Posted by Amused at 4/6/08 7:10 a.m.

Interesting that the "fish" in this example isn't the buyer, but the buyer's real estate agent.

So the potential buyer never gets to see the house if the buyer's real estate agent doesn't like the commission terms?

Posted by Kary L. Krismer at 4/6/08 7:41 a.m.

That's the risk you take. The current system is all about attracting agents with buyers, rather than attracting buyers. It works well for sellers, but perhaps not so well for buyers.

BTW, it's only some buyer's agents that will be discouraged, but the point is, that is not good for the seller. Even if it's only one agent, that agent may have the buyer that would have made an offer within the first two weeks.

Posted by Joy Canova at 4/6/08 8:56 a.m.

I will show my buyer any house at any commission rate because we will have committed our relationship to a written Buyer's Agency Agreement at 3%. My buyer may avoid a property at a lesser commission, consider making up the difference, or have me negotiate with the other side for 3% (which is only possible, btw, with a written buyer agreement).

Some buyers really do want an expert on their side and understand the importance of a fair commission. And before you ask, 3% is fair. Realtors work on contingency, as well as commission.

My buyers know I put in many, many hours for them before a buy ever arises. They also know I support their best interests even if they never find a house to buy. Meaning: I will not get paid for that work.

Is it fair, then, that a buyer who comes along and swiftly makes a purchase should also expect my commission to be 3%? Of course it is. Without evenly out the ups and downs of the source of my livelihood, I could not keep my expertise in the marketplace.

Kary, I like your metaphor. I find the general public (and frankly a lot of agents) is not very aware of agents who truly think in terms of the client's needs first. When positing how one may help a buyer or seller, a list of credentials just will not do. Instead, a Realtor should offer what they bring to the table to meet their client's needs. Its a mindset thing.

Posted by laxtosnoco at 4/6/08 9:34 a.m.

So two points on the selling agent commission structure, but nothing on pricing?

If a seller prices his property competitively I've gotta believe that consumers will find it through one of the myriad online search sites.

Aren't there still (unrepresented) folks who will see an interesting listing and call the name on the yard sign? They don't care about the commission split, and the listing broker will probably get both sides anyway.

Posted by Mack McCoy at 4/6/08 9:43 a.m.

- So the potential buyer never gets to see the house if the buyer's real estate agent doesn't like the commission terms?

Not all agents are in contractural relationships with buyers. So while I may know of a half-dozen contractors who might, if the sun is in the correct position in the sky, be looking for a project, the chances of my calling them on a 0.5% commission are long.

For three percent, I might give them a call.

- Aren't there still (unrepresented) folks who will see an interesting listing and call the name on the yard sign?

Every little bit helps.

Posted by synthetik at 4/6/08 9:45 a.m.

The fish have all felt the sting of the hook by now, even the dumb ones, and they aren't taking the bait.

Posted by Joy Canova at 4/6/08 10:40 a.m.

One often mistakes "finding a house" as the essential need for an agent. Its not.

Buyers need agents to construct an offer which will incite the sellers to negotiate. Then the agent negotiates not only the price, but repairs or consessions which are needed to compensate for condition.

Great agents know how to structure contracts and negotiations which meet the needs of the buyer, mitigating/minimizing risk exposure.

Today's real estate case law puts a heavy burden on the buyer to discover risks associated with stucture, land, and title conditions.

With the high cost of housing, this is hardly a time be over-confident about going it alone. Be smart. Find a good advocate.

Posted by Kary L. Krismer at 4/6/08 11:16 a.m.

Lax wrote: "So two points on the selling agent commission structure, but nothing on pricing?

If a seller prices his property competitively I've gotta believe that consumers will find it through one of the myriad online search sites."

Well sure--pricing matters. But we're really typically talking about a .5% difference, or $2,500 on a $500,000 house. That would be an insignificant price change that would be unlikely to change buyer interest.

Keep in mind fishing is relatively slow right now. Getting that bite is tougher than a year ago, but even a year ago waiting 60 days wasn't all that unusual.

Finally I do want to make clear it's only some agents that will be affected. Just this morning we met with a buyer to sign up an offer. On the way back I asked my wife what the commission was. She didn't know and had to look it up. Perhaps not a great example, because in this case it was outside the area our client told us they were interested in (actually in a place they specifically said they weren't interested in), so we didn't select the property. But the point is not all agents look at commission. If some do, however, it will hurt your chances.

Posted by Kary L. Krismer at 4/6/08 11:18 a.m.

synthetik wrote: "The fish have all felt the sting of the hook by now, even the dumb ones, and they aren't taking the bait."

Sales volume was up almost 50% in March over February, so that's hardly correct. It wasn't has high as March 2007 or 2006, but it was probably 66-75% of those years. Hardly a case where no one is biting.

Posted by Debra Sinick at 4/6/08 11:21 a.m.

Joy,

Agreed. Your post gives much of the service we provide when the buyer decides to buy the home. However, before we get to the contract/negotiation stage, we do more than just open a door. We share our knowledge of the neighborhoods, the builders, the pros and cons of the home(there are always pros and cons), the pricing, etc., so the buyer can make an educated decision as to whether to buy the house or not. We can alert them to issues, as we see them, and, then direct the buyers to the appropriate people to get questions answered: title, land use/zoning, schools, noise, etc. We are advisors to our buyers first and foremost.

Kary-I disagree that summer is always best to sell a home. Homes do sell year round, however, if you look at the trends over time, inventory, even in the fast selling years, increases into the spring and summer. Summer is the time to play in Seattle so many buyers want to do other things on weekends than look for a home. Consequently, showing activity increases during the week, rather than on weekends. But the competition to sell is that much greater during the summer.

Sellers, who are planning to sell soon, should get on the market now before the summer rush. Homes should be priced well to beat the competition so the seller is still not trying to move their home in the doldrums of August.

Posted by Kary L. Krismer at 4/6/08 11:22 a.m.

Lax wrote: "Aren't there still (unrepresented) folks who will see an interesting listing and call the name on the yard sign? They don't care about the commission split, and the listing broker will probably get both sides anyway."

It was actually a discussion related to that over at Rain City which got me to write this piece.

http://www.raincityguide.com/2008/04/03/dont-sign-that-listing-contract/

Posted by Kary L. Krismer at 4/6/08 11:27 a.m.

