A peek 'Behind the Curtain' at real estate practices
Survey: Most agents, brokers not troubled by uniformity of commission rates
By Matt Carter, Wednesday, August 10, 2011.
Image courtesy of Fuzzy Gerdes.
Real estate agents and brokers surveyed by Inman News say their colleagues often engage in practices that most agree are unacceptable, such as relisting a property to generate fresh interest or reset days on market.
But the survey also found that real estate professionals are divided on the acceptability of much of what goes on "behind the curtain" -- such as agents "double ending" a transaction and representing both the buyer and seller.
The online survey of agents and brokers -- "Real Estate: Behind the Curtain" -- asked real estate professionals about not only the frequency of more than three dozen customs and practices, but whether they thought such behavior was acceptable or not.
More than 500 respondents rated the acceptability of those practices, while 367 reported on the frequency of those practices in their markets, based on their own experiences.
Some of the practices that agents and brokers found most troublesome -- like sharing the seller's minimum price with a buyer's agent -- seem to be infrequent or rare.
Many brokers and agents were indifferent about some practices that appear to be fairly common, such as pricing properties at less than their market value in order to generate interest.
One telling statistic: Nearly 58 percent of those surveyed (see Chart 1) said it was common for major listing brokers in their market to charge the same rate or roughly the same rate for services -- a sign that consumers have little power to negotiate commissions, and that there's a lack of competition based on cost.
CHART 1. FREQUENCY: Major listing brokers in the same market area choose to charge the same rate or roughly the same rate for services.
CHART 2. ACCEPTABILITY: Major listing brokers in the same market area choose to charge the same rate or roughly the same rate for services.
"The majority of consumers feel 6 percent or 7 percent is the 'rule or law.' If we could publish our company policy on commissions, the consumer would be better informed to make a decision," said one survey respondent.
But most agents and brokers said they were not bothered by uniformity in commission rates, with 41 percent saying it was acceptable and nearly 13 percent calling it a "desirable" situation. Only 31 percent shared the view that it's "unacceptable" for major brokers in the same listing area to charge the same or roughly the same rate.
Agents and brokers said the same was true of commission rates offered to cooperating brokers on the buy-side of a transaction. Among those surveyed, 58 percent said it was common for offers of compensation to be the same or roughly the same among major listing brokers. Attitudes about that practice were much the same -- 30 percent of respondents said such a situation was unacceptable.
"My brokerage allows us to choose percentages offered to (the) other side of transaction," said one agent -- implying that others do not. ...CONTINUED
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Submitted by Gary Kurtz on August 12, 2011 - 2:05am.
Just like any business, there are people that follow the rules and do their best to keep their clients interest as job one and others who break the rules because they can. Just remember that your reputation is easy to mess up, but hard to fix.
Gkurtz
http://luxuryrealestateinsider.com
Submitted by Connie Youngblood on August 13, 2011 - 9:32am.
Working generally with buyers, on more than one occasion, I have lost out to the listing agent due to duel agency, twice less than our initial offer. I have called the listing agent always in a polite manner, to get some feedback and inquire why our offer was not selected, especially when it’s significantly less than my clients offer. No matter how polite you are, the response is generally the same, defensive, hostile and abrupt; “how dare you question my authority.”
We really have no procedure or protocol to address this issue. The consumers are very savvy individuals. This situation represents an ethical issue.
Your business reputation will eventually catch up with you and it is difficult to repair once you have been branded as dishonest.
Submitted by Connie Youngblood on August 13, 2011 - 9:34am.
Working generally with buyers, on more than one occasion, I have lost out to the listing agent due to duel agency, twice less than our initial offer. I have called the listing agent always in a polite manner, to get some feedback and inquire why our offer was not selected, especially when it’s significantly less than my clients offer. No matter how polite you are, the response is generally the same, defensive, hostile and abrupt; “how dare you question my authority.”
We really have no procedure or protocol to address this issue. The consumers are very savvy individuals. This situation represents an ethical issue. Your business reputation will eventually catch up with you and it is difficult to repair once you have been branded as dishonest. Additionally, it hurts our industry as a whole.
