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Why don't people get this upset at lawyers working contingencies of 30-50% of winnings?
Well I think to a large extent they do. Have you never heard the term 'ambulance chaser'? I don't think the public's perception (rightly or wrongly) of lawyers that work on contingency is very high. It's probably not a good idea to pin your colors on people's perception of them or compare yourself to them.
But there are some important differences though:
1. They are aligned 100% with the interests of their client. The lawyer makes more when their client makes more. Buyer's agents and their clients are not aligned. Buyer's agent makes more when the client pays more.
2. Lawyers don't get paid from sales commissions that the other side offers to them to help them sell something. And they don't work in a cooperative model with the opposing side as buyer's agents do.
3. Some places do cap the fees in some proportion to the actual work done (e.g. you get paid for your time plus a bonus related to the risk taken - say no more than the billed hours) and many places do have regulations. But I'm not arguing that it's tightly controlled.
4. I think that many legal and consumer experts do not like the contingency model but it's seen by many as a necessary evil because it's sometimes the only recourse that someone who suffered an injustice can pursue. Many people cannot afford to pay legal expenses and take the risk of losing. With agents, much of the risk can be controlled by the client themselves, not some external entity that they cannot control (i.e. a judge's or jury's decision). So if clients were taking the risk, they would be more careful committing to money spent on selling or buying and they might be more selective and cost conscious (driving up quality and costs down).
Alot of times, the scenario is that a company has dealt treacherously with a mass of people in a mass lay off and now the market is flooded with motivated sellers because they all just got canned (some may have families, kids in school, etc) and need to get out of the area. Some will simply go into forclosure and the families may end up looking at jail time by the IRS if there is a deficency or get sued by the banks, etc, etc.
Treacherously? Snidely Whiplash? Twirling a handlebar mustache?
Someone's been watching too much CNN.
All credible economists say we are at or very near full employment. Some even forecast an unemployment rate of 3.5% this year -- the lowest rate since 1969.
1. They are aligned 100% with the interests of their client. The lawyer makes more when their client makes more. Buyer's agents and their clients are not aligned. Buyer's agent makes more when the client pays more. Are they? I hear some attorneys, particularly those that go after insurance companies, are known for pushing for a settlement instead of wanting to go to court due to the time commitment. What makes you think the attorney is more aligned with their client than the agent? What's the difference?
2. Lawyers don't get paid from sales commissions that the other side offers to them to help them sell something. And they don't work in a cooperative model with the opposing side as buyer's agents do. Sure they do. The loser pays that money that the attorney takes from. Agents are cooperative to a degree but like attorneys they promote their clients interest.
3. Some places do cap the fees in some proportion to the actual work done (e.g. you get paid for your time plus a bonus related to the risk taken - say no more than the billed hours) and many places do have regulations. But I'm not arguing that it's tightly controlled. RE offers many types of models for clients to pick from.
4. [I]I think that many legal and consumer experts do not like the contingency model but it's seen by many as a necessary evil because it's sometimes the only recourse that someone who suffered an injustice can pursue. Many people cannot afford to pay legal expenses and take the risk of losing. With agents, much of the risk can be controlled by the client themselves, not some external entity that they cannot control (i.e. a judge's or jury's decision). So if clients were taking the risk, they would be more careful committing to money spent on selling or buying and they might be more selective and cost conscious (driving up quality and costs down).[/i]I think you'd find many RE agents would also prefer to get out of the contingency model (if you buy or sell the house I get paid). Unfortunately, most consumers prefer to pass the risk off to the agent. They also cannot afford the cost of losing (the house not selling/deciding not to buy or getting denied a loan.)
You, my good lad, are incorrect again. I've explained above in red. I know you'll want to argue and belabor the point but I'm unlikely to bother replying to you again-fyi. I've said what I need to say and trust the intelligent readers to decide for themselves.
Is actually more time though?
Is there actually more knowledge needed?
More schooling, sure.
Barriers to entry are WAY higher and the lawyer assumes legal liability for anything official that he does. Realtor and real estate companies will try to weasel it back to the lawyer and the title company.
When was the last time you heard of a realtor or a real estate agency having to eat 300, 400, 500k for a botched sale?
You, my good lad, are incorrect again. I've explained above in red. I know you'll want to argue and belabor the point but I'm unlikely to bother replying to you again-fyi. I've said what I need to say and trust the intelligent readers to decide for themselves.
What consumers would not want to do if realtor were paid by the hour is pay them doctor and lawyer rates. That is what this boils down too.
Barriers to entry are WAY higher and the lawyer assumes legal liability for anything official that he does. Realtor and real estate companies will try to weasel it back to the lawyer and the title company.
When was the last time you heard of a realtor or a real estate agency having to eat 300, 400, 500k for a botched sale?
since this is a frequent refrain of yours recently, did you have such a case where you personally were harmed to the tune of several $100K? And presumably by a Realtor's negligent representation? Tell us about it.
Lawyers carry insurance the same way that Realtors do, to pay for proven negligence. Good luck telling an attorney "Hey you cost me $300K" and them turning around and writing you a check for that amount the next day
You, my good lad, are incorrect again. I've explained above in red. I know you'll want to argue and belabor the point but I'm unlikely to bother replying to you again-fyi. I've said what I need to say and trust the intelligent readers to decide for themselves.
1. A buyer's agent incentive plan gives him more money when his client pays more. This is misalignment of incentives. A contingency paid lawyer makes more when his client makes more. Alignment of incentives. Big difference. Of course there may be rogue lawyers who are lazy or maybe independently wealthy and don't care about making money. But alignment of interests is a basic in business. Without that, you have a much greater chance of not having your interests looked after. Agents very nicely plead for you to trust that they will ignore the incentives that are stacked against the clients but it's a hard sell. I'll bet on aligned incentives over incentives that are stacked against me.
2. No, attorneys are not paid by sales incentives offered up by the other side. They get a share of the judgment decided by a jury and/or judge or a settlement. They are not asked to cooperate with the other side in exchange for splitting their pay. Wrong.
3. Yes, I agree with you.
4. I don't believe that agents want to get out of the current system. While they may be annoyed and financially impacted when clients flake out or whatever, the alternative is worse. You can't have your cake and eat it too - fat commissions and no risk. Agents profit greatly from the inherently dishonest system where buyers are convinced that buyer's agent services are 'free' to them. Make consumers pay for the value they get (basic of our economic system) and the whole game changes. No buyer buying a modest home is going to pay 7,500 to 15,000 for the services they get from their buyer's agent for the simple reason that it's extremely poor value. That fact should be very uncomfortable for agents because their cost is artificial and propped up by the lie that "it's free".
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