Debra wrote: "Kary-I disagree that summer is always best to sell a home. Homes do sell year round, however, if you look at the trends over time, inventory, even in the fast selling years, increases into the spring and summer."

I'd agree--at least as to some areas. That was mainly just part of my transition from fishing to real estate.

I had a listing recently where they wanted to sell in February/March because that's when the wife was retiring. Initially I didn't think that would be a good idea, but I looked at the sales stats for that particular area and it was pretty evenly disbursed throughout the year by quarter. We ended up not listing until January and closed a week or two early.

Posted by Joy Canova at 4/6/08 12:28 p.m.

Debra, How right you are to point out the work done by Realtors before we ever think about a contract. I, as many others do, give this time freely and without consideration of when I get paid. If you make it you practice to do so, it all comes out in the end.

Kary, here's to your good effort to stay true to your metaphor! ; )

Posted by Lincoln Davis at 4/7/08 11:06 a.m.

Thank you for the posting. Very interesting. This is my first time posting a comment, as I have never really had anything to say or add to the discussion.

I post now, because I just placed my Fremont condo on the market. I'd love to get the groups suggestions on the best ways to "attract" buying agents to my place - http://windermere.com/index.cfm?fuseaction=Listing.ListingDetail&ListingID=19645258.

I'm sure readers like myself (people who have, or who are looking to put there place on the market) would be interested in your suggestions.

Posted by Leanne Finlay at 4/7/08 12:19 p.m.

Hi Lincoln, thank you for participating! Since your property is listed currently with an agent, the best advice we can give you is to listen to your agents' skilled advice.

We can give you more or less generic selling tips I think, but I would personally hate to second-guess your agent.

Generic good advice for any seller: Make sure your property is immaculate, as bright as possible (including turning on lights if needed when you leave), make it as easy as possible for agents to show the property, price it well, use good marketing photos ...

Price + condition are key factors.

I'm sure others will chime in here too.

Posted by Mack McCoy at 4/7/08 1:29 p.m.

There is no secret about marketing property. It's a skill, and your agent has it. You get good photographs - not flattering ones, good ones, that tell the property's story; you have good advertising copy - which you do; you make it accessible to viewing 14/7 (nothing worse than "One's not good, can you make it four? Or tomorrow?").

The hardest thing to do is wait, but after all the activity of getting the property ready for market, the days (hopefully, not larger measures of time) afterward go p-a-i-n-f-u-l-l-y s-l-o-w. Because good listing agents, like today's pitchers, don't leave anything in reserve. It's all out from the first pitch.

Agents have different opinions about open houses. I like to have it open the first week, because if it's "hot," it gives people a chance to see it with their friends and family even though their agent's got something else to do.

I know the building well; I remember it before it was a condo. And my wife, Cynthia (and I) built condos across Aurora in 2001. Plus I've had a few listings down the street at the courtyard condos on Linden, and a duplex on Motor Place. So I know that the location can be a difficult draw. But here's the bottom line on livability: three of my four original buyers still live in the one we bought, and Allen Place is off the main drag, but close to the ever valuable Marketime grocery. For livability, nothing beats having a full-service grocery / deli two blocks away.

If you think your agent should be doing "something more," discuss it with her. I don't think so. I think broker's opens are a waste of time in Fremont, and as far as public opens, to my mind - after the first one, they're only real purposes are to act like something's being done to market the property, and to help an agent find a new buyer.

Allabest.

Posted by sandykaduce at 4/7/08 3:37 p.m.

Lincoln--I agree with Mack. Looks like your agent is doing a good job for you. And I commend you on putting the link in these comments here--bet you'll get some web traffic from that. Heck, you got me to go look, and Fremont isn't even my area!

The photographs are great and the condition looks really good--she appears to have staged the place and it looks really inviting. These are among the most important things because most buyers' first impression will be of the photographs and that is what is going to convince them to visit the home. Same with buyer's agents--the first impression of your home will be the photographs on the MLS, so those need to encourage rather than discourage a visit!

Posted by Dugald Allen at 4/7/08 11:30 p.m.

Nice job, Lincoln - linking it in! That's a great way to increase your views (I just added one more!) :) A big ditto on everything said above...

..except that one thing Mack opened with: "There is no secret about marketing property.'

I disagree. Some folks have a knack and are just plain better at it...

Posted by Dugald Allen at 4/7/08 11:43 p.m.

Kary, FWIW, I'm a big fan of being paid a fair fee, but a good agent will bring the opportunities to their clients regardless of the commission.

I think your focus on the agent makes some sense, but your analogy doesn't work for me... I can't see where the buyer fits in. By and large, I'm not marketing to agents.

Bringing your property up in the ol' reticular activators of buyers' agents makes sense from a "I saw this cool one online - let's go see!" persepctive ...but the next step for most buyers is "kewl, email me the listing. How much is it?"

It's mostly the buyers who need to be offered the bait - in the form of a well-priced home with great photos and motivating copy. Once in the home, quality presentation and staging are the hook.

Posted by Kary L. Krismer at 4/8/08 7:49 a.m.

Dugald wrote: "Kary, FWIW, I'm a big fan of being paid a fair fee, but a good agent will bring the opportunities to their clients regardless of the commission.

I think your focus on the agent makes some sense, but your analogy doesn't work for me... I can't see where the buyer fits in. By and large, I'm not marketing to agents."

As mentioned, we don't look at commission when representing buyers, but the point of the piece is that not all buyer's agents are as good as you and me--commission matters to some. And by not offering what is expected, you're cutting yourself off from that part of the market.

I realize the analogy isn't perfect, in that it's agents rather than buyers that are the fish. But what you really want when selling is the agent that has the buyer that will buy your house. That's the fish.

Posted by Kary L. Krismer at 4/8/08 7:55 a.m.

Lincoln wrote: "Thank you for the posting. Very interesting. This is my first time posting a comment, as I have never really had anything to say or add to the discussion."

Welcome.