Submitted by Barbara O'Donnell on August 13, 2011 - 9:41am.
I have been a Real Estate Professional for over twenty years, first in Western Australia, and now as a Real Estate Broker in Florida. While there may be some truth to a few of the things you have said about Realtors others are untrue or unfair. It is frustrating for a home to be listed so low that it gets so many people's hope's up ( And a corresponding pain for the Realtors with the multiple bid situations) What most people don't realize that it is usuallty the lender (and in Florida, they own most of the houses or will soon!) who tells the realtors to keep dropping the price til they get some offers. Also you infer that it is not legal to "double-dip". As long as agency is is properly disclosed from the onset, this is completely legal.
Submitted by Audrey L. D. Petschek on August 14, 2011 - 9:13am.
As in any business there are those that are ethical and those that are not. Most of this survey asks questions that are regulated by the industry and should not be grey areas. One of my personal pet peeves is re-listing a property just to get "New" and no days on market in front of the consumer as an attempt to refresh a stale property. It is not illegal to do so but the industry has done a bad job of policing the statistics because of this practice. In this current environment almost every listing is soon stale so now it is common practice. What erks me most is simply the statistics that we use and share and live by that are never correct. A "days on market" should be every single day that property was listed for sale under that owner during that attempt to sell. Our stats are pulled from just the last listing so our average days on market may show 180 days when that property and so many others my have been on for over 900 days! And it may show it closed at 96% of asking price when in fact the property was reduced 40% over the entire listing period from the first day of listing to sell it! The REAL numbers would tell the truth about this current market. Same goes for listing below market value to stir up interest. If the seller is willing it may actually sell the house but in this current environment there are few prices that will even work with that strategy.
As far as commissions, there is no set amount but most companies have a policy that agents can not veer from. However many independents will cut commissions to grab business but the ones I have dealt with that do this also often do things that I consider unethical and not in the best interest of the seller or buyer. The old adage that you get what you pay for comes to mind. I know one company that consistently attempts to keep everything "in house" and sell to their own clients and not share the listings with the general community and I have seen more than once buyers way overpay and sellers lose hundreds of thousands that they would have made had the properties been properly offered. Yes, they paid a little less commission as sellers but they got burned badly and the independent made a killing and saved on all advertising and promotion and got a double commission.
As far as Dual Agency is concerned, if done properly and ethically, it is fine. But it means you can never tell the seller what the highest amount the buyer will pay or tell the buyer what the motivation of the seller is or the lowest they will take...unless you are expressly directed to do so by your client. If it is done properly everyone should be on an even playing field, only unethical agents would sell a not as good offer to their own client. They teach ethics in real estate as a mandatory continuing education class, some people get it and some people don't. But that is the same with all industries, look at Wall Street, the mortgage mess and the banking industry-going as far as to forge documentation to foreclose on home owners!!! Realtors are coming up smelling like roses these days! Right and wrong are pretty black and white in real estate. I intend to be in the business for the long haul-and yes, I am one of those "Top Producers" that finds those that cheat very aggravating but I can only hope that those that work with me and others like me will see that there are some very good, ethical professionals out there that take this very seriously and want to make sure the client's interests are protected over and above our own needs and wants.
Submitted by Matt Carter on August 15, 2011 - 2:48pm.
@Barbara O'Donnell -- The article does not address the legality of double ending transactions, as laws vary from state to state. In some states it's illegal, in others it's allowed without disclosure, and in still others it's allowed but only with disclosure.
In Florida, disclosures work the other way around. Brokers are PRESUMED to be operating as "transaction brokers," providing "a limited form of representation to a buyer, a seller, or both in a real estate transaction."
"Transaction brokers" do not represent the buyer or the seller in a fiduciary capacity. Because Florida brokers are presumed to be operating as "transaction brokers," they are not required by law to provide disclosures enlightening consumers on this issue, although some do.
Brokerages that are acting as a "single agent" are required to disclose that fact, and then if they want to transition to a transaction broker relationship they are also required to disclose.
When it comes to pricing listings, legal issues (including false advertising) may arise if a house is listed for sale at a price is below what the seller is actually willing to accept, whether the seller is a private individual or a bank.