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1% sell side, thanks a rant load!

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1% sell side, thanks a rant load!

Created by:

Dean Curtis

Date: December 10, 2007, Number of Replies: 35

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First off, I support alternative business models. I’m glad I have the choice between a $6.00 Carl’s burger and one off the value menu. I like being able to choose a Hyundai or a Cadillac, both have 4 wheels, but approach the market with different appeal. Second, I would never suggest that .99 cents be the lowest price a business should sell a cheeseburger, or that the interest rate on ‘the car you can’t ignore” should go no lower than 7.0%. That would constitute price fixing, which we all know is not only illegal, but something we should all oppose at our core.

The home my clients really like is listed on the NWMLS by MLS4owners.com. In the listing the broker for MLS4owners has disclosed that the 1% SOC is set by seller. Great, so we have a FSBO who pays 1% on the MLS getting full exposure to the market via all our IDX systems we pay for on all our web sites which we also pay for. All of our clients get to view, inquire, tour, and perhaps buy properties which are basically FSBO. The MLS4owners business plan also refers to XA-Rule 4(e), which they state on the listing, requires the selling broker to work directly with the seller, and all information is provided by the seller and is not verified by the broker. I would say that by snapping a couple pictures and putting a listing on the MLS they have earned their 1% list side in its entirety. They will get paid their worth in accordance with the job they have done.

That being said, a 1% sell side makes for a skinny paycheck. I don’t know about how things are where you live, but where I live clients who are shopping homes in the 300,000 range are at a premium. 300K is well above the medium price for a home in our area, and clients who can actually qualify to purchase in this price range are even rarer. God bless these clients, and I will do my best to get them any home they want. I have heard it said by many Realtors that they don’t even look at the co-broke when they show properties. Generally speaking, I also show my clients what they want to see regardless of the commission. Actually I am showing this home regardless of what the commission is, but that does not mean I am blind. I do know how to calculate how much my family has to live on based on the sale of a home. You can figure out for yourself how much you would make on this deal. For myself, I have a 60/40 split with my broker, I pay 1.5% Business and Occupation tax, and I am around the 25% federal tax rate, the home lists for 345,000. Individual also are the fees, costs and expenses each of us occurs for the privilege of having one of the greatest jobs on Earth.

I can hear many of you asking now, why doesn’t this guy have a buyer/agency agreement guaranteeing a minimum commission on properties which he has shown? The answer is, at least in this case, that I met my clients via a web search. We have exchanged emails for the past couple months. They have been keeping an eye on the market too during this time. I send them information on new listings and research property for them as they are out of area. By the time we went on our first showings we had already established a relationship in which I was comfortable. This property came into play on our third outing. Could I have at some point had them sign a buyer/agency agreement? Yes I could have. Would a buyer/agency agreement have prevented me from working a low commission deal? Yes, perhaps it would have. I have chosen not to use buyer/agency agreements in my business. For that I pay occasionally.

If you have any comments I would appreciate hearing them.

Merry Christmas,

DEAN CURTIS

Associate Broker REALTOR® GRI ABR e-PRO
John L Scott 1310 S. Ruby
Ellensburg, WA 98926
Cell phone 509-856-7046 Fax 509-962-5182
MailTo:dean@deancurtis.com
http://deancurtis.com

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Melina Tomson Licensed Real Estate Broker, OR

Date: December 11, 2007

Dean,

We have a local WhiteStar Realty guy that has been doing 1% lately also. If you don't do BAA's that is your choice, but you can also change midstream and be upfront and honest with your clients and say "Most agents tend to me paid by a commission from the seller. This seller is offering a 1% fee for finding him a buyer. I'm happy to show you the home, but if you want to write an offer on this house, I will need you to pay me an additional X% fee. " You can tell them the issue didn't come in conversation before as the commissions being offered were acceptable to you.

I didn't used to look at commissions, but I defiantly look now. There are some weird things out there. I just tell my buyers when we first go hunting how I get paid, and what I expect to get paid. I still let clients know if something comes up within their critera, and what difference they would have to pay me. Most buyer just choose to pass on those.

Melina Tomson, MS
ABR, e-PRO
melina@tomsonburnham.com
www.TomsonBurnham.com
ph: 503-371-6515
fax: 503-588-1628

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Jim Bourgoin Licensed Real Estate Broker, FL

Date: December 11, 2007

Dean,

The REALTOR COE states pretty clearly that representation agreements are to be in writing. Here in Florida, Florida State Statutes state that representation agreements be in writing.

Would you take a listing without putting the listing agreement in writing?

