I don't know how it is where you are but where I am answering those questions is the job of the attorney. I'd be accused to practicing law without a license.
Intelligent buyers or sellers should have access to flat fee services and if they are indeed poor services, then redfin like companies will go bankrupt. If they are fairly priced they will survive.... Let the end customers decide.
Give them a choice.
And no one is being abandoned. When I sign up for a flat fee service, i know exactly what I am getting and what I am not getting. And I choose to pay for only the MLS listing and do not wish to buy the rest of the services. And I am happy to pay the flat fee for that.
First, let me say that I'm a free market kind of guy and therefore I'm a strong believer that consumers must take responsbility for their actions. If a consumer hires a flat fee broker with the understanding they are saving money and that consumer later gets left out in the cold, it it the consumers fault. It is no different than hiring a flat fee plumber or flat fee mechanic...the consumer is attempting to save money (and there is absolutely nothing wrong with this) and sometimes you get burned. It's a called gaining experience. If that consumer fails to read and / or understand their limited service contract, that consumer will learn a valuable lesson. If they feel they've been wronged, the seller should seek remedies under the law. If the current laws do not address the problem, anyone can work to get them changed. If the authorities choose not to address the wrongs, then so be it.
Next, you and I both recognize that the majority of the agents in our industry are paid much more than the value they bring to a transaction. They lack the essential knowledge and skills to effectively represent a seller or buyer. It's not any different with attorneys, CPA's, etc. I can call 10 agents today and ask a question about a provision in our promulgated contract form, or contract law, or surveys, or title commitments, etc. and 9 of them won't have a clue what I'm asking them.
I hope you would also agree that in good times and bad, it is only in theory that an agent will put a client's interest above their own. That is like mandating you love your client's family more than you love your family. It just won't happen because it's against the law of nature. When agents need money, very few can or will place their client's best interests above their own because it means the agent is putting their survival second to their client's survival. Sounds good in theory, but it just doesn't happen often. The only way agents will ever effectively overcome this dilemma is to live well below their means, stay debt free and have money in the bank. I can assure you, that will never happen either.
Finally, you ask why the policy makers not enforce the rules they make. Simple....money. State and national associations are numbers driven. They have employees and mortgages/rents to pay. If instead of having "image campaigns" the state and national associations had "education campaigns," they would slowly but surely dwindle their membership ranks which obviously would reduce their income. No "group" intentionally decreases their membership knowing it will ultimately destroy their organization. Have you ever heard NAR or your local association say "we have XXXX number of members with XXXX hours of ongoing education"? Never. They only proudly announce how many "members" they have. Members equals numbers equals survival.
It may sound as though I'm sour about these things. I'm not. I simply don't follow the industry thought process. I believe in being truthful is more important than being part of any group. I know I will be lambasted for making these statements, but honesty is my policy and always will be, even when it's not politically correct.
And one last thing...I do share your frustrations my friend.
I think the public/consumer/client is the best source for determining who is a Real Estate Professional and I think self-proclamations of (I am the Professional) hold little value.....
People are not stupid because they do not have a Real Estate license, they have options (and should) they can decide (and should), they can get screwed (By a full service agent or a flat-fee service) and they do.......
A True Professional Agent, an honest Agent brings something extra to the table in the Service they provide and it definitely has value but not all consumers require full service and they should have options...Perhaps from Agents who are also Professional/honest but provide a different approach/choice of Services. (Unless you are saying there is no such thing as an honest/professional flat-fee service provider?)
Jack...Nice job, good comment
Guy..Been finding your views interesting and am glad you contribute here....
JR...Your honesty and pride in your Profession are unquestionable, I am always glad to see you..
PS..If anyone uses the "You get what you pay for" cliche, "I'll be back" and will rant incoherently and endlessly
about NAR ; )
My statement is applicable to all states where agents must have a solid working knowledge of contracts, contract law, surveys, title commitments, etc. What states those might be, I'm not sure. But I do know our obligations of competence require this in Texas.
Donald A Mituzas
Licensed Associate Broker
2008 Realtor of the Year
Director - New York State Association of Realtors
Director - Westchester Putnam Association of Realtors
A more serious answer is that many agents are consciously or subconsciously acting in their own interest as well. So does your mortgage lender, or your financial representative, your car salesman. THey all need to make a living and deserve to get paid (only question is how much). Most agents who are good and honest obviously want a situation where BOTH they and the client benefits. The dishonest ones just push the clients, sometimes without realizing it, and sometimes very knowingly.
I know a couple of really nice and honest agents and love them. I even used their help a couple of times when I had to buy or sell in a new neighborhood that I didnt understand. But when I read questions worded the way the original question here was worded, it makes me PUKE.
