It is NOT illegal for anyone to state, as so many below have, that there is no standard rate of commission and I would challenge you to find any statement to that effect in any of the three (major) anti-trust acts or case law. â€œThe Sherman Act outlaws all contracts, combinations and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids and allocate customers.â€ (U.S. Dept. of Justice)
If someone asks, what do you charge for commission and I tell them what I charge, that is not a violationâ€¦period. If I tell them what others charge (as if there were any way for me to know), I could be skirting the line. If I collude with other agents/brokers to agree to fix commissions or to split up a geographical territory for our respective customer base, I would then have stepped over the line. Rememberâ€¦ price fixing, bid rigging and allocation of customers are keys to the Sherman Anti-trust Act.
Now, as far as the costs of running a real estate business, perhaps you can explain why that is the consumerâ€™s problem. If my barber canâ€™t run an efficient business, he will soon go the way of other inefficient businesses. It works no different in real estate. That my friend is how capitalism works. Capitalism does not mean the consumer should pay more because weâ€™re in some tough economic times and we expected more than we got. It is the agentâ€™s job to have realistic expectations and to have the knowledge and forethought to reach those expectations. If it doesnâ€™t happen, please donâ€™t blame the consumer as he clearly stated what HIS expectations were when he mailed out the referral fee letter.
Your traditional real estate side was clearly displayed when you insinuated the builder should pay up because the agent involved had higher expectations and it â€œsucksâ€ when we donâ€™t get what we want. I say, GET OVER IT! Stop taking the traditional agentâ€™s view by saying the consumer should put themselves in our shoes but instead put yourself in theirs. Then and only then might you actually understand why those in our industry seldom reach the standard of being called a professional.
Guy E. Gimenez ABR, CRS, GRI
Broker / Owner / Investor
The PowerHouse Group
However, here, the builder made an offer of 1% for a referral that resulted in a contract. The fact that the agent did not see the disclosure is her mistake and the builder would not be required to pay any additional fee(s) even if she sued. Here's something to consider, does the realtor expect the "homeowner" pay the referral fee she desires, in this case $24k? Just for a referral? Obviously the builder is not going to reduce or forgo his profit, which is probably at 3% so that the realtor can continue to refer business to him.
For those realtors who chimed and and said that the builder should pay additional fees here is what you must consider before you refer business and demand ridiculous fees, otherwise you are at risk of losing your license:
Part 23. Texas Real Estate Commission:
Section 535.20(a): Referring a prospective buyer, seller, landlord, or tenant to another person in connection with a proposed real estate transaction is an act requiring the person making the referral to be licensed if the referral is made with the expectation of receiving valuable consideration. For the purposes of this section, the term â€œvaluable considerationâ€ includes but is not limited to money, gifts of merchandise having a retail value greater than $50, rent bonuses and discounts.
Section 535.148(a): A licensee may not receive a commission, rebate, or fee in a transaction from a person other than the person the licensee represents without first disclosing to the licensee's client that the licensee intends to receive the commission, rebate or fee, and obtaining the consent of the licensee's client. This subsection does not apply to referral fees paid by one licensed real estate broker or salesperson to another licensed broker or salesperson.
Section 535.148(b): If a party the licensee does not represent agrees to pay a service provider in the transaction, the licensee must also obtain the consent of that party to accept a fee, commission or rebate from the service provider. As used in this section, the term â€œservice providerâ€ does not include a person acting in the capacity of a real estate broker or salesperson.
Subtitle A. Professions Related to Real Estate (Tx. Statute):
Section 1101.652(b): The commission may suspend or revoke a license issued under this chapter or take other disciplinary action authorized by this chapter if the license holder, while acting as a broker or salesperson: (13) accepts, receives, or charges an undisclosed commission, rebate, or direct profit on an expenditure made for a principal;
Basically, if you are referring business and are getting paid for it, you must inform your client. See what they think?
1% - 15 homes,
2% - 50 homes
3% - 1384 homes.
The homes 800 K and above that have sold since 1/1/2011
1% - 0
2% - 14
This should give you an idea of what is on the market and what is happening with commissions.
If you are a custom home builder I can't imagine you build more than 10-12 homes a year, but homes in that price range are going to sell themselves. Yes, we agents have a bad habit of conveniently missing out on the properties that are advertising only 1% or anything less than 3% commission. However, a good agent is going to make sure they have a buyer's rep agreement addressing the commission they expect to collect from the transaction. 9 times out of 10 the agent will fill in 3% and never explain what that means to the buyer as we are so accustomed to receiving 3% and it never becomes an issue. This part of the business is the toughest because when you have to explain to a client that we are usually paid 3% by the seller, however in the event we're not they are responsible for the difference they tend to not want to sign the agreement; leaving us unprotected if we choose to still help them find their next home.
Not sure how long this property was on the market, IF it was on MLS or not, but if it was on the market for a while you have to understand that agents don't want to show your property that is advertising anything less than 3% when there are so many other listings that are offering 3%. From a business strategy standpoint you may want to consider offering 3% to get your properties moving quicker which leads to moving onto the next project quicker.
