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I got a call the other day from an agent. She was angry, with cause, about something another
agent had put into our local MLS. Now, for the faint of heart, I’m going to talk about the dirty little secrets
of real estate here, and I’m going to call them as I see them. If you are thin skinned, you might not want
to read on. Here’s what happened: Agent X, from another company, put a new listing in the MLS. Under
the Buyer Agency Fee offered to cooperating buyers’ agents, he had X%**, except for three particular
agencies (which he named)—to those companies he was offering a fee that was less than X%. We’ll
call this offer of compensation Z%. I might add that X appeared to be a number that might have
represented half of his gross commission, although I have no way of verifying that. I will add that X is a
number frequently seen in my MLS as a cooperating fee offered to buyer agents.
Our local MLS pulled the listing, and hopefully slapped his wrist. Not because of what he is offering—he can offer whatever he wants. It’s just that if he wishes to alter his offer of compensation to one or more particular companies, the protocol is to notify those brokers in writing, broker to broker, e.g. “It says X% in the MLS, but be advised we are offering your company Z%”. The agent who called me said: “I can understand why he is offering only Z% to companies A and B; Z% is what those companies are offering everyone else. But our company doesn’t do that, and I don’t like us to be singled out.”
She was pretty annoyed. Before I go further, into what I really want to get to, let me remind everyone of some truisms with respect to commissions:
Ø Every state (as far as I know) requires brokers to negotiate commission rates with sellers.
Ø It is a major violation of anti-trust to talk about a commission in terms of “we charge what everyone else charges” or “we pay the same co-op fee everyone else does”.
Ø That being said, there is an incredible herd mentality in real estate. The two companies who are offering Z% both belong to an adjacent MLS, where Z% is what I have observed as being most commonly offered.
Ø If you offer compensation in the MLS, and I accept your offer of compensation by selling your property, you must pay me what you offered.
Prior to accepting your offer of compensation, I can certainly contact you and negotiate a different fee [Standard of Practice 3-3
Standard of Practice 3-2 does not preclude the listing broker and cooperating broker from entering into an agreement to change cooperative compensation. (Adopted 1/94) ]
Ø Smart agents work exclusively with buyers and sellers; as I like to tell my students: “Don’t ever let some seller’s agent tell you what you are worth!”; when I sign up a buyer client, we negotiate my fee, and my clients know that if the offer of compensation in the MLS is less than that, we’re making up the difference somehow—either my client writes a check, or we will structure the offer with closing cost assistance coming back to my client so he can pay me the difference.
That’s all well and good, but here’s what I really want to get at: one of the dirty little secrets of real estate. Here’s what it is: even though the REALTOR® Code of Ethics says in Article One that a REALTOR® must put his or her client’s needs above all others, including his own, and even though SOP 1-12 says:
Standard of Practice 1-12
When entering into listing contracts, REALTORS® must advise sellers/landlords of:
1. the REALTOR®’s company policies regarding cooperation and the amount(s) of any compensation that will be offered to subagents, buyer/tenant agents, and/or brokers acting in legally recognized non-agency capacities;
in real life, agents gloss over this. I sometimes wish, like on the old “Bewitched” TV show, we could administer a truth spell to REALTORS®. Remember that truth spell? Once Samantha, the witch put it on the mortals, they could only speak the truth—no matter how damaging it was to them personally. Imagine, if you will, a conversation with a REALTOR® under this spell:
Seller: “What’s this number here—it’s less than your commission?”
Agent: “Oh, that is the buyer agency fee our company is offering to other companies who sell your house.”
Seller: “Hmmmm—you are charging me X%--this number isn’t half of X—let me see it’s—well, it’s somewhere around 40% of the gross fee. Why is that?”
Agent: “We like to discourage other agents from selling our listings. See, I make the most money if I sell your house on my own. That’s called a double-dipper. Plus, it keeps the broker happy when we don’t share commissions with other agents.”
Seller: “Well, I really want all the agents out there working on selling my house, not just you and your company.”
Agent: “Look, are you going to be a pain about this? If you are, I’ll cave and grudgingly offer the other agents half of our commission. Of course, then I’ll put your listing in my pocket and keep it there until I show it to all my buyers. Then I’ll share it with the other agents at my office, and they’ll show it to all of their buyers. If we still don’t sell it then, we’ll put it in MLS and offer half the commission.”
Seller: “But I want my house in the MLS right away. I want it on the Internet. I want it at realtor.com.”
Agent: (Sighing!) “All right, all right. We’ll do it your way, but I won’t be happy about it. I may have to not
return other agent’s calls about showing your property so I can try to sell it myself.”
[Let’s violate another one: Standard of Practice 3-8
REALTORS® shall not misrepresent the availability of access to show or inspect a listed property. (Amended 11/87) ]
Seller: “I don’t understand! I thought you wanted to sell my house quickly, at the highest possible price, and with the best terms and conditions for me.”
Agent: “I said that, but I don’t mean it. I really want to sell your house at the best price, terms and conditions for me.”
Wow! How scary is that! But here’s the bigger question—how true is that? You see, I’m fairly convinced that few agents sit at the listing presentation and actually explain company policies as they should, in accordance with SOP 1-12. Yet here we are, in a tough market in many parts of the United States, and instead of doing everything possible to sell listings, some agents are still putting greed ahead of their client. Ask yourself this: if you were a seller, and you really understood the process the way we do, wouldn’t you want your property to be made as appealing as possible to all agents, especially buyers’ agents? What do relocation companies do in a tough market? They ask the agent what the ‘prevailing commission rate’ is (their term, not mine). They then tell the agent they will pay a fee in excess of that rate, and instruct the agent how the fee is to be split. Guess what? It always amounts to an incentive for a buyer’s agent.
Here’s my final point: we are in a sea change in our business like I’ve never seen before in my 33 years in the business. Consumers know more and more everyday about what we do, how we do it, and how we get paid. How in the world are we demonstrating our value to the consumer if we insist on playing games that benefit only us?
Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com
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