Jim Bourgoin, CEBA, ABR, ABRM

Exclusive Buyer Broker/Agent

www.buyersadvantage4homes.com

Hernando - Citrus - Pasco

Tampa Bay Area

Spring Hill Florida

352-585-6408

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Win Singleton Licensed Real Estate Broker, Falls Church, VA

Date: December 12, 2007

Hi Dean,

You wrote in part -

"... why doesn’t this guy have a buyer/agency agreement guaranteeing a minimum commission on properties which he has shown? By the time we went on our first showings we had already established a relationship in which I was comfortable. This property came into play on our third outing. Could I have at some point had them sign a buyer/agency agreement? Yes I could have. Would a buyer/agency agreement have prevented me from working a low commission deal? Yes, perhaps it would have. I have chosen not to use buyer/agency agreements in my business."

There are several problems with this practice of choosing not to use written buyer agency agreements in your business.

First, without a written buyer representation agreement, neither you nor your client have really gone over together the "rules of the game before taking the field". Certainly no player in any sport would ever consider doing this... and you can't expect your "amateur" buyer to know what those rules are. What are your obligations under Agency to your buyer client? What is your client's obligations to you and your firm? (And yes, the represented buyer has obligations to the agent too!) How will both of you handle a smaller brokerage fee than what you and your client agreed you would receive for your services to them? All of these are fully covered and explained in a written agency agreement.

Second, written agreements serve an educational purpose as well... to educate our clients as to what you will and won't do on their behalf, which cuts down on confusion and misunderstandings later. The excuse you used in your post that you and your buyer had exchanged emails (or even phone calls) is no substitute for both parties really understanding how this Agency relationship is practiced before ever taking them to the first house. Even an attorney will almost always get a retainer agreement signed when he/she finally meets the client in person, regardless of how many times they may have discussed the client's legal problem by email or phone prior to that face to face meeting. This agreement will clearly show everyone that this attorney has been retained or engaged to represent this client.

Lastly, if a dispute arises between you and your client, you could really have a problem with the NAR Code of Ethics in Article 9 which states, "REALTORS, for the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions including, but not limited to, listing and representation agreements, purchase contracts, and leases are in writing in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each party to such agreements upon their signing or initialing." Oral agreements are clearly unsafe and totally dependent on each parties recollection or memory. Isn't it true that our buyers and sellers always have very short memories? Ha! "Oh, I never said that." "Gee, I would have never agreed to something like that." Without a written agreement, you will have a very hard time proving otherwise. So think of a buyer agency agreement as a "CYA" (cover your backside) form as well.

It is not hard at all to get these agreements signed with a buyer who truly feels you are the agent to work with. They also clearly show your clients that you are a professional who leaves nothing to chance or poor memory. And if a buyer won't sign one with you, then merely adopt a sound business practice that you won't drive them the first block in your car to see any home until they do.

Regards,

Win

**********************
Win Singleton, CRB, e-PRO
Associate Broker
Northern Virginia Real Estate, Inc.
1018 Shipman Lane, Suite 200
McLean, VA 22101
(703) 536-7631
wins@winsingleton.com
Licensed in Virginia
**********************

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Tal Kramer Licensed Real Estate Agent, GA

Date: December 12, 2007

Re: 1% sell side, thanks a rant load!

Our only commodity is our time. Most markets have an over supply of inventory these days. If one of the matching properties for my buyer is paying a commission less than I consider acceptable - I skip that property. If I didn't notice the commission until after I had called to verify the property was still available - Then I call the listing agent and tell them I just noticed the low commission and I will not be showing after all. They need to know that their client (the seller) is losing opportunities due to the low fee.

Our job is more than just finding the right property for the buyer, that's the easy part. Our real job is being the real estate consultant that advises on pricing, negotiates a solid contract, coordinates and advises on inspections, and does a good job of monitoring the transaction from contract to closing. Those activities are where our expertise comes in and for most of us, 1% gross, simply doesn't cover the time commitments. Bottom line - There are too many homes to choose from to invest your efforts by showing and contracting for low selling commissions so either skip those properties or get a minimum commission via your buyers brokerage agreement.

Tal Kramer

Tal and Jeanette Kramer
Re/Max Communities (Metro-Atlanta)
770-971-0025
Mobile: 678-978-1900
Kramer@MyDreamHome.com
www.MyDreamHome.com

We're never too busy for your referrals :-)

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Thomas Early

Date: December 12, 2007

Lastly, if a dispute arises between you and your client, you could really have a problem with the NAR Code of Ethics in Article 9 which states, "REALTORS, for the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions including, but not limited to, listing and representation agreements, purchase contracts, and leases are in writing in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each party to such agreements upon their signing or initialing." Oral agreements are clearly unsafe and totally dependent on each parties recollection or memory. Isn't it true that our buyers and sellers always have very short memories? Ha! "Oh, I never said that." "Gee, I would have never agreed to something like that." Without a written agreement, you will have a very hard time proving otherwise. So think of a buyer agency agreement as a "CYA" (cover your backside) form as well.

