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You commented that you didnt get any takers to discuss your idea when you first posted it.. Mike commented :shrug:
Do not put words in my keyboard. I asked for proposals for incentivized pay systems, I did not ask for general comments or discussion. I still have not had a broker suggest a plan that would get him more money as a purchase price went down. It appears that among the small sample of agents here there is no will or desire to upset the apple cart of the status quo.
when I read #511 again just now, I couldn't help but think -
if folks vetted their agents and used a really good agent, then they wouldn't be so tortured over worrying whether their agent is out to get them to pay the most or buy the fastest so the agent could get paid more or faster.
the idea of developing a base price for each house AFTER you've viewed it, and having a different compensation equation for each house as well, is just so cumbersome and unrealistic. Even in a "everything wallows on the market" ... what would happen if you and your agent disagreed over base prices?
I don't think the idea of "offsetting against the compensation the Buyer would get" would work anyway because ...
if your agent is happy earning the given commission from a given sale in the given market ...
what advantage do you as Buyer gain by a unique model for your agent that might, under the best circumstances and the simplest situation possible (% of $ below asking price), reward them above their expected compensation? Beyond the peace of mind that you know the agent you don't really really trust isn't convincing you to pay more than you should have to through better negotiation?
And I'll repeat - I would be happy to work on an hourly basis and upfront retainer. This would be earth-shaking to the commission model, yes? And I've heard MANY agents say they'd do the same.
What I posted way back on #415 still holds true:
Most people here know how much I dislike the current system where buyer's agents are meant to represent the buyer's interests but they are paid by the seller's agent splitting his commission to help him get the deal done. That makes no sense whatsoever and I love to say it because it just sounds so screwed up and speaks for itself. You don't really even need to argue against it, you just describe it factually and any sane person says "whatcha talkin' about Willis?".
However, I am not in favor of a system where buyer's agents are compensated entirely or mainly by amount they negotiate off of the list price or base price or whatever. Why?
1. It retains the strong incentive for the buyer's agent to get the deal signed, even if it's not in their client's best interest. Just like today's model, the agent would not get paid until the deal is done and the agent has a risk that the client will walk away every day the that deal remains unsigned. This proposed model only addresses the problem that the buyer's agent gets paid more when the buyer pays more. However, the cash flow and walking risk are likely bigger incentives to get a deal done than earning a couple/few hundred more in commission from getting the client to pay more (or at least not encouraging him to pay less). That's why agents are happy to explain to you that they would never be driven by a couple of hundred dollars but they ignore the fact that delays in closing (e.g. when you should back out of a deal and find another home) delay their cash flow and increase the risk that the client walks away. This proposed model is just a minor twist on the way it works today and retains too many of today's sins.
2. It's too singly focused. Of course buyers always want to pay less but reduction off of some list or base price is often not the overriding priority in a deal. Some want speed. Some want repairs done. Some want reduced risk of losing the home. Protecting the buyer's interest where they need protection is much more than just negotiating the biggest price reduction.
3. It's too complicated. I agree that you would need to agree the compensation based on the specifics of the deal, once (or as) you and your agent agree to the buying/negotiating strategy for that specific house. Do buyers really want to be negotiating their agents compensation at the same time they are stressed out deciding on offer price, etc, etc? This introduces risk that the discussion around negotiation strategy may be polluted by the compensation agreement as there is a potential conflict of interest here. I want my agent to advise me on the best strategy and I don't want to wonder if he's thinking about what will earn him the biggest "price reduction" based compensation. Anyway, above all, overly complicated models for anything have a nasty history of screwing consumers in the end. Agents will become expert at working this system and consumers who only do this a few times in their lives will be at a great disadvantage in the face of all of this complexity.
So we can debate whether some smaller element of the compensation can be based on price reduction - e.g. the bulk of the compensation based on something else but a further bonus paid for price reduction. I don't really see why not but I don't see this as a core compensation driver. And if it's just a smaller bonus, it might not be a significant motivator. And if it's just a niche thing that some buyers might want to do, it's probably not worth talking about as a replacement for today's model.
I've already written enough but generally I favor a fee for service and/or time model - but one that looks very different from the way buyer's agents work today. As soon as buyers pay by the hour or by the service and it's transparent that it's their money, their expectations and ability to pay will be dramatically different than they are today. There are many ways that this could play out but I see these loose principles as a start:
-Modular - customer pays for what he wants/needs and nothing more. You want to drive around your self to viewings rather than pay an agent $150/hour for that, you do. You want to save money by researching homes for sale yourself on the internet, you do. You need help with the contracts, etc. you get a contracts specialist to help you. Scared about the condition of the home, you need an inspector. Perhaps, for example, inspectors' quality improves and the ones who can't work well without an agent 'interface' get weeded out. They are already becoming 'professionalized' so this is a natural progression.
-Well defined services - activities, deliverables and outcomes are clearly defined. Not just a vague notion of 'protecting your interests' or worse, reciting fiduciary duties such as loyalty and obedience as if they are activities or services in themselves. You pay to have your contract reviewed, you know exactly what to expect from your contract specialist for this service. If you need neighborhood advice, you understand exactly what the agent can and cannot provide, what kind of data, etc you get and do you get a personalized written report, have a discussion for an hour, etc. What does that service look like and what's your expected deliverable? Perhaps technology can do some or all of this for you for little or no cost.