A home is the most important investment most people make. and there are no checks and balances on what advice they get from the agents. Nor are they privy to the communications. Compare that to the rules that say your bank or stock broker has to follow when they transact with your money (preserve all records and all communications or advice for so many years). Yes, stock brokers can turn out to be sleazy or stupid or both, but you can go to SEC and get all their records and see if they cheated you or did any insider trading. Some get caught too. can you imagine pinning a dishonest realtor? that would be so much tougher.
I found most of the agents I met to be poor advisors to their clients because they dont understand things themselves. Yes, they know the market and the neighborhood but majority dont understand finance or mathematics. 99% of them tell you its always better to own than to rent ("because you build equity" they repeat without understanding the details). Most cant build a simple spreadsheet or calculator that helps compare cost of owning vs renting. Most didnt see the housing collapse coming and I dont blame them - very few did. If all they are doing is secretarial work in showing around a place and walking through an elaborate process (partly designed to keep lawyers and agents in business), then they should be paid secretarial wages.
to me NAR has created a monopoly. All agents charge approx 5 to 6% because all other agents do. Since they all do, no one needs to lower their price. The prisoners dillema concept from game theory doesnt work as you have NAR and its rules.
Some buyers and sellers are better off using an agent. Some are better off without. Monopoly on MLS listing is what is keeping most agents in business...
HERE IS A NEW WAY OF LOOKING AT THINGS
The reason you have a million realtors in this country is that everyone eyes the 6% commission and doesnt realize its easy work. I actually sympathize with some of them. Lets change things around. Lets reduce it. Or make it competitive. Let people charge what they want. The good realtors will sell hundreds of homes in a year and still make a good living. THe bad ones will find going tough and will leave the profession, further helping the good realtors make more money.
And the commission should be something like 8% for the first 100k, 6% for the next 100k, 4% for the next 500k of home value and only 2% thereafter. Something like that - a progressive rate. Did anyone think of this yet? WHEY a flat rate? why not progressive like I suggest? And more so, whey cant they set their own rate and differentiate on service or reputation.
I believe in free markets. Open up the market, and in the end it will be good for everyone. The stock brokers hated it when electronic exchanges came up. They would lose their edge they thought. They somehow continue to make millions. Despite regulations, despite very very tight bid asks. (They found new ways to hose us and the govt though :-) . Its time the housing market became more transparent. Pricing or selling a house is pretty easy if all agents got out of the way of FSBOs and let them access the information.
Power to the people !!
Power to free markets (with a prudent amount of regulation)
The buyers agent has typically always worked for the seller - by asking the buyer to step up (buy now or be priced out forever !)
The sellers agent used to also work for the seller and try to improve the sale price. These days they tend to work for the buyer by asking sellers to accept reality and bring down asking prices in line with the market.
The day buyers and sellers realize this, they are more likely to negotiate better via the system.
Anyone who has lived in a neighborhood for a few years and understands the market, is intelligent, can take an unemotional decision to price their home, is willing to spend time once in a while to show his/her place, has no need to pay a 6% comission while selling a home.
There are times when 6% is fair. But in high price markets such as ours, its a stretch very often. Selling a $1million home doesnt take twice as much effort as a $500k home 30 miles north of here. the payment shouldnt be twice either.
Those who take the FSBO route purely to save the commision and are neither experienced nor smart enough to figure out the fair value of their home are the ones who cause FSBO success percentages to drop.
First time buyers dont know the system at all and are probably better off using an agent.
Some of my favorite Realtors are in Cook, you being one of them. The link wasn't meant to be a slap in anyone's face. I think from your posts on Trulia we all respect your integrity and professionalism. However as large a county as Cook is, I wouldn't doubt that there are some pockets where some shenanigans are pulled, but again that argument was not the intent of the post..
However, as for actually "answering" Andrew's question, Jack has it just about right. The people who pay some company $250 or so just to get their home on the MLS know exactly what they're doing. And the company that provides that access makes it crystal clear that all the seller is receiving is that listing. If that's what someone wants, that's fine.
And maybe I've got an ethical blind spot, but I don't understand Andrew's concern. I work at one of the largest real estate companies in my area. It's not at all unusual for a home to be listed by an agent with that company, and to be sold by another agent with that company. Andrew worries that the agent or the firm will receive a commission only if it produces a buyer. Yes. So? The company's already made the $250 or so that it charged for putting the listing into the MLS. So long as there's full disclosure, what's the problem? And for $250 in today's market, it's difficult to imagine "a mutation where his listing agent is working against his sale to protect the listing for his own (possible future) sale." The listing agent (or the agent's company) made/earned $250 for putting the listing into the MLS. The deal's done.
split 50/50 with buyer broker
after spilt 70/30 split with brokerage
After split 30% for Uncle sam
exactly how much are we suppose to work for?