It is not hard at all to get these agreements signed with a buyer who truly feels you are the agent to work with. They also clearly show your clients that you are a professional who leaves nothing to chance or poor memory. And if a buyer won't sign one with you, then merely adopt a sound business practice that you won't drive them the first block in your car to see any home until they do.

Regards,

Win

**********************
Win Singleton, CRB, e-PRO

And of course there is the old stand by answer to this question - No Ticky, No Laundry. :-D

tOMe

Thomas A. Early, Master CEBA
425 W. Schrock Rd.
Westerville Ohio 43081
Serving the Greater Columbus Ohio area
mailto:TomEarly@BuyersBrokerage.com
http://BuyersBrokerage.com
100% Buyer Representation 100% of the Time
Past President of the National Association of
Exclusive Buyer Agents (NAEBA) http://NAEBA.org
NAEBA: 1-800-786-1570
Buyers Brokerage 1-614-890-2722

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Thomas Early

Date: December 12, 2007

At 05:16 PM 12/12/2007, you wrote:

Our job is more than just finding the right property for the buyer, that's the easy part. Our real job is being the real estate consultant that advises on pricing, negotiates a solid contract, coordinates and advises on inspections, and does a good job of monitoring the transaction from contract to closing. Those activities are where our expertise comes in and for most of us, 1% gross, simply doesn't cover the time commitments. Bottom line - There are too many homes to choose from to invest your efforts by showing and contracting for low selling commissions so either skip those properties or get a minimum commission via your buyers brokerage agreement.

Tal Kramer

Hold your horses there Tal.

It seems you are saying that you should not show a buyer a home based on the amount that will eventually find it's way to your wallet. Who are you representing, your client or your wallet.

IF you had an agreement with the buyer the buyer would already know that if the listing brokerage was only offering 1%, they would need to make up the difference. Of course if your not using an agreement, your don't deserve to be paid to begin with so 1% should do nicely.

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Wanda Gabriel Licensed Real Estate Agent, Bloomington, IL

Date: December 12, 2007

Dear Tal,

Re: 1% sell side, thanks a rant load!

Our only commodity is our time. Most markets have an over supply of
inventory these days. If one of the matching properties for my buyer is
paying a commission less than I consider acceptable - I skip that property.
If I didn't notice the commission until after I had called to verify the
property was still available - Then I call the listing agent and tell them I
just noticed the low commission and I will not be showing after all. They
need to know that their client (the seller) is losing opportunities due to
the low fee.

I totally agree with what you say, but question the validity of it. As an
ABR we were taught that it is our responsibility of the buyer's agent to
find all homes available that would fit our client's needs, regardless of
the commission base; which would be covered by a buyer's agency agreement.
The buyer is allowed to ask for a highter commission within the offer.

Your Favorite Realtor

Wanda Gabriel

Wanda Gabriel
Realtor; CRS, ABR, GRI, QSC
Prudential Snyder Real Estate
#1 Brickyard Dr.
Bloomington, IL. 61701
office # 309-664-1918
mobile # 309-275-9263 (309-ASK-WAND)
personal fax# 309-661-3762

http://www.WandaGabriel.com

I'm happy to help you buy or sell your home.
I love your referrals.

No virus found in this outgoing message.
Checked by AVG Free Edition.
Version: 7.5.503 / Virus Database: 269.17.1/1182 - Release Date: 12/12/2007
11:29 AM

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Tal Kramer Licensed Real Estate Agent, GA

Date: December 13, 2007

Re: It seems you are saying that you should not show a buyer a home based on the amount that will eventually find it's way to your wallet. Who are you representing, your client or your wallet.

Re: As an ABR we were taught that it is our responsibility of the buyer's agent to find all homes available that would fit our client's needs, regardless of
the commission base

--------------------------

To the first point... I'm neither representing my client or my wallet, I'm representing the 'business standards' I've set for how I choose to conduct my business. Attorneys, Doctors, Accountants and nearly every professional I know has set pricing. Its not set by the parties they work with. I know what my time is worth and I choose to only work for a client if I'm properly compensated for that time.

We all make choices. I can buy my suit at K-Mart or get better quality elsewhere. Its no different here. Remember, our only commodity is our time. If we're using our time to sell a 1% commission home, then that time is no longer available to work with a full paying customer or better yet, to spend with our families.

As for the second point... I'm not an ABR but I doubt the course teaches that we must accept below average fees. If agents want to be altruistic, then they ought to be working in a charity environment or become a pro-bono attorney or donate a portion of their income to charity. This is how we feed our families and working for less than half the usual fee makes no sense to me.