-Right priced resources for the activity - for example, centralized with scale, low cost back office clearing house processing for paperwork. Either by state or operating across the country from low cost areas like Louisiana, Alabama, etc. And a lower cost local 'coordinator' who is heavily supported by technology/data, etc. Nobody making $150/hour to measure ceiling joists, for example. If you just need someone to open a door or do some legwork, a lower cost/lower skilled resource will do that job. Just like in any other industry. Higher cost, higher skilled professionals will only be engaged where their costs and skills are justified.
-Accountability - buyer funded activities usher in a new age of accountability for buyer's 'representatives'. if you're paying someone $150/hour to help you determine your offering price and buying strategy for the home you choose, you will naturally have expectations in place for that service. if someone can do it cheaper, they will appear and the price will drop for that service. Quality will improve with higher client demands/accountability and costs will fall.
I'll stop there but that's a just a flavor of the direction that it could go. I think that regulatory action would be required to stop sales commission from funding buyer's representation. Similar to the actions taken in financial services to restrict client 'advice' being funded by sales commissions for products sold. Given the choice, consumers will normally pick the option that they see as "free" but without understanding the insidious lack of transparency and conflicts of interest.
When there is finally regulatory action to stop the current nonsense, there will need to be a good alterative model in place so that buyers can get the help they need at a price they can afford, taking advantage of new ways of working and technology enablers. Just a loose directional vision from a consumer. Obviously there are practical considerations for everything, laws varying by state, and a million other considerations.
Do not put words in my keyboard. I asked for proposals for incentivized pay systems, I did not ask for general comments or discussion. I still have not had a broker suggest a plan that would get him more money as a purchase price went down. It appears that among the small sample of agents here there is no will or desire to upset the apple cart of the status quo.
Do you sometimes read your posts before posting?
To review:
You clearly asked, "Where is the agent...?"
You did not ask for specific proposals for alternative pay systems in any way, shape, nor form, not even implied.
If receiving proposals was the basis of your bewonderment, you may more articulately and productively have queried:
"Would any agent be able and willing to formulate and provide a plan that will garner him a higher commission payout per transaction for helping achieve a lower contract price for the buyer client?"
And, of course, I gave you a superior concept, albeit founded in the apparently irritating values of experience, service, and integrity.
If you had sincere interest in discussion of your proffered and flawed concept, you would perhaps take time to post in response to mention of the obvious flaws kindly noted by people with actual life experience with the public in real estate brokerage.
As far as not asking for "general instruction?"
What, your post is only up for worship and acclaim, despite the obvious flaws?
That won't work.
If you will evolve to comprehend the value and motivations of "integrity" and "Service" you will understand and embrace the motivation of honest agents working diligently in service to achieve the best price they can for their trusting clients, to garner much larger payoffs through future business.
Why would I, or any good agent, bother to propose a Rube Goldberg-inspired compensation plan when I have all the motivation I need right in front of me daily?
Merely to cater to your notion based in misunderstanding of integrity and transparency is not a good enough reason.
I think you have had all the help you need here.
I.e., "When the student is ready, the teacher will appear."
...As far as the proposal, it involved establishing an agreed upon base price (not the listing price) for each property based on things like listing price, days on market, comps and market conditions. ...
Quote:
Originally Posted by kokonutty
If you're going to ask questions, please at least read the outline of the proposal first. "Asking price" is irrelevant to the formula.
I just wish everyone here who knows how overpaid agents are, would reply with what they do for a living.
Then I'll go on electricians, lawyers, plumbers, dog walkers, etc forums and start threads about how an electrician came to my house for 30 minutes and charged $300, or how lawyers are overpaid because lawyers in China work for $10/hr, or how I once changed my own kitchen faucet, so there's no need for plumbers, or..... well you get the idea.
You haven't been paying attention. Your scenario would not work to garner more commission.
You're right about paying attention. If the discussion is this cumbersome, imagine getting consumers and agents to understand the model and its implications, intended and otherwise.
You're right about paying attention. If the discussion is this cumbersome, imagine getting consumers and agents to understand the model and its implications, intended and otherwise.
I can just see it:
Consumer: "So... How do you calculate your commission?"
Agent: "Well, I actually have a graphic model for illustration that I can share with you:
.
Too bad that you are unable to understand that the "base Price" is what gets plugged into "the formula." While possibly useful in determining the base price, asking price is not part of the formula.
It's also too bad that you want to linguistically torture a post rather than respond in the spirit in which it was posted - understood by all here, except, apparently, yourself.
It's also too bad, and possibly pathetic, that you continue to assert that I have no use for an agent who utilizes experience, service and integrity when that is 180 degrees from my own viewpoint. Nowhere have I stated anything of the sort but that doesn't stop you from continuing to make such false claims.
To review:...
I think you have had all the help you need here.
I.e., "When the student is ready, the teacher will appear."
I have sincere people to talk to.
Good luck with your scheme.
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