RealTown's RealTalk

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We have a new outfit in town that is advertising all over the TV and radio with – Pay no commissions – full refund of buyer commissions…

Website is www.relogic.com

Appears that the Buyer can purchase increments of an agents time,  plus pay a reasonable processing fee at closing, and get the full buyer commission refunded.

Seller pays a flat fee up front plus a reasonable processing fee at closing, plus the buyer side coop.  They claim a 70% commission savings and say they’ll do everything a commissioned broker would do.  Apparently all their agents are salaried.

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Reading their site, it does not look like it is really full service. For buyers it looks like it is full-service if the buyer wants it to be, but they charge $1,000 upfront for three people to do 20 hours of work. There is one licensed agent, a showing specialist and a research consultant. That time could add up pretty quickly, and then the buyer would have to buy 10 hour increments at $500. Not bad, $50 per hour guaranteed for each and every buyer. And of course if the buyer buys the first home it still costs $1,000. It also says refund of all buyer side commissions up to 3%. It sounds like if the commission is 4% or 5% then they get the extra. And of course if they do not buy a home you already have their $1,000.

For sellers, there is an upfront $995 fee, and for that they put it on the MLS, their site, Realtor.com, Zillow, a few others and a single property website. Up to 10 digital photos and a staging consultation are included. Let's see, in this market with so many listings expiring with little work done they have a guarantee of $995 per listing. If one agent had 30 listings that is a guarantee of $29,850, even if all the listing expire. If they sell then they get approximately 1% of the selling price including the $995.

They  include a lockbox and a sign along with 100 brochures, and. It says nothing about an agent showing your home so my guess is that the seller gets all the scheduling calls from the centralized showing service and also has to show their own home.

So for every listing they get at least $995 and if the home sells they make approximately 1%, with what appears to be nothing more than putting it on the MLS and their website. Not a bad return for not doing much.

I turn down 9 of 10 listings because the seller will not price their home properly but under this arrangement you really do not care as even if they want to list the home at $200,000 too much you still are guaranteed $995.

Regards,
Jeff Launiere, P.A., e-PRO
Keller Williams Realty
Tampa, FL
813-469-3163
MailTo:Info@SweetHomeTampa.com
http://www.SweetHomeTampa.com

The thing that scares me about this model is what you touched on when you
stated
"I turn down 9 of 10 listings because the seller will not price their home
properly but under this arrangement you really do not care as even if they
want to list the home at $200,000 too much you still are guaranteed $995."

If every Agent just put listings on the market for whatever the seller wants
to list it for because they are guaranteed their $995, what would this do to
the market? You would end up with a flood of over-priced listings and many
Realtors may not be honest with sellers regarding pricing their homes. I
hope this is not the future! Scary if you ask me.

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"The thing that scares me about this model is what you touched on when you
stated
"I turn down 9 of 10 listings because the seller will not price their home
properly but under this arrangement you really do not care as even if they
want to list the home at $200,000 too much you still are guaranteed $995."
If every Agent just put listings on the market for whatever the seller wants
to list it for because they are guaranteed their $995, what would this do to
the market? You would end up with a flood of over-priced listings and many
Realtors may not be honest with sellers regarding pricing their homes. I
hope this is not the future! Scary if you ask me."
_________________________________________________________________
I agree with you on this, however I am finding that agents are unfortunately accpeting these listings anyway. I reject these overpriced listings and within a couple of days the listing is on the MLS at the very price that the seller wanted to list it at, and sometimes even higher than they wanted to list it at.

My point is that if these companies are going to charge these upfront costs, they probably do not care what price the seller wants to list at. My guess is that they do not refuse anybody that wants to list with them. And yes there will be a ton of listings that are overpriced, but I can honestly say that there are probably 10% - 20% of the listings being priced right with the rest overpriced anyway.

I am amazed when I see a listing for a home and it is listed at $350,000, then you see the builder is selling the same model except it also includes a bonus room the other does not, granite countertops while the resale has formica, and so on, yet the builder is selling the inventory home at $299,900 and we can get them down to probably $280,000 or so, and maybe even lower. The builder is also paying 3% toward buyers closing costs and to the buyers agent they are paying an 8% commission. 

Although the company that is offering this plan says they are offering the same services as others but at this upfront fee and a small processing fee. When I look at their website, with what they have listed that they do, they do not do many of the services that I do, and these sellers think that they are going to save a lot of money, where most will probably expire and they have actually lost the $995 upfront fee. They pay to save and instead it ends up costing them more than the regular full service companies. The only ones that do save are those that end up selling, and my question is do they end up getting as high a price as they would have with a regular full service Realtor.

Yes the market is slow, but the homes that are priced to the market are selling. Unfortunately, there are thousands of agents willing to take overpriced listings, and I guess if you are willing to do so, then there will be companies willing to charge these sellers an upfront fee. The same seller that thinks they can sell their home even though it is overpriced is probably the same person that is going to look at saving a couple of percent by paying an upfront fee, because they really think their home will sell even though there are 30 other homes that are the same model for sale at a lower price than they are.

