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Asked by Breeun, 02664 Thu May 29, 2008

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14
Deborah Madey, Agent, Brick, NJ
Thu May 29, 2008
BEST ANSWER
There are two issues....one is price fixing...the other is fiduciary responsibility.

Price fixing applies to the industry, not to a company policy. An agent cannot establish individual policy that contradicts their contract with the broker. Agents under the same broker will often have different policies, as long as each is consistent with the guidelines set forth by the broker. A broker can set a minimum for the broker. That is not price fixing.

The other issue is the fiduciary responsibility of the buyer agent to the buyer. If the buyer has been told that the buyer agent is only showing properties which meet a minimum payment criteria, the buyer agent may proceed accordingly. If the buyer believes the agent is showing and sharing all properties for sale, and the buyer agent has withheld certain properties because of the compensation offering, the buyer agent would be violating a fiduciary responsibility to their client, if that is their client.

Yes, an agent can decline to show properties that are beneath the agent’s or company’s minimum compensation criteria, but the buyer must be made aware. I recently had someone inquire about a property where the compensation offering was 1% and the property was in the low 100’s. I spent about 10 minutes providing the details about the property, as a courtesy. I went over room sizes, taxes, etc. Then, I explained that I would not be able to show them the property, but was happy to provide them the listing contact info. I additionally stressed that the buyer may find other buyer agents who might be willing to accept the compensation, or that the buyer could agree to my fee structure. I gave the buyer all the property info, and an array of choices. At no time did I discourage the buyer from pursuing this property; rather, I gave them options on how they could. This buyer executed a buyer agency agreement with me, and declined to see this subject property.

If buyer agents were denied any ability to set forth minimum payments, and were required to show any and all properties, then why not just pay buyer agent $1. BTW, that actually has shown in MLSs.

As a seller’s agent, I strongly encourage sellers to offer a compensation to buyers agents that is competitive with the industry for their area. I have no comment about your offering, and do not support or oppose it. I have not reviewed your competition, and therefore, am not able to provide an opinion for your area.

In answer to your question, an individual agent setting a minimum fee structure for themselves is OK, as long as it is consistent w/ their employment contract. A broker or company can establish fee structure also. Competing companies may not adjoin together in setting prices, as that is illegal price fixing. Agents who work for the same company may not individually collaborate and determine that they, as agents will fix prices together.
5 votes
Don Tepper, Agent, Burke, VA
Thu May 29, 2008
Technically, you've asked a question dealing with antitrust, and that's a legal issue. I'm not a lawyer, so this isn't legal advice. So...

No, it's not price fixing. Price fixing would be if all the agents in town got together and agreed that they would all charge 6%. That's not the case here...clearly. You've negotiated a lower commission with your agent, which is exactly what the free market is all about.

But your question, of course, deals with the other agent. Let's take another example, to make it easier. Let's say you run a local fast food operation. You pay your new employees $7.50 an hour. A potential employee comes through the door and fills out the application. But he announces he won't work for a penny less than $9.00 an hour. He says that other fast food restaurants will pay $9.00 and he wants that. Otherwise, he won't work for you.

Well, OK. You tell him that's more than you want to pay, and wish him well. Is he price fixing by trying to get more money for his services? No. Are you price fixing because you pay less when you buy those services? No. Are you price fixing because you've conspired with all the other fast food restaurants to "fix" the salaries low? No. Of course not. Others pay more. Are the others price fixing by generally paying more than you're offering? Again, no.

The other agent, in your case, isn't even an employee of the real estate firm. He's an independent contractor. He feels--correctly or otherwise--that his time and efforts are worth a certain amount of money. He can choose not to provide services if he feels that he won't be adequately compensated for his time and efforts.

You may not like it. And the other agent may be "cutting off his nose to spite his face" because, as you note, the commission "will be substantial," even at a lower-than-customary rate. But it's fully his decision on whether he wishes to engage in activities in which he feels compensation (for whatever reason) isn't sufficient.