Can you tell me what I can buy with less than peanuts?
Every person has a right to his/her own choices best of luck with Flat fee Mls service. What works for a select few will not work for the masses.
LONG LIVE BROKERS
When we work with FSBO or un-represented principals we have a non-agency disclosure that we have them sign and then we proceed to represent our client. If the other side needs advice we have to steer them back to the fee menu or refer them to an attorney.
In my experience selling a FSBO or a listing that is not fully represented by a brokerage takes more of my time, requires more dancing around issues of advice and representation, harder and more emotional negotiations without any real savings on the part of my buyer client. So if it isnâ€™t the house of their dreams it isnâ€™t going to be on my showing list.
The above would not be typical of a knowledgeable seller but the majority of price conscious sellers are not knowledgeable; they are just trying to net more of the money.
There is a beauty in an agency relationship, especially in negotiations. Heads of State never negotiate on their own, they always send in an agent. Keeping principals one step back allows for various strategies. Positions and strategy can be discussed privately between the principal and the agent and then carried forth to the other side.
Article One in the Code of Ethics is to protect my client but I am to treat â€œall parties with honestyâ€. In the dance of negotiation and representation that comes down to â€œif you ask me a direct question I will answer honestly; but youâ€™ve got to know the questions and how to specifically ask to get the information that is beneficial to the other sideâ€™s interest. Again a knowledgeable experienced seller might be able to deal with a good agent but most do not measure up and can be taken advantage of. Using the contract and time lines to the advantage of my client is what Iâ€™m supposed to do. Iâ€™ll do it to an agent that doesnâ€™t know and Iâ€™ll use against a seller that doesnâ€™t know also.
It is all about getting the best for my client. Getting what they want and holding on to the coin.
"I hope you would also agree that in good times and bad, it is only in theory that an agent will put a client's interest above their own. That is like mandating you love your client's family more than you love your family. It just won't happen because it's against the law of nature".
It is not a theory it is the very essence of being an agent. If you don't know that deep in your heart you should not be licensed. We are licensed professionals and that license is to act as a fiduciary agent. That means we do the clients bidding and place their interests ahead of our own.
No offense or anything like that was taken. I found the report very interesting and glad you pointed it out. I love the links you find they always make me stop and think. As I have told Dunes stop it, it makes my head hurt when I do! LOL.
That wasn't a complaint or criticism just an observation. Personally I don't care what companies charge or do. If that's what people want or choose then so be it. I just wonder why the report concluded that it must be collusion. I would think that it may border more on Anti Trust violations.
You always find these interesting links.
Very interesting report with even more interesting conclusion. Why is it that collusion or boycotting must be the reason that Flat Fee brokers listings take longer to sell instead of the efforts of a full service broker.
A flat fee broker will put the listing in the computer and that's usually about it. They make the seller or buyer agent do the rest of the work.
A full service broker provides the exposure, advertising, advice etc. that gets a property sold.
I have dealt with many of these flat fee companies (I work in the Chicago area which is Cook County). It's not a matter of boycotting them (they usually pay out the average commission a buyers agent would get) as it is the fact that if you want to get anything done, you have to do the job that a listing agent should be doing on top of your job that you are doing for your buyer. We have very strict Dual Agency laws here and many times working with these discount brokers borders on Dual Agency.
Many Flat Fee services don't have keyboxes for agents to have access to the property and you have to set up a showing with the owner. Kinda hard to show a house when the seller is at work and your buyer wants to go see it.
Some of these companies also have their buyers call listing agents directly to see a house. The listing agent shows the house, and sometimes even writes the offer, and then they (the discount services) take claim to the buyer and want to get paid as the buyer agent.
Many times a buyer will have some of these Flat Fee company listings on their list of houses but since you can't get a hold of the seller or calls are not returned, these listings get put aside or even forgotten about. The buyers usually have a long list of houses and they move on to the ones they can see. This may have something to do with them taking longer to sell. Exposure and accessibility have a lot to do with houses selling. If you don't know it's out there or can't get in to see it, it becomes hard to sell it.
What would like to know is how many Flat Fee listed homes sell compared to full service broker listed homes.
"Can't argue with what I don't know."
I do it all the time, would you like some tips?
Besides how can JR counter the fact that ( V'c (F) > O,Vnc (F) O, and W' (F) > O (F) ) ????? ; )
Obviously from these facts FSBOs will replace RE Agents sometime in the next 59 days and sell for three times the current market price.......lol
Math talks Nar walks, Dunes
PS..Rock now that Guy has exposed you as a undercover Realtor will you be sending me hate emails and pointing out I must have had a bad experience with an Agent to be so Anti-Agent?