There will always be someone who comes up with a plan to drum up more business. It kind of reminds me of all the discount firms that were taking so much of the market share in 2005 and 2006, and were the media darlings, and now are either going out of business or you never notice them anymore. I expect this will be true with this also. They are probably looking at getting a guaranteed payday, even if most of the listings expire, and for the buyer upfront fee of $1,000 they are looking at a guaranteed $50 per hour even if the buyer ends up not buying.

In the end it has to be buyer and seller beware. The seller agrees to pay an upfront fee with the promise to save thousands if their home actually does sell. And the buyer agrees to pay upfront fees for set blocks of hours of service, which will probably result in the buyer doing a bunch of extra work since they will be afraid that the buyers agent will go over the 20 paid for hours and then have to buy another 10. The buyer may overpay for the house since they will be dollar concious and not use the available services. And the buyer may even be thrilled when they get money back at closing. The funny thing is there are plenty of Realtors in our area that advertise that they will rebate 1% or more at closing, and they do not even charge an upfront fee.

Regards,
Jeff Launiere, P.A., e-PRO
Keller Williams Realty
Tampa, FL
813-469-3163
MailTo:Info@SweetHomeTampa.com
http://www.SweetHomeTampa.com

Judith Clausen, Exclusive Buyer Brokerage
Buyers Advantage Real Estate of Metro Denver
Web Site:  www.Buyers-Advantage.net
Blog:  Denver Real Estate Blogspot
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Denver, CO 80247

View all available homes in the Denver metro area

Jeff Continues:  Yes the market is slow, but the homes that are priced to the market are selling. Unfortunately, there are thousands of agents willing to take overpriced listings, and I guess if you are willing to do so, then there will be companies willing to charge these sellers an upfront fee. The same seller that thinks they can sell their home even though it is overpriced is probably the same person that is going to look at saving a couple of percent by paying an upfront fee, because they really think their home will sell even though there are 30 other homes that are the same model for sale at a lower price than they are.

JUDIB REPONDS:  I truly don't understand what paying an "upfront fee" has to do with whether a listing is over-priced or not.  Those are totally separate issues.  Commissions are what they are for several reasons, including (1) sellers often simply don't HAVE the available cash to pay an agent an appropriate amount given the amount of time and expertise required to initiate and complete all the marketing, negotiating, troubleshooting, etc.; (2) Yes, there is a component of "WINNERS PAY FOR LOSERS" involved...someone must pay for all the FREE work we do; (3) WE ROUTINELY DEFER THE SELLER'S RISK.  I think number 3 is likely the biggest component of why commissions are what they are...We incur an enormous amount of risk...the higher the risk, the higher the reward.  Remove SOME OF THAT RISK (by the seller participating UP FRONT in the costs of servicing their needs) then you also remove SOME of the potential reward.  If this is done appropriately...where there is a clear understanding between the agent and the seller as to (1) what the seller is paying, and (2) what they are paying FOR, this could work very well...and profitably...for both!  This is precisely why I became involved with ACRE®...(Accredited Consultant in Real Estate...and yes this is a "shameless", yet appropriate plug!) because it permits me (and all the other ACREs around the US and Canada) to open up new resources WITH TRAINED, PROFESSIONAL REALTORS for the consumer, as well as open up additional income streams for the agents (like doing a "move vs improve" study for a prospect without the inherent conflict created by the fact that the agent only gets paid if the "move" option is the one selected...and yes, I understand, sometimes it IS the best option...but isn't the seller just a little bit skeptical when they KNOW it's the only option that affords the agent a paycheck?)

Jeff Continues:  There will always be someone who comes up with a plan to drum up more business. It kind of reminds me of all the discount firms that were taking so much of the market share in 2005 and 2006, and were the media darlings, and now are either going out of business or you never notice them anymore. I expect this will be true with this also. They are probably looking at getting a guaranteed payday, even if most of the listings expire, and for the buyer upfront fee of $1,000 they are looking at a guaranteed $50 per hour even if the buyer ends up not buying.

In the end it has to be buyer and seller beware. The seller agrees to pay an upfront fee with the promise to save thousands if their home actually does sell. And the buyer agrees to pay upfront fees for set blocks of hours of service, which will probably result in the buyer doing a bunch of extra work since they will be afraid that the buyers agent will go over the 20 paid for hours and then have to buy another 10. The buyer may overpay for the house since they will be dollar concious and not use the available services. And the buyer may even be thrilled when they get money back at closing. The funny thing is there are plenty of Realtors in our area that advertise that they will rebate 1% or more at closing, and they do not even charge an upfront fee.

JUDIB RESPONDS:  Yes, there will always be someone coming up with a plan to drum up more business.  I never saw that as a BAD thing...and it's particularly not a bad thing when IT HELPS ALL THE PLAYERS INVOLVED.  In the early 90s when we were first confronted with the concept of Buyer Agency, there was a lot of "what are THOSE agents trying to pull!"  It was new, it was different, it wasn't more of the "same ol' same ol'".  And it was good for the consumer AND for the industry.  Not only that...IT WAS LOGICAL...why shouldn't each party to the transaction have their own representation, their own fiduciary counsel!