Hope that helps.
6 votes
The_Bayou, , Newton, MA
Thu May 29, 2008
Breeun,

The take away I got from your message is that this buyers broker better be making his clients aware that he will not make them aware of houses unless the sellers are paying a minimum rate. If I were a buyer, I would not sign a contract with him as I can not control the commissions that are offered by home owners, and I am not going to pass on my dream house because of his policies. To be clear, I don't think that there is anything wrong with what this buyers agent is doing, as long as it is fully disclosed to his clients.
2 votes
Voices Member, , 02053
Thu May 29, 2008
If your listing contract reads 4%, I will assume (and it should be on your contract) that the listing broker is offering half of that (2%) to any brokerage/agent who brings a buyer to the property. It's very normal for a buyer’s agent whose company has a service fee of 2.5% or 3% (whatever it may be) to tell the listing agent of that fee to see if the seller is willing to cooperate in paying that fee. You're not going to pay your agent anymore but this agent and his office is looking for a higher fee paid to them for their services. It's a normal occurrence.
Buyer Agents may have calculated the costs/ time etc of driving this buyer around for a period of a month or two or three. If they then find a home that's paying a 2% commission over many others at 2.5% or 3%, they just may decide not to show the buyer your home because the commission will not cover his expenses/time.
I know it sounds like paying a 4% commission to sell your home is certainly enough but remember how it’s split up. Immediately your agent and his office is offering 2% back to the buyer agency. The buyer’s agent will then split that 2% with his agency. The buyer agent is compensated a portion of that 2% - Sometimes it’s just barely 1% (before expenses / taxes) .
In this market, if I were you, I'd let that agent show the house. I would make sure that I saw the request for the additional service fee – It should be in writing - If he's looking for 3% and you're offering 2% now - I'd negotiate a 2.5% commission. Remember you're not increasing the commission to your lsting agent or his office. You've already negotiated what that will be. Don't lose this buyer, he could be a good one - and potentially you may be able to make up the difference on what you settle on for a price. GOOD LUCK with it!
Web Reference:  http://www.marciakramarz.com
2 votes
Jim Johnson, , 78233
Thu May 29, 2008
This is a legal question. You should consult with an attorney if you think you have been harmed by the agent. I do not believe however that it is illegal, and you may want to accept that other agents may react similarly if your agent is not offering the lion's share of the commission to a buyer's agent.

I agree that the amount of a commission on higher priced homes should make a difference, but there is another factor to consider. A buyer's agency agreement usually states a commission that the agent expects, and obligates the buyer to pay any amount paid by the seller below the stated figure. When a buyer is faced with this prospect, they most often decide not to make an offer, because the commission is traditionally paid by the seller. When they do make offers, the offer usually includes some condition requiring the seller to pay the difference.

This is just one of the reasons that cut-rate commissions are a form of disservice to a seller.
2 votes
Brooke 'The…, Agent, Camp Hill, PA
Thu May 29, 2008
Hi Breeun - Wow! good questions!
ALL commissions are negotiable! Regardless - Brokers cannot set commissions - BUT they can leave a listing or sale if they feel they are not willing to accept a lower commission...
You can fire your agent and use another who will work with you or you can accept their rate of commission.
Web Reference:  http://www.pahotlistings.com
1 vote
Julie, , Buffalo, NY
Thu May 29, 2008
Great answer, Don, as always.
1 vote
J R, , New York, NY
Thu May 29, 2008
Honestly, I think greed has more to do with it than anything else and the rest of it is just a bunch of Realtor BS.
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Thanks for showing your true colors, Breeun. Notice when I said someone was lying I didn't posit you as the someone, but now I am. I don't believe your entire post.
1 vote
J R, , New York, NY
Thu May 29, 2008
I was told by my agent that another real estate company refused to show properties at this commission rate, which is 4%, apparently my agent got to talking commissions with the other agent and was told it was the policy of this company not to show homes at this rate.
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I'm not sure this story is entirely true. I don't believe the other agent refused to show the property because it was the "policy of this company" not to show homes at this rate. EVen if the agent got their license yesterday they would know this is against the law. Perhaps the "other" agent told your agent they were coming as a buyer agent because they get a minimum of 2.5 or 3% or whatever, and your agent took what they said as a "policy" their company had, had never come across a buyer's agent and didn't know what to do.
1 vote
Breeun, Both Buyer And Seller, 02664
Thu May 29, 2008
Thanks for the information but it is not customary for agents to sign an agreement with a buyer in my area. I insisted that we have one so that I can assure myself a rebate on the purchase and I ensured that the listing contract is not valid unless we have the buyers agreement. Most agents here will just show you homes and expect a commission for the seller.