Can't argue with what I don't know. I totally defer to you on your area. Speed reader? I don't know about you not being that. I guess all that math could have slowed you down a bit. I got lost before the first equation or whatever they call it. lol
It's been my own experience in my area that the flat fee listings are much more overpriced across the board. Of course I must add that it is my opinion that most of the regular listings around here are also overpriced. Perhaps it is just a characteristic of my own location and the ineffectiveness of most agents here, or at least the disconnect from reality that some seem to have. Maybe in the 3 areas they sampled it is different, I am speaking from my own experience.
IMO the "other possible explanation" is that flat fee listed homes, like FSBOs, usually start out overpriced.
Oh, and Dunes. . .. thanks for the compliment! YOU get a thumbs up! :)
And just so you know, 78704 is the closest zip the bridge I live under. And winter is coming soon so make sure you throw an old coat over the railing for the less fortunate. My family will appreciate it.
Sorry to hijack the post Andrew....just couldn't let the "non-pro" deal go.
You might be lnterested in the paper attached to the link below. Page 6 is very interesting.
As I recall, it is mandatory for attorneys to be used in residential real estate transactions in New York, but they're seldom involved in respresenting either buyers or sellers in residential real estate transactions in Texas. By your statement, I will assume New York state laws have a much narrower definition of practicing law than Texas.
Actually, the reason we a million realtors is because everyone looks at the 6% commission and doesn't realize 1. it's HARD work (it's hard to get listings, it's hard to get buyers and it's hard to close sales) and 2. you aren't going to get the entire 6% in your pocket.
All the best!
In the end, a healthy functioning market that is efficient is good for buyers, sellers and agents. And you'd agree that 1 million members of NAR (I admit many may not be active agents), just shows the area is overcrowded and cannot be supported by "normal" volumes. Over time, our country needs to move to directly productive things than being agents or stock brokers. We need doctors, nurses, scientists, professors, and some clean image athletes too !
My answer is, "No." Limited services brokerages provide flexibility for sellers who require only certain brokerage services and allows them to pay accordingly.
Jack, we charge what we want, and for me to advise someone that they'd be better off FSBO-ing would require that they had at least 1/10th of the experience that I have.
Some markets have progressive rates, Seattle had them and, under careful analysis, probably still does. By which I mean, if someone analyzed the final contracts, commission rates decline as the price range increases.
The vast majority of people who proclaim that "most agents suck" also fail to note that the little technical detail that in the overwhelming majority of transactions, one agent walks away with less than half of 6%.
As the abstract reads, "One possible explanation for the success of real estate agents is collusion." In pursuit of that Possible, but hardly Definite explanation, they continue, "In this paper we first consider the mechanisms through which collusion might be sustained."
One possible explanation for my spelling skills is a caring fourth-grade teacher. In Pursuit of that, we can consider how that influence may be sustained. However, the credit for my spelling skills might be better placed with my spell-checking program.
Don't kill the messenger. Undoubtedly there are problems in dealing with some flat-fee services just as there have been numerous reports of problems with full service agents on this forum. Some of the problems with flat-fee services that you mention are addressed in my infamous Trulia blog. The post of the link to Dunes where page 6 was referenced was meant to call attention to minimum service requirement statutes that states such as Illinois have adopted. I thought it was relevant given the nature of Andrew's post along with Dunes' adamant feelings of consumers being given a choice. Most open minded people would agree that laws such as these are anti-competitive, and big brother not really looking out for anyone other than who does the best job of lobbying. $$$$$
The whole idea of Professional Ethics is to establish a standard HIGHER than that which is legally required!
(Before y'all start, I want you to note that most legislatures have RAISED the legal requirements to meet NAR standards, rather than NAR establishing ethical standards that simply meet the legislative requirements).
So. Andrew Silfen is a Realtor (right?), and he specializes in residential, and someone comes by and offers him the listing for a tract of mining land. Ethically, Andrew must either refuse, or at the very least, partner with a broker who has expertise in this area of real estate.
Legally, if the client wants Andrew, Andrew can list the coal mine! Ethically, no, he can't!
Here in Washington State, FSBO-helper brokerages typically charge a small fee for (sometimes) a keybox, (sometimes) a sign, and a fax machine for notices to be sent to. They do not enter into an agency relationship, the broker does not represent the seller, and the broker usually doesn't do anything except provide access to the MLS. So many of the problems Andrew brings up are avoided, for better or worse.
Use craigslist, postlets etc. to market a home FSBO.