The only thing I would add is price is a factor, and your agent should be able to tell if you're overpriced by the number of hits it gets on the NWMLS system. Few actual showings of the property (people coming to your place) can also be a factor indicating it's overpriced, but that can reference other factors (e.g. the 2.5% commission addressed here, lousy pictures, a map link that is to a different area entirely, etc.). But the hits on the NWMLS is pretty much purely price. If you're not getting a good number of hits, it means agents with buyers aren't even looking for a property of your type in your area in your price range. Think of the agent hits on the NWMLS as a fish finder (sonar). If you're not seeing many, you're in the wrong price area.

Posted by Mack McCoy at 4/8/08 8:05 a.m.

- I disagree. Some folks have a knack and are just plain better at it...

Dugald, you're absolutely right, but the same is true with all skills. There really aren't any secrets to playing the piano well, it just takes about ten thousand hours and a good teacher. Those with a knack will have a career, those without it will ... I dunno, play banjo?

As far as determining who your target market is ... I kinda side on the idea that the target market is the real estate agent. It is a small, but vocal, minority who are "going it alone" and are ready to buy, and I think getting agents out to see most types of residential housing is the way to go.

There are some properties where that may not be the case. Individualistic by nature, I have no hard-and-fast rules concerning these properties.

Posted by Kary L. Krismer at 4/8/08 8:17 a.m.

Mack wrote: "As far as determining who your target market is ... I kinda side on the idea that the target market is the real estate agent. It is a small, but vocal, minority who are "going it alone" and are ready to buy, and I think getting agents out to see most types of residential housing is the way to go."

I think that's particularly true in today's market. When the market was hotter, unrepresented buyers would be more likely to stop by an open house. Now it seems like a larger percentage of people out there who are looking have agents--they're the serious buyers.

Posted by Mack McCoy at 4/8/08 8:51 a.m.

- If you're not seeing many, you're in the wrong price area.

Which means - you're too high, not that you're underpriced!

Thanks, Lincoln, for sharing your story. Now you've got a half dozen more agents pulling for you!

Posted by buddhabrad at 4/8/08 9:11 a.m.

The Battle for WaMu(tm)

Bloodbath update

In what is reminiscent of the Cold War theory of "mutual assured destruction", the actions surrounding WaMu in recent days provide an real world example of what would happen if, rather than just threatening to wipe each other out, both parties just went ahead and started launching missiles.

As you've read here over the past week, the battle for WaMu is escalating as the company fights for its' life.

Under heavy short-sale pressure at the end of last week, WaMu responded by taking on a massive investment plan which effectively reduces a WaMu share's value in half.

This action pushed the stock up nearly 30% yesterday, as the market generally viewed the $7 billion investment as a sign that WaMu would survive the crisis, since some advisors believed the company would run out of cash at the end of the year.

However, and this is a huge however.... The shorts continued to just pile into this stock over the last 24 hours, effectively doubling down their bet that they can push down, if not crush, the stock.

Here's the logic: If the stock was worth $11 last week, and the company strikes a deal which dilutes the stock by adding 100% more stock into the market, then the new equilibrium price would be $5.50.

Add to that the upcoming announcement of massive losses at next week's shareholder meeting and the dwindling revenue streams due to getting out of the mortgage business (not to mention another big bucket of expenses for shuttering all those home loan offices in places like Iowa, etc), and you have the makings of a $4 stock.

So the scenario developing now is not a bankruptcy, nor a take-down like Bear Stearns ($40 one day, and bought out at $2 the next). Instead, the massive stock dilution acts as a poison pill staving off suitors. For now, anyway....

When you get $7 billion and then immediately post losses of $5.9 billion, it's pretty clear that WaMu's bandage will be effective in the short-term at putting off immediate bankruptcy, but the longer term future is not great. (Unlike one-time computer or car sales, mortgage losses are the gift that keep giving due to their contract length.)

Condolences to those 3300 WaMu staffers who are losing their jobs. More to come, I'm sure.

Posted by Lincoln Davis at 4/8/08 9:11 a.m.

WOW! Thanks for the feedback. All very helpful. I'm thrilled that you all think the place looks great. I've actaully enjoyed the process so far ... I guess it becomes a waiting game now.

I'll make sure to update the group on the progress of the selling process moving forward.

-- Lincoln

Posted by Rebecca234922 at 4/8/08 12:58 p.m.

I am in the early stages of finding and buying a home. I don't have an agent YET because I don't want or need one yet. (Yes, I will get one eventually. No, I won't choose my agent based on blogs, so don't get all excited. LOL!) I'm sure all of this has been said before, but I'm going to say it again anyway. As a buyer, I strongly dislike the fact that agents get paid on commission. Here are several reasons why:
1. There is an inherent conflict of interest. My interest is to get the most inexpensive house that satisfies my needs and desires. My agent's interest is to get me to buy the most expensive house I can (or can't!) afford, so he/she can get a bigger commission. Of course, agents are SUPPOSED to put the client's interest above their own, but self-interest inevitably creeps in anyway.

2. They get paid the same commission whether I buy tomorrow or next year. It is in the agent's interest to get me to buy quickly and with minimal investment of time and money on their part. Buying quickly may not be in my best interest.

3. Buyers with a larger budget command more of the agent's time and effort than those with a lower budget, simply by virtue of the fact that the agent will get paid more on the big sales. There is little the low budget buyer can do to compete with the high budget buyers in this.

4. The buyer ends up paying the same amount to the agent, regardless of the amount of work put into the deal. It's just not fair that those of us who need less assistance end up paying just as much as those who need full service.

I don't say this to be accusatory. I am sure there are many truly wonderful agents out there. I'm criticizing the system, not the agents. I'd like to see some creative people come up with different payment schemes to address these issues. I know there are many good reasons for the current system. And, no, I don't have a better idea. Maybe someone else does.

Posted by Mack McCoy at 4/8/08 2:10 p.m.

Nope.

Mostly, I'm not looking for ways to get paid less. And personally, I'm not looking to work for people who don't value what I do.

Some of your suppositions aren't completely accurate, but they'll do for the sake of discussion. I do hope that you find what you're looking for.

Posted by Kary L. Krismer at 4/8/08 3:06 p.m.

Rebecca wrote: "1. There is an inherent conflict of interest. My interest is to get the most inexpensive house that satisfies my needs and desires. My agent's interest is to get me to buy the most expensive house I can (or can't!) afford, so he/she can get a bigger commission. Of course, agents are SUPPOSED to put the client's interest above their own, but self-interest inevitably creeps in anyway."