The part I have trouble with is that the median sale price in my area is around 300k. At 6% the full commission is 18k. My 4% commission is 28k now if someone can tell me why I should have to pay 10k more than the average home owner. Honestly, I think greed has more to do with it than anything else and the rest of it is just a bunch of Realtor BS. 10 years ago the same Realtors were driving Mercedes and BMW's and the median sale price was 120k, go figure!
1 vote
Tman, , 30642
Thu May 29, 2008
Breeun, good morning...

I've been through this more than once ..

Is this price fixing..? .. not really, it's an amount used in their particular office that can be negotiated at any time ... their legal issue, is it fraud or is it blackmail.? .. that will depend on the Attorney Generals viewpoint in your state....

No you shouldn't pay the extra $10,000 ..

The buyers agent can be all of the "independent contractors" he wants to be ...

But in the end, he works for somebody - a broker, a real estate agency, etc ... so you need to "actually see" this special glow in the dark double handshake contract for the extra $$...

I would find the agents office and sit down with the owner/broker ... in todays market realtors need all the cash flow they can get ... and like car dealers, they certainly can't stand another ounce of bad press. ...

A smart businessman will take money and run ..or.. like in one of our last homes, the buyers agent tried to pull a 3% commission on a 3.5% contract ... after it was all said and done, the listing agent got 2% of the sale price ($13,600) and the buyers agent took 1.5% on a $680,000 home ($10,200)...

The buyer and sellers agent will negotiate at your contracted amount of 4%.. just stick to your guns ... typical greed factor, in another year they'll be praying for consumers like you.

So sad.!


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0 votes
Breeun, Both Buyer And Seller, 02664
Thu May 29, 2008
These are all very helpful answers and opinions, my seller’s agreement says the buyers agent will get 2% and my buyers agreement says my agent will get whatever the seller on the other end is offering, and regardless of that I get a 1.5% rebate of the purchase price. I understand that many of you live and work in an area that may impact your opinion on my situation. Get off the percentages and ask yourself this, is the prospect of a $14,000 commission and whatever take you may get from that enough to motivate you to sell a house. I am betting that most of the 2,000 realtors in my area will say yes!
0 votes
Debt Free Da…, , 85260
Thu May 29, 2008
I wouldn't show it, gas is $4 a gallon now. I'm in business to make a profit and not volunteer. You get what you pay for.
Web Reference:  http://getprequalified.com
0 votes
Larry Story, Agent, Greensboro, NC
Thu May 29, 2008
Breeun,
While I cannot vouch for you agent it is not illegal for an agency to have guidelines for their agents and what they work with. I will say on the buy side it is unusual. On the selling side I know of many national firms that have guidelines for their agents as far as what they negotiate for commissions. These are intercompany rules. You might not know but usually in even a large national name the agents are basically independent contractors. So they may have guidelines also if their buyers signed an exclusive agreement with them they may have in their agreement that they will get a certain percentage of the purchase price say 3% so if you only pay 2% to the buyer's agent that would mean that the buyer would have to make up that 1% out of their pocket. Sorry but, that makes your home unattractive to some buyers. If your listing agent agreed to take less and only 2% you could change to 5% and do 3% to the buy side. Of course it is all negotiable so if you do not trust your agent that would raise a red flag to me.
0 votes
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