Seller: Price cut calls for lower commission
Seller finds compromise is often a one-way street
By Benny Kass, Tuesday, May 5, 2009.DEAR BENNY: Isn't a contract a contract? I am about halfway through an eight-month listing agreement. The Realtor is pressuring me to again lower the asking price. He has shown me where similar homes for sale have recently had their asking prices reduced. I know the market is going that way, but I cannot afford to lower my price and don't have an urgent need to sell immediately.
Do I have any legal or ethical obligation to lower my price or can I simply stick to my guns and expect that my contract be continued as is? I assume that the listing contract is legally binding and cannot be changed. If I wanted to go to another Realtor, could I get out of it or do I need to wait for the contract to expire?
For example, when the Realtor asked me again to lower the asking price, I asked him to lower his commission and he said the contract specifies the commission and it cannot be changed until the contract expires. So my point, which went unnoticed, was that the contract should be continued as is. --Craig
DEAR CRAIG: Yes, a contract is a contract and is legally binding on all parties. But that does not mean that a contract cannot be modified, changed or even terminated, if both parties to the contract are in agreement.
You do not have to lower your price from a legal or ethical reason. If you had to sell, then yes, it would be a good idea -- especially in this market -- to do so. But since you are not in a hurry to sell, then I would "stick to your guns" and to your contract. I remain optimistic that the market will rebound, but I can't tell you when this will happen. We are starting to see some positive signs in the real estate market; how long that will last is anyone's guess.
You made a good point to your real estate agent. If he wants you to lower your price (which would be a modification of the listing contract), he could also agree to reduce his commission.
Getting out of a listing contract depends on the custom in your area. In my experience, most listing contracts can be terminated before the end of their term, but you may have to reimburse the agent for any expenses incurred while the agent was under contract.
DEAR BENNY: I want to purchase a house, but my apartment lease is not finished until July. Is there some type of law or relief to where I do not have to pay the remainder of the lease? I know that management will take me to small claims court, but I didn't know whether there was a type of law or type of relief in the case of becoming a first-time homeowner. --Leasa
DEAR LEASA: I know of no such law. I suggest that you (1) contact your landlord (or the management agent) and see if you can work out an acceptable compromise, but (2) try to schedule your settlement (escrow closing) as close as possible to the termination date of your lease. In my opinion, it often makes sense to buy first, and then have some time to move furniture and make any improvements or repairs to the new property while you still have somewhere else to live -- even if you have to pay an extra month's rent.
DEAR BENNY: I have a rental house that is under contract with a rental agency. About six months ago, an individual from the agency called me and stated that the house needed a new roof. The agency had an estimate that sounded reasonable so I gave my approval. I sent the agency the money to complete the job. I waited for the roofer to fulfill the contract the agency had with the roofer. After a long wait the roofer came and picked up half of the contract money, but never started working or even delivered roofing materials.
The agency brought suit and now has a judgment against the roofer, but I don't think the roofer has any money to satisfy the judgment. To the best of my knowledge the agency didn't check for references, licenses or insurance. If the agency can't get the down payment through the judgment, is the agency legally obligated to return my down payment? If I have to take the agency to court would I have a case against the agency? --Paul
DEAR PAUL: That's a tough question, and you really should consult a local attorney for specific advice.
Have you done any research yourself? Was the roofer licensed in your jurisdiction? Is there a written contract between the agency and the roofer? What arrangement or contract do you have with the rental company? I need to know a lot more before I can give you a response.
In general, if the agency did not do its homework, then you may have a case against them. But litigation is always time consuming, expensive and, more importantly, uncertain.
Depending on the amount in question, I would hesitate to file suit. But let your lawyer give you an opinion based on all of the facts. ...CONTINUED
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Submitted by Ted Jernigan on May 5, 2009 - 3:37am.
I don't know what kind of contract this seller has, but loering the price on my listing agreements does result in a lower commssion. Lower the sales price by 10% and the commission goes down by 10%. I realize sellers in many markets are feeling serious pain. They are looking anywhere for relief.
Ted Jernigan
Ebby Halliday REALTORS
McKinney, Texas 75071
Jernigan@ebby.com
972-489-6173
Submitted by Teresa Boardman on May 5, 2009 - 3:56am.
What does the agents commission have to do with it? The seller agreed to pay the agent x % the amount of money the agent receives goes down just like the amount the seller receives if he or she lowers the price.
Submitted by Emmanuel Scanlan on May 5, 2009 - 4:10am.
Re: Isn't a contract a contract?
There will be plenty of Agents weighing in on this about how "That is how the market goes", etc., etc. However, many Agents either do not, or choose not, to realize how lowering a listing price can affect the seller. I have heard this same scenario many times over the years.