Self-interest doesn't invariably kick in if you have the right agent. As I mentioned recently either here or at Raincity, we had a client we were showing two houses two, and one was only a 2.5% commission. We thought that was a better one for the price, and told him so, but he liked the other one. If we were only interested in the commission, we'd not even have shown him the 2.5% one.

Rebecca wrote: "2. They get paid the same commission whether I buy tomorrow or next year. It is in the agent's interest to get me to buy quickly and with minimal investment of time and money on their part. Buying quickly may not be in my best interest."

I've said this before, but usually it's the agent that has a hard time holding the client back. Taking time to negotiate can be very beneficial, but most clients don't like to be out of contact with the seller for a week or more.

Rebecca wrote: "3. Buyers with a larger budget command more of the agent's time and effort than those with a lower budget, simply by virtue of the fact that the agent will get paid more on the big sales. There is little the low budget buyer can do to compete with the high budget buyers in this."

Wrong. That 2.5-3.0% one was a very low priced sale, but he needed to close within 40 days from the time we first contacted him. We put the effort in to find him a house and succeeded, even though he drastically changed locations in the middle of the process. It's not about the money, it's about getting the job done.

Rebecca wrote: 4. The buyer ends up paying the same amount to the agent, regardless of the amount of work put into the deal. It's just not fair that those of us who need less assistance end up paying just as much as those who need full service."

For that I'd suggest a rebate broker like Redfin or $500 Realty.

Posted by Leanne Finlay at 4/8/08 3:07 p.m.

Wow - busy day here. Kary, as an Ilwaco Fisherman (any of you ever heard of ILWACO??), I have got to say I love your fishing story. Fish-On!

Lincoln, best wishes to you for a big fish and a smooth landing.

Rebecca, the commission aspect of how we get paid doesn't affect us the way it seems it could/would/might. Commissions have been around for decades, so they are not something that hasn't been discussed over and over. And over again! There are other fee models available today for you to choose from, but I happen to believe that the commission model is in your best interest. You'll choose the path you like best, when you're ready, and you will talk about fees with the agent you choose.

The best strategy when you are ready, is to interview, in person, 2 or 3 agents. Try to find referrals from friends or work associates for good agents, it's a good way to get connected to the best people. Be willing to sit down over coffee, or even go 'out in the field together' and take a look together at a few houses; it's a great way to see if there is a good match between you. You can ask questions, you can just talk, it doesn't have to be very formal. Once you choose, make the formal committment with that agent, and let the others know you've made your choice. Simple!

I think you'll find a good agent when you're ready, and that you'll be surprised at how much value you get from your agent. And, if you get a really good agent, you're going to be talking to that person for years to come. The best relationships last, and are welcomed.

Posted by Kary L. Krismer at 4/8/08 5:28 p.m.

Rebecca wrote: "No, I won't choose my agent based on blogs, so don't get all excited. LOL!"

I really don't think most of us do this to get business. I frequent technical or general subject matter internet forums as an anonymous user, so for me this is just an extension of that.

The worst way to pick an agent would be because you like their web page. Google Krismer and rat to see what I think of agents and their websites. :D

Posted by Leanne Finlay at 4/8/08 6:22 p.m.

Nice rat story, Kary!

I think there are just too many blogs and internet sites for just about any industry. The majority of them are written by nice, well meaning people, but don't have much impact; there are just too many blogs. Some are excellent, but far too many are GIGO. Trendy always wears out.

A blog like this one is rare. You've got a panel of seasoned agents, an attorney, a developer and others who freely discuss their insights and opinions, and are willing to share a huge wealth of knowlege with anyone who wants to participate.

Posted by Rebecca234922 at 4/8/08 6:25 p.m.

As I said before, I'm sure there are many great agents out there and my above complaints would not apply to them. It's the rest of them I'm worried about. Maybe that's less than 1%, but I wouldn't know. I've got a friend who can refer me to a good agent, so I'm not really concerned for myself. I'd like to say I was overcome with concern for the rest of the buyers out there, but I think I honestly just needed something to b**** about today. LOL! I confess to the gross misdemeanor of Blogging While Grumpy (BWG)!

Posted by Kary L. Krismer at 4/8/08 7:14 p.m.

Rebecca wrote: "Maybe that's less than 1%"

I think that percentage is a bit low. ;-)

Posted by synthetik at 4/9/08 12:34 a.m.

"Sales volume was up almost 50% in March over February, so that's hardly correct. It wasn't has high as March 2007 or 2006, but it was probably 66-75% of those years. Hardly a case where no one is biting."

Shame, Shame, Kary. Quoting MOM numbers instead of YOY. The trend is obviously down. Heh, I can't believe we're still talking about this. I didn't realize the denial phase lasted so long.

Posted by Kary L. Krismer at 4/9/08 7:39 a.m.

Synthetik, you'd have to see my pieces titled March Numbers and What's Going to Be the Important Stat to get the complete picture. Refuting what you wrote only took the MOM comparisons. I think those are currently the 2nd and 4th pieces on this blog section.

Just out of curiosity, how many years have you been waiting for the Seattle market to crash?

Posted by Mack McCoy at 4/9/08 8:46 a.m.

I don't get to many blogs, but it seems to me that I've seen the core of Rebecca###s post at least a dozen times in the past year.

In my view, and my view only - if you don't think a real estate agent is worth their fee, don't pay them. But buyer's really don't pay their agent (unless they expressly contract to do so), any more than they pay the seller's excise tax. The Seller agrees to pay a commission to the listing broker, who then agrees to pay part of that commission to any cooperating brokerage. I know this concept is difficult to get when you imagine this money as potentially being your own, but it isn't, so stop thinking like that.

Each of these similar posts challenges to real estate industry to "be creative" to find alternative business models which are less expensive for the consumer, and I think that has been done. What the Consumer might consider doing is being creative themselves, and rather than looking for a ready-to-fit brokerage agreement, craft one of their own with an agent who is, shall we say, negotiable.

Still, I think it's more important to find a good home to live in than save a point on commission. But life is short, and if the shavings will satisfy you, go for it.