If you did everything correct on this transaction, then what's fair is that you comply with what you have in writing. I've had to pay for a refrigerator once and an owner's title policy for something I missed on a contract, and I can promise you I learned my lesson. There is NO STANDARD ANYTHING except a STANDARD OF ETHICS that we are all expected to read contracts and/or emails that contain pertinant information, and do everything to protect our buyer's interest first and make sure we comply with contract law.
The next question you have to ask yourself is how many transactions will you be doing with this agent in the future and will your decision impact the goodwill you have established. It wouild appear from reading your email that you are not working with a real estate agent with much experience. I say this because most active and experienced Realtors make sure they know up front what their compensation is going to be before they write the contract or bring a buyer to a builder.
You are more than generous offering 1% on an $800,000 contract considering the limited amount of work that a buyers agent has to do on this type of a transaction.
1% on a $800k deal for basically an introduction is a sweet deal.
If you have a good product that people want, they will find you. Clients search the net BEFORE they even call and agent so don't worry.
If you offered to pay 1%.......why should she expect 3%. I would be curious as to what you are offering in the MLS? Do you have your homes listed? If so, what is offered there.....whatever is offered there is what the buyer's agent gets paid.
You are in a tough spot, but the agent should have let you know what her expectations were if it is not listed in the MLS.....that is just my opinion and thought...................I am sure the agent is frustrated, but she should have paid attention to the details..............
Some questions I would think about are:
1. How involved was the agent....was it just a phone call...I'm sending Mr/Mrs over and you've never seen her again?.....or did the agent bring them in, talk you up, do all the walk thrus, red lines, help with financing, help pick upgrades and design and help you sell the house and then help you get it closed. If it was a quick phone call, then maybe the lower amount is more appropriate. If she has been intimately involved in the whole process the larger amount might be more appropriate.
2. Does she have a buyer's rep with the buyer? What is in it? and if you don't pay will she have the buyer pick up the difference? That could leave a bad taste in the buyer's mouth that will affect you and their satisfaction. Do you want to sell one house or a dozen in this case?
3. How likely is this agent and her sphere of influence likely to buy from you?
4. What does the competition offer?
5. There are some builders in our market offering more than 3%....sometimes much more.
6. Could you let her list some of your unsold homes, or somewhat partner with her for future business
to make you both happy and more successful. Maybe you have to stick to 1% on this one, but give her 5% on the next one.
7. Any chance you will come in or could work to come in under budget, so that you can share some of the savings with her?
In my opinion the agent is being greedy. 1% is far more than fair for a referral where the agent apparently performed no material functions resulting in the sale of the home.
Being bullied by an agent is very distasteful regardless of the future consequences. And remember, if you cave in on this deal and give her 3%, you can bet she will be back to do it again and will surely tell all her greedy cohorts how she bullied you. Think long and hard before you set a precedent that may not be as beneficial as it would appear on its surface.
The agent simply referred the lot owner to you. She did not perform an agent functionâ€¦or did she? In any event, absent an agreement to pay her more that the 1% that you promised her in your email you have fulfilled your obligation to her. Nowâ€¦if you expect her to refer owners to you in the future for opportunities to bid for work maybe you need to be more generous. It is a business decision for you and not an obligation.
Just to clarify a bit. This agent originally worked with the buyer to find a lot. Then received 3% buyers rep comm on the lot. That's when she referred us as a builder. We then began to bid directly with the buyer against other builders to win the contract.
Pay this person 1% as was indicated in the email.
(This is not legal advice) Just common sense.
First, we are prohibited from stating any commission amount is set or standard (Sherman Anti Trust Act). All commissions are to be considered negotiable. That said, you may want to do your own research with agents you work with as to what competitors are paying to insure you are not at a competitive disadvantage.
As far as this property is concerned, if you disclosed in emails what you were offering and the agent failed to read what you sent her, I can't see how this dilemma is your fault. You know what they say about "ass-u-me" which is what this agent apparently did.
If you decide to adjust your posted rate with this agent, you are going over and above what is required of you, however you may find it worthwhile in terms of goodwill and future business. In my opinion, based on your description you are in good standing to stand pat.
All of that having been said, it is very typical for sellers and builders to offer a 3% commission, and sometimes will offer bonuses to agents that bring buyers depending on market conditions. If you have had difficulty in moving homes, that might be part of the reason why. If you are not competitive with the marketplace, you might find it more difficult to sell your product - at least when working with Realtors is concerned.
Should you decide that you would like to have a Realtor assist you in handling issues like this for you in the future, I would be more than happy to visit with you about the services that I can provide and the costs associated with service. I have represented builders in the past and carry a Residential Construction Certification, and am presently working on the New Home Sales Certification. You may find that the costs in hiring a professional sales expert will be more cost effective, allowing you to focus on the aspects of the business that are more enjoyable to you - namely, managing the construction process.
Guy E. Gimenez ABR, CRS, GRI
Broker / Owner / Investor
The PowerHouse Group