Let's get realistic here on a few points:

1) I don't believe there is that much difference between most homes (read on before you respond). In other words, if I skip the low commission home, the FSBO, the home on the busy street, etc., there will be more than enough properties remaining to serve my client's needs. That may be different in smaller markets but here in Metro-Atlanta we've not had a shortage of inventory in the 16+ years I've been a Realtor so I'm confident I'll find my client's their "dream home" and I always do.

2) If the seller only wants to pay 1% then they are not realistic about what is typical compensation. Most likely the price they've set for their home isn't realistic either. Most likely they won't be realistic during inspection negotiations either. Its just like FSBO's (that I also don't show), the majority are not realistic and are overpriced, so I don't feel like I'm doing a disservice to my client by skipping some inventory.

The bottom line here is we represent our clients by giving them the best service we can while being properly compensated for our services.

Tal Kramer

Tal and Jeanette Kramer
Re/Max Communities (Metro-Atlanta)
770-971-0025
Mobile: 678-978-1900
Kramer@MyDreamHome.com
www.MyDreamHome.com

We're never too busy for your referrals :-)

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Win Singleton Licensed Real Estate Broker, Falls Church, VA

Date: December 13, 2007

Hi Everyone!

Wanda Gabriel wrote -

"I totally agree with what you say, but question the validity of it. As an ABR we were taught that it is our responsibility of the buyer's agent to find all homes available that would fit our client's needs, regardless of the commission base; which would be covered by a buyer's agency agreement. The buyer is allowed to ask for a highter commission within the offer."

Wow! Where did "the buyer is allowed to ask for a higher commission within the offer" come from?

Perhaps Case Study #16-15 from the 2007 NAR Code of Ethics and Arbitration Manual best illustrates how your premise could be seen as unethical. To sum up the case, REALTOR B had ignored the compensation information published in the MLS and presented an offer to REALTOR A to take to his his seller which called for a higher compensation to REALTOR B. "REALTOR B responded during the hearing that he had a right to negotiate with REALTOR A as to the subagency compensation he would receive for his work..."

To cut to the chase, "The Hearing Panel's decision noted that REALTOR B was indeed entitled to negotiate with REALTOR A concerning subagency compensation but that such negotiation should be completed prior to the showing of the property by REALTOR B. The decision indicated that REALTOR B was entitled to show property listed by REALTOR A on the basis of the subagency agreement between them. If there was no agreement on the essential terms and conditions of such subagency, including compensation, there was no authority for REALTOR B to show the property or to procure an offer to purchase." (Note: Just substitute buyer agency for subagency.)

"The panel’s decision further advised that it was improper for REALTOR B to follow a procedure of inserting the amount of subagency compensation to be paid by the listing broker on any document provided to a buyer or a seller, because this is properly a matter to be decided by the listing and cooperating brokers at the time the offer of subagency is offered and accepted; and that preconditioning an offer to purchase on the listing broker’s acceptance of a subagency commission greater than he had offered was a practice inconsistent with respect for the agency of the listing broker."

"REALTOR B was found in violation of Article 16."

Case Study #16-16 finds pretty much the same. By a buyer asking the seller for a higher commission in an offer than what the listing firm and the seller had agreed to offer, it could certainly mean that the listing agent would now be asked to adjust the fee on the listing side to keep the gross commission at the original amount - "The Hearing Panel concluded that REALTOR B’s actions to encourage his buyer-client to pressure the seller to try to modify the listing agreement with REALTOR A was an unwarranted interference in their contractual relationship. "

There is only one case study, Case Study #16-17 that calls for a buyer conditioning an offer on the seller's agreement to pay the buyer agent fee. But in that case, no buyer agent compensation was being offered at all by the listing firm. So the request for compensating the buyer agent on behalf of the buyer had no effect on the gross compensation still being paid by the seller to the listing firm and didn't require the listing agent to "re-open" negotiations of the original listing agreement with the seller.

And Standard of Practice 16-16 is clear on this point too - "REALTORS, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation."

Now you might claim that it was all the buyer's big idea. But let's get real here. Few buyers are sophisticated enough to have that idea... unless their buyer agent put that thought into their heads as a way to circumvent what was offered as compensation in MLS.

So if you don't like the fee being offered by the listing firm, you have 3 choices: call the listing firm and ask if you can be paid more and get their agreement before you ever show the property; OR discuss with your buyer if the buyer will make up the difference; OR don't show the property.

Win

**********************
Win Singleton, CRB, e-PRO
Associate Broker
Northern Virginia Real Estate, Inc.
1018 Shipman Lane, Suite 200
McLean, VA 22101
(703) 536-7631
wins@winsingleton.com
Licensed in Virginia
**********************

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