Jen

Chris: The story you give is a perfect example of why people in your industry should be billing their time rather than working for a commission. Difficult clients who want to waste your time and theirs on unproductive bickering need to pay for that time. I'm sure you have also had easy clients who are thoroughly familiar with the mechanics of a real estate transaction, who find their own properties on the internet, who are organized and prompt and do everything possible to faciliate the transaction. Those clients who take less of your time should pay less.

Sonja: I appreciate the value of third party negotiation. No doubt training and experience in negotiation yields better results on average. Question is whether that service is worth the 1% or 1.5% difference on a half-million dollar home.

Dan: Sorry, but your comment really struck a sour note with me. Do you really believe that the real estate industry provides FREE representation to buyers? Please let me know when Prudential Realty appears on the IRS list of tax-exempt non-profit agencies because they have decided to become a public charity whose sole mission is to promote the interests of buyers of real estate. This is a profit making enterprise. When a buyer bids on his first choice of a home and a seller refuses to take that bid because he's figuring the costs of the 5% or 6% commission, the buyer has just paid.

Your industry is really unscrupulous about touting "free" representation to novice buyers. My sister, a first time homebuyer and a generally naive person, walked into a real estate agency recently to see a few homes she spotted on the internet. She was looking *very* casually. An agent hands her a document, tells her its a "standard" form she has to sign to see the properties, and she signs it. The document gives the agent the exclusive right to represent her in any purchase she makes in two counties, whether or not its an FSBO, for SIX MONTHS. It prohibits her from going to open houses. She signs it and goes out looking at houses with this guy. I go over the document with her later and I ask her WHY she signed this thing. My sister looks at me blankly and says "but it doesn't cost me anything!" Hmmm.... you've just given away the right to work with another agent. You've just given away the right to represent yourself if you find a FSBO (appx. 25% of the market). You've just given away the possible opportunity to negotiate a lower commission to make your bid more attractive to a seller. And you've consented to work exclusively for six months with someone you may absolutely hate by the end of the day. It doesn't cost you a dime out of pocket, but you've just sold away a laundry list of rights for a period of six months in exchange for the opportunity to look at 4 houses today. Its a contract -- and exchange of rights and responsibilities-- NOT a gift.

Don't get me wrong. People as naive as my sister need help badly if they're going to buy real estate. But its unscrupulous and unprofessional that an agreement like the one above is characterized by a realtor as some sort of standard way that buyers get "free" help from real estate agents. - Mon May 12 2008, 19:37

Chris:  Really, how is this type of arrangement considered "discounting" commissions?  Is taking on dual agency in a transaction TWICE as much work when you're already handling the sell side?  Especially If the independent buyer comes to you, prequalified and willing to sign? If a buyers realtor is willing to devote multiple weekends carting a potential buyer all over creation looking at dozens of homes for the CHANCE of a 2.5% commission, it seems to me that an additional 1.5% commission in a dual agency arrangement should be ample additional compensation when the buyer arrives at the open house in response to a Realtor.com listing. 
 Tris: I disagree with the statement that buyers take agents at little or no additional cost to them. Anything that costs the seller money in a transaction takes away from the bottom line. A buyer who consents to dual agency at an additional 1.5% commission is 1% more attractive than a buyer who comes in with an agent who wants 2.5%. Furthermore, to a FSBO seller, a represented buyer is 2.5% less attractive than an unrepresented buyer. I've sold FSBO through a flat-fee realtor and buyers that came to me with their own realtor simply had to negotiate higher when the next bidder was unrepresented. Buyers may like their agents and they may feel they need them, but given the ease of online marketing and the competition of the unrepresented buyer, they need to understand that the assistance of a full-service buyers agent is not cost-free. You can argue that the buyer gets a lot of value-added, but the idea that the buyer gets that value for little or nothing is, I think, a misrepresentation.

Deborah: I do not quite understand how you consider negotiating a dual agency a renegotiation of fees lacking somehow in integrity. The example you give of downsizing the marketing strategy is clearly disadvantageous to your client. How is offering dual agency disadvantageous to your client?

You may not like dual agency because you (or the company you work for) feel it is not worth $20,000) on my $500,000 house. That would be your decision to make, of course, but I would think it fair then to be upfront to your client that you will not do it under any circumstances *before* they sign with you.

I am generally sympathetic to the complaint that buyers and sellers do not appreciate what they get for their money when they sign with an agent. But perhaps that is because as an industry you do a poor job detailing what you do for your clients and you haven't worked to carve out fee arrangements that allow clients to pay for the time they use and the level of expertise they demand. I used to be a lawyer and I didn't get paid flat fees for transactional work. I billed by the hour, detailing each task, and my clients got to see that . My hourly rate was set by the market for my expertise. Let me assure you, billing hourly is a royal pain. But clients learn to use your services efficiently when they are paying for every 10 minute phone call. - Mon May 12 2008, 13:51

I don't see why it shouldn't be a negotiable item. Yes, the agreement is between the seller and his/her agent, but agents do have the ability to elect to modify their agreements with sellers if they choose to do so. If the financial incentive is there for both the seller and his/her agent to modify the contract, why not?

If dual agency is really such a horrible idea for a buyer (realtors talk it down all the time) then sellers agents should seize upon the opportunity. In fact, I'd argue that they have a fiduciary duty to do so. Assuming for the sake of argument that dual agency puts the buyer at a disadvantage, if a sellers agent has an opportunity to deal with an essentially "unrepresented" counterparty then negotiations are likely to result in a more attractive bottom line for the seller. Why would a good sellers agent pass on this? - Mon May 12 2008, 04:34