Posted by Kary L. Krismer at 4/9/08 9:01 a.m.

Mack wrote: "What the Consumer might consider doing is being creative themselves, and rather than looking for a ready-to-fit brokerage agreement, craft one of their own with an agent who is, shall we say, negotiable."

Good point. I've never been creative on the buyer side, but I have been creative on the listing side. That 3/3 is your only option probably has never been true, or if it was, it was a long time ago.

Posted by Leanne Finlay at 4/9/08 2:53 p.m.

I think buyers do well to consider that the most seasoned agents are pretty firm in how much they will agree to work for, and the newer, less experienced agents might most flexible. This may not translate well for buyers goals. Ask yourself, do you save anything if you didn't get the best advice possible?

And, it's the same argument for sellers too.

Posted by Rebecca234922 at 4/9/08 7:34 p.m.

Funny, I don't remember saying I wanted to pay less. Nor did I say it wasn't worth the money. No need to get all defensive.

What I *am* saying is that maybe the fee should be based on something other than the purchase price. What if agents got paid based on the hours they put in? Work hard at it and get paid more. That comes with its problems too. Just tryin' to get people to think outside the box.

Posted by Leanne Finlay at 4/9/08 8:39 p.m.

HI Rebecca, since I was first licensed in 1983, we've been having these same discussions about fees. Back then, there was no real buyer representation, that came along later. But, fees are negotiable, and there are many different models to choose from.

I happen to think that the commission model that has worked around the world works pretty dang well, and see that most people do choose it.

Being paid by the hour, and doing a billable report, would add time and paperwork to a transaction, and one fear is that buyers or sellers would try to 'save' themselves an increase in cost, and not take enough time with their agent for advice and opinions. Just a thought.

Posted by Mack McCoy at 4/9/08 10:35 p.m.

- What I *am* saying is that maybe the fee should be based on something other than the purchase price.

Well, convince me. How should I change my business model? How will this benefit me?

Posted by Kary L. Krismer at 4/10/08 8:14 a.m.

Any fee that is hourly wouldn't be contingent, and most buyers wouldn't like that. Imagine owing a fee and not finding a house! Imagine making an offer on a house that isn't quite right because the fees are piling up!

The only real option for the buyer is a rebate broker, and that's only for buyers that can find their own property and think they understand pricing and the various contract forms.

Posted by Mack McCoy at 4/10/08 9:04 a.m.

Well, I guess what I'm asking is: What does a client have to offer an agent - or any service provider - to get them to go to work for them?

Posted by Rebecca234922 at 4/10/08 9:35 a.m.

Yup, like I said, there are problems with being paid by the hour.

Mack, here's how I think this could benefit your bottom line. First, you don't offer the alternative fee arrangement (whatever it might be, just not based on purchase price) to just anyone. You don't do it unless you think you will benefit in that particular case. Some benefits I see, right off the top of my head:
1. You attract customers who have been burned by one of the lousy agents who put their commission above their customer's best interest. (Apparently not an insignificant number of people.)
2. You attract sellers with low valued property that has proven difficult to sell (for whatever reason). They are willing to pay you more than the commission would be, if only they could get an agent willing to put in the extra effort required to sell the darned property.
3. You attract buyers with low budgets who are having difficulty getting the attention they want from an agent working on commission. They are willing to pay you more, if you would just give them as much attention as a buyer with a higher budget would get.
4. You could go for the high volume, low price model. For all those people who won't require as much work from their agent (sellers with such a great piece of property that it practically sells itself, buyers who have already found the property they want, etc.), you could offer them a lower fee. Of course, that means you make less on the deal. But, you could make up for that with increased volume. You would have to be selective in offering this only in cases where you are pretty sure you won't have to put in a lot of hours. And you would have to advertise it to bring in the volume.

Posted by Mack McCoy at 4/10/08 9:36 a.m.

So there's actually a corollary to Kary's Rule Of Fishing, which is How To Snare The Best Agent For Your Needs.

On the one extreme, you may decide - as our Vice President once did that after a long search for the best possible candidate, that the answer was the same person performing the search. To another extreme, you may decide that you need someone like Dolly Lenz.

It's very easy to get yourself to be your agent, but if you want Dolly Lenz, you might have to dress yourself up as a prospect a little better.

Posted by Mack McCoy at 4/10/08 10:16 a.m.

Rebecca, thanks for engaging. I think this will be useful for readers.

The first thing I feel a need to reiterate is that the buyer almost never pays the fee. Again - the Selling Office Commission is paid by the Listing Office, not the Seller. This is important to note.

One thing that a vendor or service provider has to consider is whether their clients feel that they're being treated fairly. So, for example, if I rebate Client B 80 florins on their purchase, and Client A finds out about it, Client A may feel that they've been mistreated by me and stop referring his drinking buddies to me.

But let's look at your items.

#1. Clients who have been burned by other agents. Somehow, this isn't quite as appealing as it seems at first glance. Maybe it's a hangover from my single days, but I just never got a good feeling when the girl on the other side of the table went though the litany of bad boyfriends she'd recently had. Maybe this is a niche market I'd prefer to leave to others.

#2. Attract Sellers with hard-to-sell property who are willing to pay you above the going rate. Rebecca, this so doesn't happen. If anything - when we work with a Seller for six months before going on the market helping them primp it for maximum value, and it sells for a zillion percent over what any of the comps suggested, Sellers allow us to keep the 3% of the overage without grumbling. I've had more than one Seller wonder why I wasn't satisfied with 3% of the list price. So while your scenario could happen, it would be a noteworthy occurrence.

#3. You attract buyers (who are) willing to pay you more, if you would just give them as much attention as a buyer with a higher budget would get. "Mack, I know that in my price range, you'll probably only get 50 ducats. But if you'll be my agent, I'll give you 50 ducats over whatever the selling office commission is." That would also be a noteworthy, if not unprecedented, occurrence.

#4. You could go for the high volume, low price model. Well, since people already believe I'm cramming them into properties to get them off the slate anyway ... I suppose, when Redfin starts showing an operating profit, I might consider going in that direction.

Rebecca, thanks for bringing this up. It's not often that I'm asked to change my behavior in public, and I think it's done me a world of good. We'll see.