The Agent takes the listing, when it does not sell within a week, or month, or does not have a lot of showings they then go back to the seller and tell them they have to lower their price. However, the Agent really does not take into consideration that a $10,000 drop in price only means a $600 drop in commission but that is a $9400 drop for the seller.
So what is the answer? It actually is simpler than many want to admit. It is the Agents job to counsel the seller on the sale of their home. Part of that counseling is to help the seller realize what the actual value of their home is and set a selling price accordingly.
So what happens if the seller won't price the home accordingly? Don't take the listing! Now that was simple. Unfortunately what happens is in an effort to gain the listing the seller is not properly counseled and the home is listed at whatever the seller wants to ask. Then you wind up with writers asking Benny Kass (or others) these type of questions. Additionally the RE industry gets a black eye when the seller develops a bad impression of it.
Emmanuel J. Scanlan
PS Inspection & Property Services LLC
www.psinspection.com
214-418-4366 (cell)
TREC License # 7593
International Code Council, Residential Combination Inspector #5247015-R5 (Electrical, Mechanical, Plumbing and Building)
Certified Infrared Thermographer (ASNT-TC1A Standards)
Texas Residential Construction Commission, Third Party Warranty Inspector #1593
Texas Residential Construction Commission, Inspector, County Inspection Program
Texas Department Of Insurance, VIP Inspector # 08507061016
Hayman Residential Engineering Services, Field Technician
CMC Energy - Certified Energy Auditor
Knowledge is power, but sharing knowledge brings peace!!
Submitted by Joe Heffernan on May 5, 2009 - 4:25am.
Interesting comments, especially from inspectors now providing real esate advice. Very few agents in todays market will take a listing without doing their best to show the sellers up front what they are facing and trying to determine, the sellers real motiviation for selling. Come on, we are in a down pricing trend market for the past 2 years. If it were just as simple as inspector above notes, however, what usually happens the market continues to drop, and then the sellers do not want to admit that there are few or no showings, no offers, and no buyers. If other propery around them are adjusting their price, you have no choice if you want to sell. Firing one agent will not fix the issue, the next agent in will show you the same numbers and suggest the same. Just like, If a stock goes down to $4 will anyone in their right mind pay $5 or 6, hardly. The market sets the price, not the agent, not the seller, but the market. When all parties understand this, the home will sell.
Submitted by Emmanuel Scanlan on May 5, 2009 - 5:29am.
Joe Heffernan wrote:
"Interesting comments, especially from inspectors now providing real esate advice. "
Is that really any different from a Realtor giving inspection advice? We see that all of the time.
"Come on, we are in a down pricing trend market for the past 2 years."
That's a poor excuse for a RE Agent not doing their job.
"what usually happens the market continues to drop, and then the sellers do not want to admit that there are few or no showings, no offers, and no buyers."
If you know this is going to happen (you are apparently predicting it above) then it is your job to get a seller to realize this.
"the next agent in will show you the same numbers and suggest the same. "
Yes that is true. It is also one of the major problems with the RE market today! Hungry RE professionals (all participants of the industry) are doing what it takes to "get the client" instead of "help the client".
"Just like, If a stock goes down to $4 will anyone in their right mind pay $5 or 6, hardly."
Very bad analogy as you are now comparing apples to oranges!
"The market sets the price, not the agent, not the seller, but the market. When all parties understand this, the home will sell."
A RE Agents job is to understand the market! Part of understanding the market is watching trends and trying to make sense of what is happening and what can possibly happen. You even stated trending information with:
"Come on, we are in a down pricing trend market for the past 2 years."
So what are you doing to prepare your clients for the potential their home will not sell at the original asking price? What are you doing to aggressively market that home so it is as visible to the public as possible? What are you doing to "drive" people to that listing?
"Very few agents in todays market will take a listing without doing their best to show the sellers up front what they are facing and trying to determine, the sellers real motiviation for selling."
You are now blowing smoke! Where is your empirical data to support the numerical connotation of "Very few"? The truth is the current economic situation will take good people and turn them bad and make bad people worse. RE professionals are not immune to this. If you would like empirical data to support this claim I just made go look at the rising crime stats.
I know quite a few good, honest and ethical RE Professionals struggling out there to survive while trying to maintain their values and ethics. Those are the ones I applaud and will bend over backwards to assist when I can. Those that decide to take the other path can keep their business to themselves!
Emmanuel J. Scanlan
PS Inspection & Property Services LLC
www.psinspection.com
214-418-4366 (cell)
TREC License # 7593
International Code Council, Residential Combination Inspector #5247015-R5 (Electrical, Mechanical, Plumbing and Building)
Certified Infrared Thermographer (ASNT-TC1A Standards)
Texas Residential Construction Commission, Third Party Warranty Inspector #1593
Texas Residential Construction Commission, Inspector, County Inspection Program
Texas Department Of Insurance, VIP Inspector # 08507061016
Hayman Residential Engineering Services, Field Technician
CMC Energy - Certified Energy Auditor
Knowledge is power, but sharing knowledge brings peace!!
