use it to sign up clients and clients expect less when something is free (just human nature), nobody really thinks about it too much because it just gets rolled in the mortgage
Sellers don't really think about it - they care about the total commission that they pay.
Buyers love it - well, it's 'free' - can't really argue with that
Sellers agents like it because they have someone working with the buyer who's also incentivized to get the deal done.
If agents were to do fee for service, they would make much less money and the expectations on them from the clearly paying buyer would be much greater. there would be disruption in the industry which would take time to resolve but it would solve the simple problem that people who are supposed to represent the buyer should not be paid with sales commission. In almost every case that I can think of, people who earn sales commission sell stuff or are on teams that sell stuff. 'Have cake and eat it too' comes to mind: buyers agents seem to want to explain that they are not part of the sales team and not coordinating with the sellers agent to sell the house but at the same time, they want a slice of his commission. Choose one or the other!
But.... So what?
You repeatedly cite that you would not be able to parse between decency and integrity and where your money comes from.
That you would only go to work for a client to push them into a house, because that is your ethical standard.
A good agent certainly can function differently than you propose that you would have to, without regard to the conflict of interest that mesmerizes you and would trap you into selling your clientele for lunch money.
There is SO much more that goes into feeling good for giving a client great service and a great outcome than the money.
I had lunch with an attorney this week and told him, yes, I want to be paid, but it's the action that keeps me in it.
But some people are just focused only on the money as their only barometer of acceptable behavior, and it is a great thing that they are not licensed in real estate.
As Mike pointed out, the fantasy of 'free representation' for the buyer will win every time. As long as that's allowed to persist, clearer and simpler models will not stand a chance. And there is no incentive to change the fantasy.
Buyer's agents love it - they use it to sign up clients and clients expect less when something is free (just human nature), nobody really thinks about it too much because it just gets rolled in the mortgage
Sellers don't really think about it - they care about the total commission that they pay.
Buyers love it - well, it's 'free' - can't really argue with that
Sellers agents like it because they have someone working with the buyer who's also incentivized to get the deal done.
If agents were to do fee for service, they would make much less money and the expectations on them from the clearly paying buyer would be much greater. there would be disruption in the industry which would take time to resolve but it would solve the simple problem that people who are supposed to represent the buyer should not be paid with sales commission. In almost every case that I can think of, people who earn sales commission sell stuff or are on teams that sell stuff. 'Have cake and eat it too' comes to mind: buyers agents seem to want to explain that they are not part of the sales team and not coordinating with the sellers agent to sell the house but at the same time, they want a slice of his commission. Choose one or the other!
Even very sophisticated buyers seem to prefer the existing system. We often deal with a relatively sophisticated clientele...lawyers, doctors, college professors retiring to LV. The buyer's agent commission is simply not an issue.
And you are quite incorrect in your view that the buyer's agent is incentivized to close a particular deal. The incentive in fact is two fold...to close a deal and leave the buyer happy. Blowing up a deal is a standard necessity sometimes...so you blow up the deal.
the listing agent is incented to get THAT house sold for the highest amount they can negotiate.
the Buyers agent is incented to sell their client THE MOST EXPENSIVE HOUSE they can talk them into buying, whether it's the listing agent's or not.
this is the world that you live in. it's not the real world.
Also, you confuse the legal word COOPERATE (the "we'll let you sell our houses, you let us sell your houses, and we agree that we'll use the MLS, and we will provide SOME compensation, not a set amount or %") with
Even very sophisticated buyers seem to prefer the existing system. We often deal with a relatively sophisticated clientele...lawyers, doctors, college professors retiring to LV. The buyer's agent commission is simply not an issue.
And you are quite incorrect in your view that the buyer's agent is incentivized to close a particular deal. The incentive in fact is two fold...to close a deal and leave the buyer happy. Blowing up a deal is a standard necessity sometimes...so you blow up the deal.
As already discussed, most buyers seem to prefer the system because they it's sold as it being free. You can be a PHD or a rocket scientist and you still like 'free'. Even if you are smart enough question that, the idea that you pay the same whether you use it or not kind of helps with the decision.
Are you seriously trying to say that sales people are not incentivized to close deals? You say I'm incorrect when I say that buyer's agents are incentivized to close deals, then in the next sentence you say they are incentivized to close a deal. I'm confused. Or are you trying to say that because they are both incentivized to close a deal and to make a buyer happy they are not incentivized to close a deal? That's not how logic works. If A and B are both true, then A must be true. The fact that you sometimes 'blow up a deal' does not change the fact that you are incentivized to close deals. Basic stuff.
If you tell a buyer that you are not incentivized to close the deal then he has a very good case against you for misrepresentation.
lawyer for your ex-client: when do you get paid?
lymensch: when the deal is closed
lawyer for your ex-client: Do you get paid if the deal doesn't close?
lymensch: No
lawyer for your ex-client: how do you get paid?
lymensch: a percentage of the deal purchase price
As already discussed, most buyers seem to prefer the system because they it's sold as it being free. You can be a PHD or a rocket scientist and you still like 'free'. Even if you are smart enough question that, the idea that you pay the same whether you use it or not kind of helps with the decision.
Are you seriously trying to say that sales people are not incentivized to close deals? You say I'm incorrect when I say that buyer's agents are incentivized to close deals, then in the next sentence you say they are incentivized to close a deal. I'm confused. Or are you trying to say that because they are both incentivized to close a deal and to make a buyer happy they are not incentivized to close a deal? That's not how logic works. If A and B are both true, then A must be true. The fact that you sometimes 'blow up a deal' does not change the fact that you are incentivized to close deals. Basic stuff.
If you tell a buyer that you are not incentivized to close the deal then he has a very good case against you for misrepresentation.
lawyer for your ex-client: when do you get paid?
lymensch: when the deal is closed
lawyer for your ex-client: Do you get paid if the deal doesn't close?
lymensch: No
lawyer for your ex-client: how do you get paid?
lymensch: a percentage of the deal purchase price
judge: case closed. next...
Judge Just-Because:
How do you sleep with your personally-acceptable code of abysmal behavior when you so readily describe it in public?
Have you ever heard of "Do the right thing?"
It seems to be a foreign concept.
this is the world that you live in. it's not the real world.
Also, you confuse the legal word COOPERATE (the "we'll let you sell our houses, you let us sell your houses, and we agree that we'll use the MLS, and we will provide SOME compensation, not a set amount or %") with
COLLUDE
What are you responding to? I dont' see that quote on this thread.
Anyway, that quote uses extreme language but it's not incorrect. In the typical arrangement, a buyer's agent is most certainly incentivized (rewarded) for a higher purchase price - i.e. he gets more money when the purchase price is higher. Does this mean agents are going to hold guns to every client's head to make them buy more expensive houses? we should be able to have a grown up conversation about incentives knowing that nobody is implying any wrongdoing.
If someone is paid by the hour, it's not incorrect to say that they are incentivized to work the most hours possible.
Does this mean they will work 24 hours a day? No, of course not. Maybe your husband incentivizes you with a hot dinner when you arrive home by 6pm.
if a cop is incentivized to give so many speeding tickets a day, does this mean he will singly focus on that and give tickets to people who don't deserve them? There should be no assumption that this is the case. Maybe he can go to jail if he does that so his incentive not to do that is to stay out of trouble.
You people seriously don't understand what 'incentive' means. There is a difference between behavior (which is influenced by a variety of incentives and other forces) and the incentive itself. You should not be afraid to openly say how you are incentivized without getting all defensive that you are not a crook. Your inability to have that conversation undermines your credibility as does your apparent misunderstanding of what an incentive even is.
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