Posted by Rebecca234922 at 4/10/08 11:28 a.m.

Okay, full disclosure: I confess to being an attorney. (Please don't hate me for it.) I do a lot of work as an independent contractor for other attorneys. I have had more than one attorney offer to pay me above my standard rate, if I would give their work preference over the work I do for others. Moral of the story -- there are people out there who are willing to pay more, if they think they will get more. Thing is, consumers don't generally think about that in this context. The vast majority of them are stuck thinking inside the box. Of course, a bit of advertising and media attention could change that. . .

Posted by Mack McCoy at 4/10/08 2:34 p.m.

Toward what end, Rebecca? Advertising and media attention to serve what purpose?

Posted by Rebecca234922 at 4/10/08 3:12 p.m.

The theory is that there are people who would pay more to get more from their agent, if only they knew that was a possibility. So educate them on the possibility. Advertise that you can meet the needs of consumers who need or want more from their agent, by offering a different fee structure. Consumers are happy because they get whatever extras they need, even if it means they pay more. (These are consumers who value your services! The kind we all like to work for!) And you're happy because you get more money. Plus, the happy consumer brings in more such business. You could make a name for yourself as the agent who goes above and beyond, regardless of purchase price.

Posted by Leanne Finlay at 4/10/08 11:12 p.m.

Rebecca, do you go above and beyond for your clients by pretending to be a buyer when you are really an attorney baiting real estate agents? Do you charge extra for this service?

Posted by Kary L. Krismer at 4/11/08 8:37 a.m.

The problem is I think your theory is based on a lot of false premises. For example, that agents will not work as hard for clients looking at lower priced properties. My wife and I really scrambled to find the guy a house when his apartment was being converted to apartments (yes that's still occurring), and needed to be out within 40 days of first contact with him. He ended up buying a house in Tacoma for only about $225,000. Or in December we had two buyers that wanted to close before the end of the year. We didn't allocate our time based on which was in the higher price bracket.

Also, the lower price buyers are the ones least likely to want an alternative system (other than the existing rebate systems), because they don't have the funds to pay for it. They're also the ones most likely to need a full service agent.

Posted by Kary L. Krismer at 4/11/08 8:39 a.m.

Leanne wrote: "Rebecca, do you go above and beyond for your clients by pretending to be a buyer when you are really an attorney baiting real estate agents?"

I don't think being a buyer and being an attorney are mutually exclusive.

Posted by Rebecca234922 at 4/11/08 10:43 a.m.

Leanne, I am both an attorney and a buyer. And I am not trying to bait anyone. Just having a discussion and challenging the status quo. While I have challenged the system, I don't think I have been unkind, rude, or personally attacked anyone here in doing so. I expect others here to treat me with the same civility.

Kary, thank you for standing up for me. :) Your point about my assumptions is well taken. Perhaps only the consumers who have been burned in the past would be interested in an alternative fee structure. And, as Mack pointed out, maybe that's not a niche anyone really wants to pursue. Maybe I ought to include myself in that category of distrustful buyers. Though I've never been personally burned by an agent, several of my clients have. No one ever comes to me because the deal went smoothly, only because it was botched somehow. It's easy to get a skewed perception from that kind of one-sided experience.

Posted by Mack McCoy at 4/11/08 10:43 a.m.

David Ogilvy, in his fine book, Confessions Of An Advertising Man, wrote that one way to endear yourself to your agency was to offer to pay 16% instead of the traditional 15%. You won't feel the one percent very much, but it will double the agency's profit and make you their top priority as a client.

- - - - - - - - - - - - - -

One thing that Rebecca (who is a good sport for carrying on with us, let's have a round of applause ...) did not do before prescribing a course of action for us what to diagnose our problem. She spoke of her problems, and the problems that she thinks other buyers may face, and challenged us to make the necessary changes to complete the circle.

As it turns out, very very few real estate agents tell their clients what to do. Usually, they first learn what the client's goals are, and offer a set of options for how to proceed toward that end.

When I asked Rebecca how her proposed changes would benefit me, she responded, essentially, it'll make you more money. Maybe that's not one of my immediate goals. Maybe what I need is less stress in my life, more time for my family.

Diagnose first, prescribe later. Works better 'most all the time.

Posted by Mack McCoy at 4/11/08 1:29 p.m.

Having written that, sixteen percent sounds pretty good to me!

Posted by Mack McCoy at 4/12/08 12:26 p.m.

End of story: if you want to sell your house, target agents who are working with buyers.

Posted by Rebecca234922 at 4/12/08 5:57 p.m.

I spontaneously dropped into an open house today (for a house that is WAY out of my price range) just because I was walking by. The house had beautiful views and lots of potential, but the agent was clearly frustrated that her seller wasn't taking her advice. The flower boxes on the porch sat empty. The interior and exterior paint were colors that perhaps 5% of the population would find appealing. The kitchen was dated, but could have been dramatically improved just with some fresh paint on the walls and cabinets, and cheerful handles and knobs. The agent couldn't get her seller to even plant a few tulips, let alone repaint.

To sell your house, find a good agent and then take their advice.

Posted by Mack McCoy at 4/13/08 1:49 a.m.

Or, Rebecca, bring your price down to compensate for the failings.

The thing about advising clients on what to do to prepare their homes for sale is that you have to take into account their capabilities and accept their unwillingness to have stuff done. Some sellers won't even empty the kitchen sink, others will go back at night touching up paint atop door jambs.

Personally, I'm not the agent who will complain to the public about my seller's shortcomings. When somebody comes in and complains about something, I suggest ways that they can correct it, after they own it!

Posted by Kary L. Krismer at 4/13/08 9:12 a.m.

I sometimes deal in properties where you can't make any changes (bankruptcies). In the past you just needed to price accordingly, but in this market that might not work as well. (Bankruptcy listings are rather rare now due to the increase in the homestead to $120,000.00.)

But I did have one listing last year where an agent walked in and complained that if her seller would allow staging like I had, she could sell his property. I had to explain to her that the house wasn't staged. The owner was just very neat and had a good sense of style. Preparing that house for sale required us only to request a couple of personal pictures be removed from a bookshelf.

But yes, generally the seller is advised to listen to the agent's advice. But there are going to be limits to what they are willing/able to do.