Submitted by Jill James on May 5, 2009 - 5:49am.
We definitely could get into a "tit for tat" thing here -- REALTOR vs. Inspector -- but I will say, despite my training and degree in architecture, qualifiction to be a building code inspector, and 10+ years of experience in construction, I do NOT inspect houses and never claim to be a home inspector!
We, REALTORs and Inspectors, are in the same industry, but we each have our own specialties. Certainly, each specialty has its good guys and bad guys! And, certainly, since we cannot be in another person's shoes all the time, we do not have a full understanding of the other guys issues of the day, week, year. And, since I like to be an optimist -- because life is to short to live it with a dark cloud over my head -- I do feel that most members of our respective specialties does the best job they can at that particular time.
So, let's each stick to our own knitting and do our jobs to the best of our abilities and nudge our fellow real estate professional (REALTOR or Inspector) gently and personally, not in the public eye. We all have enough challenges from naysayers from outside our industry poking at us to keep us busy.
Onward and upward folks!
Jill
Submitted by Jill James on May 5, 2009 - 6:13am.
As to the request to reduce a commission when a listing price reduction is made, as a listing agent I will continue to market a property with the same vigor whether the property is at the original listing price or a reduced listing price. And, since a reduced list price does essentially reduce my commission, I will be performing those marketing activities with less money coming in.
Frankly, sometimes I think we are all crazy for accepting the way this pay structure works! What other professional takes on these kind of expenses on contingency? To those who are not REALTORs, please remember, most REALTORs take on and service a listing with NO retainer or payment guarantee. Money goes out of our pocket and away from our family with no certainty of payment -- like the two contracts that were cancelled on the closing date last week. And, although most of the general public believes that REALTORs make huge amounts of money, since most REALTORs in my area sell fewer than 7 houses a year and have some sort of split with the Broker, the average REALTOR makes about $35,000 per year. No one is living high off the hog with that kind of money in NJ!
If the Seller does not need to sell and does not want to reduce the price of his house to sell, I'd give him an unconditional release from the listing contract, rather than compromise my professional commitment to market his home to the best of my ability. And, most likely, if I knew of his intentions intially, I probably would not have taken the listing in the first place.
Good luck to you all,
Jill
Submitted by Emmanuel Scanlan on May 5, 2009 - 6:34am.
Jill,
"Frankly, sometimes I think we are all crazy for accepting the way this pay structure works! "
I agree with you completely, in the nice sense of the way, not that you're crazy. The entire system really does need to be revised, from Agent licensing all the way to paying Brokers their fees when the sale is complete. The current system may have been adequate prior to the explosion of electronic media and marketing but is now only a hindrance to progress and competition.
I would believe that the Agent is paying as much in costs and fees, if not more, than they are making. That is either side of the coin whether a buyer agent or seller agent.
There are many good Agents out there that have to "follow the plan" before they can even obtain the Broker's license and open their own office. These same good Agents, even ones with no prior RE experience, that if given the opportunity right from the start could be providing exceptional service and results to their clients as their own Agencies. Instead the current system amounts to "Indentured Servitude" to a Broker.
Emmanuel J. Scanlan
PS Inspection & Property Services LLC
www.psinspection.com
214-418-4366 (cell)
TREC License # 7593
International Code Council, Residential Combination Inspector #5247015-R5 (Electrical, Mechanical, Plumbing and Building)
Certified Infrared Thermographer (ASNT-TC1A Standards)
Texas Residential Construction Commission, Third Party Warranty Inspector #1593
Texas Residential Construction Commission, Inspector, County Inspection Program
Texas Department Of Insurance, VIP Inspector # 08507061016
Hayman Residential Engineering Services, Field Technician
CMC Energy - Certified Energy Auditor
Knowledge is power, but sharing knowledge brings peace!!
Submitted by Jim Lee, Portsmouth New Hampshire Realtor on May 6, 2009 - 4:38am.
So Emmanuel, how much do you reduce your fee because the buyer needs to save some money?
Just curious.
PS, I don't give inspection advice, have been licensed since 1978, and work for a 100% commission shop so I set & control my own fees.
Jim Lee, CRS, ABR, GRI, NAR Certified e-PRO Trainer
Realty Executives Associates, Knoxville, Tennessee
www.KnoxvilleHomeCenter.com mailto:Jim@JimLee.com
(865) 693-3232, My Personal Toll Free # 1-800-662-2488 ext. 163
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