Another Interesting Blog Post

Interesting to me, at least.  There’s often talk about the problems with organized real estate, but I think that a lot of the suggestions for improvement are wrong headed, and don’t address the problems.  I don’t expect a lot of agreement on this, but I think that people who advocate addressing commissions in order to cure organized real estate or the MLS have to take a longer look at the issues.  Redfin (currently only in the US) and discount brokers have a role, I’m sure, but they aren’t the solution. 

With that in mind I point interested parties to a  blog post by Kris Berg, an accomplished California Realtor.

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5 Comments

Filed under discount brokerages, MLS, Other Blogs

5 responses to “Another Interesting Blog Post

  1. Skeptic

    They have a fairly low tolerance level for bubbleheaded bears over there 😉

  2. jim

    Rob:
    All these anecdotes sound made up. I have no problem with our current commission structure for RE agents because I know how much non revenue generating activity is involved in a realtor’s day to day for every sale that ultimately closes. So while 10 hours work for $35k sounds too rich, it seems right if spread over all the other flakey deals that go no where. I would say to this agent it goes with the territory that some buyers are flakes and that’s what justifies high commissions. My biggest gripe in the current market is that homes priced right sell fairly immediately within days, sometimes hours. The effort reward ratio for realtors is at an all time low and it breeds contempt from some buyers. Of course as a seller I recognize that it was easy money for me as well and I am happy to share the rewards.
    My cynicism towards the whole Real Estate game is fostered more buy the “multiple offers breeding overpaying” market we are in, instead of any animosity towards realtors.
    A second note of cynicism on my part is towards newer realtors that have not experienced a tough market and feel a sense of entitlement to the relatively easy sales they currently experience. That’s tempered by the famine for realtors which is coming. Guys like you will likely be ok in any market.

  3. robchipman

    Jim:

    Funny that you think these are made up anecdotes. I haven’t dealt with discount buyer agents, but I have dealt with discount listing agents, and the anecdotes ring very true with me (I would pretty much echo Jeff Brown’s approach, btw).

    The challenges Kris brings up have a buyer’s agent’s parallel challenge: if the discount listing agent doesn’t even turn up at offer presentation, what kind of agency does a buyer’s agent owe to the seller?

    A duty of fairness, obviously, but what does that mean?

    Is the buyer’s agent required to explain the meaning of contractual terms? If so you’re pretty much creating an agency relationship, through actions, with someone who has an agency, through contract, with another agent.

    To begin with, its very arguably unethical (and counter to the Standards of Business Practices) to even talk to the seller w/o the listing agent, but if they aren’t present don’t you owe a duty, as the buyer’s agent, to the buyer to show them all properties and negotiate on their behalf?

    Putting the discount listing agent to the side for a moment, if the buyer’s agent does create an agency relationship with the seller, then we have a limited dual agency agreement. But has the buyer consented to this? In writing? Can we consent to an LDA agreement in writing without cancelling the original agency agreement with the discount broker? And if we do that, aren’t we intruding on an existing contractual agreement and inducing its breach?

    Lest you think this is an unlikely scenario, it isn’t. It has happened, real world, in this market, recently. The seller’s agent did not appear at the offer presentation. The seller claimed to understand exactly what they were doing, and agreed, in writing, that the buyer agent was only representing the buyer. Later, the seller claimed to have relied on explanations made by the buyer agent in order to make a decision, but because either they misunderstood or the buyer’s agent lied the seller received less on closing than they had expected. hey still closed, but then complained and chased the buyer agent.

    There was a saw off to the tune of $1000. The original discounted buyer’s agent’s portion of the commission was just over $2,000. Two grand gross, minus split, minus costs, minus $1000. Pretty slim paycheque. Note that I’m not asking for sympathy for the buyer’s agent. However, if the discount listing agent had been present at the offer presentation, doing their job, the problem would not have arisen.

    Of course the buyer, who had real agency representation, did just fine, as you would expect.

    What is my point? RE is a serious business. The market decides on what compensation will be. If you want to compete with Realtors, do so, but educate yourself, because otherwise you’re likely to suffer financial loss (and to be fair, you may not even know you’ve suffered).

    If you’re using a Realtor, get a good handle on what your role and responsibilities are. Many (not all, but still, many) complaints I hear about Realtors come from principals who behave in unreasonable manners. Its a serious business, as I’m sure you’d agree.

    I disagree that the sale means easy money for you. You had to buy, and you had to service, and you had to keep the faith. You were the one taking the risk. The payoff is improved by renting the bank’s money, but they tie you up, after all, and you still take 99% of the risk.

    As for my role, well, let’s just say that the easy sales pay for all those non-sales I’ve made 😉

    You are right that its a tough time for new Realtors. There is a lot of competition, yet we’re in a bit of a hothouse. The market will change.

  4. jim

    I have used (worked with-fruedian slip 🙂 the same realtor for 15 years, so I get the effort that goes into it,thus I am loyal to him. I am also in sales-sort of, and I work with a number of charities so I understand the difference between the two.

  5. mike

    I think the solution is high buyer agent commission and flat mls listing fee.

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