Posted by Leanne Finlay at 4/13/08 9:37 a.m.

HI Rebecca, I'm sorry if I was wrong in interpreting your postings. I had just come off another blogsite where the tone is incredibly negative, and I was feeling more than a little irritated, and I'm sure it came thru in my writing more than intended.

I do feel though that for an attorney to critique how agents earn their fees is a little like the pot calling the kettle black, in the sense that both attorneys and real estate agents have fee structures that are constantly criticized by people looking in from the outside, and determining that they have figured out a better model ...

And, a note about the lowest price point buyers - I love first time buyers, no matter how little they qualify for. They do often take more time, but they are a good reflection of the main reason I got into real estate: to be able to make a difference in someones' education about the real estate market, and help them make a wise choice in whatever they choose to buy.

A good relationship with a first time buyer is likely to be a relationship that lasts years. They become future sellers, they have friends and relatives, it's like a little seed that grows. This kind of connection feels a little like living in a "small town", and it becomes a friendly network of people to work with. I appreciate the confidence from my clients who refer their friends and relatives, that confidence is far more satisfying to me than an extra percent or bonus on the commission would be.

Posted by Leanne Finlay at 4/13/08 9:41 a.m.

Kary, bankruptcies certainly won't get work done before closing, but I happen to think that a good real estate agent owns a broom and dustpan, and hopefully some cleanser, and at least will make the property be "broom clean" condition. I showed a house a few weeks ago that was full of spiders, cobwebs, fall leaves and clumps of dirt ... inside the house. It would have taken less than an hour to just get it reasonable!

Posted by Rebecca234922 at 4/13/08 9:59 a.m.

My comment was intended more for sellers than their agents. I know there is only so much an agent can do when a seller is unwilling or unable to do the relatively little things that would make a big difference in price.

The agent's behavior in this instance was about 180 degrees from what I would want in an agent. (Which is rather funny, since she was trying really hard to make herself into my agent.) Not only did she complain about her seller's shortcomings, but she complained about the *home's* shortcomings! Shortcomings I had not complained about at all! I felt like I was the one selling the home to her. For example, the kitchen had some splashes of color in it and I said I was glad to see something other than the all white kitchens that are so popular lately. (Personally, I just don't like them.) The agent then responded by complaining about how chopped up the kitchen was, how buyers in that price range did not want a dated kitchen. I found myself defending the sad kitchen. (And maybe that was her strategy, though it seems risky.) Granted, I was upfront with her and said the home was well out of my price range and I was just looking for kicks. Maybe she was hoping to connect with me well enought that I would hire her. Had it not occured to her that how well she was (or wasn't) doing her job of showing that house might be more important to me than her friendly personality? Another thing that did not impress - I mentioned that I was looking for a condo in a good neighborhood, meaning good schools and low crime. She suggested northgate. I know what the crime statistics are in northgate. I know about the schools in the northern part of northgate. I expect my agent to know that too.

Posted by Mack McCoy at 4/13/08 1:33 p.m.

Hmmmm.

I don't know what to make of this conversation.

Personally, I think that it is beyond the scope of a real estate agent's expertise to comment on the quality of schools and to interpret crime data. Statistically, Vatican City is the most crime-ridden nation in the world.

I think that if you shop for opinions, you're likely to find the one that suits you.

Posted by Rebecca234922 at 4/13/08 2:28 p.m.

You mean it's not part of an agent's job to know the characteristics of a neighborhood? (That's a real question.) What happened to "location, location, location"? Location is super important, but I'm on my own when it comes to figuring out what location I want? I see your point about the scope of your expertise. I guess I'm just a little surprised and disappointed by it.

Posted by Kary L. Krismer at 4/13/08 2:47 p.m.

Leanne, in the bankruptcy context you are really limited because your client isn't the person living in the home. I have done some light cleaning, but that's about it. If they are really messy, the trustee can try to get the court to through them out, but that would probably take some extreme facts.

Posted by Mack McCoy at 4/13/08 2:48 p.m.

To some degree, Rebecca, yes, you are. Are you suggesting that it should be up to the real estate agent to determine what neighborhood you should live in? You're a big girl, though, so I know you can handle this responsibility.

People: Educators don't know how to evaluate schools (Mine's great, except that we need more money, so it sux); you want us to evaluate crime stats? "Well, this area has 1.157 zitzings per 1000 residents, and this one 1.228. Heh, that wuz easy."

Did you tell the agent that what you meant by "good neighborhood" was one with "Good schools, low crime?"

I'm sure that, as an attorney, your answer depends on the question being asked; I'm reluctant to attempt to answer what I think your question might be.

I do think it's important to focus on what it is that we know, what we think, what we believe, and what we don't have a clue about. And if you truly think that a real estate agent is a source of expert information about education and crime, then I'd like to suggest that you re-evaluate your opinion.

Posted by Mack McCoy at 4/13/08 2:51 p.m.

You can tell the difference between people who are trying to get something done and people who are watching with a cool one in their hand.

I'm both kinds of person, depending on the situation. Right now, I'm thinking, boy, what if Morse had just laid a bunt down. But when it comes to getting homes sold at the highest possible price, there's no better strategy than attracting agents with buyers.

- - - - - - - - - - - - - -

It seems to surprise the General Publick that all of us in the Real Estate Profession are not overcome with joy every time we meet someone new.

It's not that I'm not a likeable fellow, and it's not that I don't recognize that All Of My Fellow Humans are deserving of the same respect and attention as a hot buyer with pen in hand ready to write on my listing right now.

But in real life, my friends, I'm just like you are. You walk into an open house, I don't know why you're there. Are you ready, willing, and able to buy the listing? Are you a neighbor who's thinking of selling? Are you another sort of person who has decided that coming into my open house is a good way to spend fifteen minutes of your Sunday?

Maybe you're a new loan or insurance rep. Sigh. I know the deal - you want to connect with new agents. Fourteen years in the business, I feel the need to tell you gently but firmly, there are fifty people in line ahead of you.

And maybe, just maybe, you've come to prove your presupposition about real estate agents.

Sure, maybe I misread you. Maybe you weren't looking disapprovingly at my seller's Swastikas I Have Loved (Honest, they're just saving this for an upcoming production of The Sound Of Music!)

