You may get it … obviously, they don’t get it
The “REAL ESTATE” section of the June,11, 2011 Washington Post features an article by Dina ElBoghdady titled “… And the broker takes a slice. The story is sub-titled ” As market has soured, the average commission has been climbing.” You can feast your eyes on the on-line version by clicking Post Article.
If you visit the Post website to read the article, be sure to note the paid ad in the upper right hand corner. Ms. ElBoghdaddy seems to have a certain slant to the article (through words, inferences and people she has chosen to quote).
If you have read this far, let me state… WE THINK LISTING RATES ARE TOO HIGH IN THE DC MARKET AND WE LIST HOMES FOR NO MORE THAN 5%. You can now return to the gibberish shared in the article.
The article does offer some insight into the mindset of sellers that wish to go it on their own. The commission paid to the agents involved does come out of the sellers proceeds at closing. Of course, the sellers proceeds come from the buyer at closing. Who is actually paying the agents may be literally the seller but in reality it is the buyer providing the funds. If you focus on who is actually paying, the seller is overlooking the more important question…”How much will I net from the sale of my home?” Most sellers want and should receive full service from their agent. The price they pay should not be based on yesterday’s marketing, nor should it be based on the unwritten, but widely practiced 5.5%.
The article indicates that the average commission being charged in the DC area has increased from a low of 5.02 percent in 2005 to 5.40 percent in 2010. Those figures indicate that a lot of sellers are savoring the sizzle and never tasting the steak. Those figures indicate that sellers are willing to pay more for less. In plain words, it may smell good on the grill but it tastes like shoe leather on your plate.
Well, not so fast grasshopper. Ms. ElBoghdady has reached out to some experts (?) to explain and justify this increase in commission rate. The illustrious Steve Murray, president of Real Trends shared that “During the boom, competition among agents drove commission rates down. Now, agents are putting more time and money into marketing these homes, and they’re not as willing to compete with each other by lowering commissions.” Hmmm..I guess it should be pointed out that Real Trends is a firm that makes its living off Real Estate agents. They charge a fee to brokers so agents will have access to trade information and tips on how to make more money. It would seem that Real Trends and Mr. Murray have a vested interest in agents earning more money. I should point out that some agents that pay for his service, include the cost of his service in their annual budgeting which then becomes a factor in the commission rate they will charge.
The next expert (?) Ms. ElBoghdady quoted is none other than the president and chief operating officer of Long&Foster, the Washington area’s largest real estate brokerage. Jeff Detwiler ( formerly a big mortgage company executive…oops…does that resume say Countrywide???? Now their history in the industry just screams …expletives deleted). Well, Mr. Detwiler shared “The lowest commission rates were in a marketplace where buyers and sellers were coming together on their own and agent’s job was to line up orders and show products.”
ARE YOU KIDDING ME???? Note to Detwiler…. While you were rolling along in the Mozilo-mobile, Long and Foster agents were doing a damn site more than taking orders. Of course, you may have missed that while you were dodging the bullets fired at Countrywide...see this story I am not just sharing hearsay, I worked at Long & Foster and I am familiar with hundreds of agents and managers there. Comments like this further erode your relationship with agents on the street. Just shut up. Oh, and please check the history, Long and Foster was the firm that began charging 7% for listings until market pressure forced them to drop the policy. This occurred after the company claimed the higher fees were a success.
The article progresses with Ms. Boghdady’s assertion that “many firms offer deeply discounted but limited services to such sellers. She points to the Redfin model of rebating a portion of the commission back to customers and the Save6 model which offers a flat fee service. Discount is an interesting adjective. It implies that there is a set rate which is discounted. Whatever a broker is paid is negotiable. There are no discounts.
The next area covered in the article covers the perils of “for sale by owner”. Without attributing the statement to anyone, Ms. Boghdady states “sellers who go it alone…end up leaning heavily on the buyer’s agent.” The buyer’s agent represents the buyer and can not give the seller any advice. It is against Maryland law. The buyer’s agent can not represent the seller. For sale by owner folks are on their own. At this point she quotes Joan Caton Cromwell from McEnearney Associates “You end up doing the work that the seller should be paying their agent to do. Also, the sellers are emotionally involved with the property and they all think their house is the best house on the block.” Smoke and mirrors folks. Of course many of the sellers are attached to their homes. The buyers agent can not advise them about the sales price. The buyers agent can only present an offer. It seems that some agents need to brush up on “whom the agent represents.”
The next dance involves the amount of commission offered to the buyers agent. Larry Lesson shares that “There’s no motivation for a Realtor to show a house if the seller is only offering 1 or 1.5 percent commission”. I admire Mr. Lesson for professing what happens behind the curtain. I can also share that any agent that eliminates homes based on the commission being offered is operating outside the lines. Jonathon Hill had the courage to share that agents “shouldn’t pick and choose based on what the agent wants.” Buyers are supposed to have the option of choosing a home from homes that meet THEIR criteria. Agents that eliminate homes because of the amount of commission offered are not interested in their buyer clients best interest. They are only interested in making as much money as possible. If you look at the bottom of the shoe labeled integrity, you can scrape these agents off.
One other point was covered. What happens when a non-represented buyer shows up. Should the listing agent keep all the commission? Some agents make a living “double siding” transactions. At this point in my career, I don’t think it is a good way to do business. It is never an issue with our 5% listing service. If someone shows up without an agent, we will recommend an agent for them. We want no part of the buyer’s side of the commission. We want the 2.5% we share to be paid to an agent that represents the buyer. We firmly believe that both sides in the transaction should have their own representation.
It is a very interesting article. It is not completely accurate, but one must consider the sources referenced. We do offer a complete, full service listing service for 5%. If you wonder how, read this post. If you are interested and wish to contact us, call us at Century 21 New Millennium (301)509-5111 or (202)656-5710 or use this form and we will be in touch