Why shouldn't I take the opportunity to see if you're shopping for an agent, and put out some feelers to see if we might get along for six months or so while trying to find you a house?

Personalities vary. Everybody doesn't like everybody else. Certainly, agents holding open houses shouldn't do anything to negatively affect the marketing of the property. Butcha know, it isn't a crime to be unpleasant, unresponsive, and unlikeable. And some people just like to complain. C'est la vie.

Our license allows us to sell real estate. It doesn't confirm personality upon us, social skills, warmth, charm, extra intelligence, good looks or better health. And whenever I hear how much of a (your word or phrase here) I am, I think of Howard Cosell, who was a famous sportscaster a generation ago. There's a little thing called a "Q" rating, which is a public awareness and approval rating. Britney Spears probably has a 100 Q score - everyone knows her name. Cosell had a big score, and 20% of respondents voted him Most Favorable, 20% Most Unfavorable - wide leads in both categories. When a colleague chided him on "winning" the Most Unfavorable vote, he said: What are you talking about? I got forty percent of the vote!

There's an good agent for almost every personality type. And life is so much more fun when you stick to being around people whose company you enjoy, and avoiding those you don't.

Posted by Leanne Finlay at 4/13/08 5:09 p.m.

Yes Kary, light cleaning,with a broom and dustpan, and some cleanser is all I meant. We are not the homeowners cleaning squad for sure!

But, if a house is too filthy, and it's your listing, and there is no one who is able or will pay for the basics, a good agent just does it. Heck, I'd rather give a house a basic sweep up & have a better first impression when real buyers come inside than sit there for 3 hours on a Sunday and listen to the neighbors tell me how the previous people lived like pigs ... :-).

Mack, your points as usual are correct. Buyers ask us questions all the time that we simply cannot answer 'correctly'. Sometimes it's a simple statement that they want a 'good neighborhood'. Well, if we just met 45 seconds ago at an open house, how do we define what the person means as 'good'? Do they mean 'good' as in close location to their job? 'Good' as in easy freeway access, like Northgate? 'Good' as in next to a hospital or the fire station? 'Good' as in resale values are very strong? 'Good' as in the nicest street in the area?

Safe to one person is unsafe to another, and anyone can get crime stats online for any census tract. I never have thought of Northgate as being an unsafe area, and know that clients of mine who live there don't think of it as unsafe either. That question needs to be answered by the individual, not the agent.

Some questions are better answered with a question back, and guidance to a website with even more pertinent information.

Posted by Rebecca234922 at 4/13/08 5:37 p.m.

Yes, I did tell the agent that my definition of a good neighborhood included low crime and good schools. I did not even ask for her opinion about where such a neighborhood might be (because, indeed, I've done the research myself). IMHO, she shouldn't be suggesting an area at all, if she doesn't have that knowledge.

It's not that I disliked the agent. She was actually pretty likeable. I was just surprised that she actively pointed out several of the property's shortcomings. Maybe she wouldn't have done that, if she thought I might actually buy the property.

Leanne, apology accepted. Of course, people are constantly criticizing attorney fees. I welcome the criticism. Indeed, I offer different fee arrangements for clients with different needs. And not just the traditional fee arrangements, either. Attorneys are getting really creative these days when it comes to fee arrangements.

Posted by Mack McCoy at 4/14/08 12:14 a.m.

Thanks, Leanne!

It's hard to buy a house, especially for the first-timer. Or the second-timer. It just is.

The reasons seem clichéd, but they're spot on. It's the biggest purchase of people's lives. It's a very emotional decision, and one typically relies on friends to help with VEDs - but really, who has a friend that's as knowledgeable as a real estate agent?

So buyers look for agents that they like, which is completely reasonable - and perhaps, as good a reason as any other. When we go to professionals to have some less emotional issues solved, such as legal and investment matters, we tend not to care that our professional is curt, somewhat impersonal, often confuses us with other clients (so, what about that boat? Oh, you're not the guy with the boat. Okay.)

Homebuyers may not be at their best when searching for a home. I think the vast majority of agents understand that - so long as the situation doesn't deteriorate into rudeness, hostility, or attempts to involve us in unethical behavior (look, zitface, I just want the seller to think the west wall is a little unstable ...)

I think Rebecca's brief diary is a very useful sketch of a home-browsing visit, and can serve as an exercise for both agent and shopper to look for ways to improve their personal presentations.

Posted by Kary L. Krismer at 4/14/08 7:11 a.m.

Mack wrote: "To some degree, Rebecca, yes, you are. Are you suggesting that it should be up to the real estate agent to determine what neighborhood you should live in? You're a big girl, though, so I know you can handle this responsibility."

To some extent I wish people would leave the area more open. Except for school issues, I've never understood why people limit themselves so much. When my wife and I were looking last year, our acceptable area was over 66% of King County (we only excluded areas south of a line that ran roughly through the middle of Kent), and we even looked at places in south Snohomish.

Posted by Kary L. Krismer at 4/14/08 7:15 a.m.

Leanne wrote: "Safe to one person is unsafe to another, and anyone can get crime stats online for any census tract."

There are some who advise only to give access to stats, and not give conclusions. To do otherwise could be seen as steering, blacklisting, or some such thing.

Posted by Leanne Finlay at 4/14/08 8:53 a.m.

And it is nearly impossible to answer, except generically for a client, the school question. As an example, years ago I had 2 relocation buyers moving to the Eastside within a few months of each other, both looking for a 'good' elementary school, and both looking to live in Bellevue. Generically, I consider Bellevue Schools to be very good, and some individual schools in any school district excellent. I recommended that both people actually go to the schools to talk with the principal, which they both did. The each chose their favorite school, and discussed with me why they chose that school for their kid. And, the interesting thing was, the school each chose was the school the other put at the bottom of their choices.

Posted by Mack McCoy at 4/15/08 1:47 p.m.

Perhaps it's because I have a background in music and design, but "creative" isn't a term that I necessarily associate with billing options. I remember back in the day when we threw the word around to mean, Seller Financing. "Creative; we'll get the seller to carry a second at sixteen for five years, creative."

Then, again, I've had to live with a generation of the lending profession referring to their loan programs as "product."