I was running in a local park a few days ago. The road into the park is about a half mile long and barely wide enough for two cars to pass in opposite directions, thus there are “NO PARKING AT ANY TIME” signs on both sides the entire length. As I drove in two mini-vans were parked next to a field, and I waited as two other cars coming the other direction passed. Three women were in the field chatting and setting up cones, perhaps for a relay.
As I ran out ten minutes later, the vans were still there, but now there were five cars stopped in one direction while three others drove by in the other. The women were oblivious, corpulent Paris Hiltons. When I suggested they move their vans to a parking area fifty feet away, one said “Oh, get real. It’s not as if this is a major thoroughfare.” Solipsism at its summary best. Rules are fine unless they’re inconvenient.
…
696.810 Real estate licensee as buyer’s agent; obligations….
(3) A buyer’s agent owes the buyer involved in a real estate transaction the following affirmative duties: …
(c) To be loyal to the buyer by not taking action that is adverse or detrimental to the buyer’s interest in a transaction;
(d) To disclose in a timely manner to the buyer any conflict of interest, existing or contemplated;
Whenever the charge of venality is brought against the real estate profession, out comes the Code of Ethics, here codified into Oregon statute. It’s our Wizard’s Curtain; while most agents I work with — and I suspect most people here — take it very seriously, too many don’t.
The reason high BACs and agent bonuses are used so often as marketing ploys is because they work. I was told recently by one agent who incorporates both in many of his older listings that not only does he immediately get more showings, once under contract the buyer’s agent is much more eager to cooperate to get to closing.
Venal? Indeed.
But while I have no special affection for agents who filter their clients’ needs through their own desire, that’s part of the human market condition: people gravitate toward self interest. (Though I’d argue that long term self interest is in what’s ultimately best for the client.) The real problem is systemic.
First note that none of the governing bodies have cast discouragement on the practice. It’s as if the West Linn police had passed the vans and said “It’s not as if this is a major thoroughfare.” Buyers’ interests are swept away for the sake of a false decorum.
Much more to the point: Because the buyer’s agent is still being paid by the seller, he or she is still working, at least in part and certainly in this case, in the seller’s interest. You can couch it in all the rules and platitudes you want — Oregon has even found it necessary to put it into statute: The buyer’s agent is not representing the seller, even if the buyer’s agent is receiving compensation for services rendered, either in full or in part, from the seller or through the seller’s agent. — but the net effect is there, curtain notwithstanding.
The only remedy I see, the only way to consistently get buyers equal representation, is, as Greg has argued so many times, to split the listing commission from the buyer’s commission. In this case two things happen: having secured his own contract, there’s no temptation for the buyer’s agent to lean to the seller’s side;
and there will be just a little less room in the profession for the venal.
[Next: the inherent value of Free.]
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April Groves says:
I am gonna go out on a limb here and admit – I don’t get it.
I do see the special incentives (bonus to selling agent) creating a conflict. But, then the solution is dealing with that particular issue. I don’t see how it relates to divorced commissions.
Say we do divorce commissions. Great – each party is paying their own agent based on an agreed upon fee schedule. Unless that is a flat fee, the point is still moot. An unethical buyers agent has just as much reason to push higher priced properties, or purchasing before they are ready as they did before the break-up.
I have to agree with a Kris Berg comment I read somewhere that says it just doesn’t make sense. Why would a career agent risk reputation and business for and extra couple hundred bucks. Is the problem really that wide spread?
June 23, 2007 — 3:37 am
Phil Hoover says:
What’s a BAC?
June 23, 2007 — 6:07 am
Jeff Kempe says:
>I do see the special incentives (bonus to selling agent) creating a conflict. But, then the solution is dealing with that particular issue. I don’t see how it relates to divorced commissions.
April ~ With compensation already set by a buyer/agent contract, the seller loses any ability to manipulate the process with higher commissions, and bonuses take on the taint of kickbacks. The problem disappears without another layer of rules, which arguably already exist.
The average BAC (Phil: Buyer’s Agent Commission) here is 2.5%. On a $300k home the additional half percent plus the $2000 bonus puts $3500 in the agent’s pocket; trying to get the same amount from a higher priced home would mean a $140k jump, almost certainly taking it out of the buyer’s qualified price range.
June 23, 2007 — 7:45 am
Chris says:
Can’t say I have took more then a passing glance at the commision split before showing a house. But of course like any professional this is a business, and a higher split improves the bottom line.
I know of an older agent who used to do just the opposite. He used to get his sellers to agree to 6%, then offer the buyers agents 2%-2.5%. Worked like a charm for him, he was only called on it a few times.
June 24, 2007 — 6:17 pm
April Groves says:
Chris – what your agent does is normal in Savannah. There is an understood 60% – 40% split (list favor). However, if you go a half hour drive south towards Hinesville, 50% – 50% is the norm.
Jeff – First, I don’t think you can lump the flat fee incentives with the percentage based commission. I fully get what your saying and see the validity, but what I don’t get is the point. And I will not deny that I may be naive here, I work with great people. But, I don’t think that there are so many agents with the integrity of a slug that sort available property by commission before they take a buyer out. I also don’t think that there are so many agents out there that cause harm to their clients for 1/2%. Do you?
I also don’t see this going over well at a listing presentation. It is a negotiation to get the 6% with the advent of discount brokers and the amount of choice in the market. I can’t imagine the availability of sellers out there willing to sign a higher commission agreement because the agent says it will help sell their house is that high.
June 25, 2007 — 1:46 am
Jeff Kempe says:
Hi, April ~
The salient point is that, while pretty much no one will admit to filtering listings through buyer agent incentives, the tactic works, so some fairly substantial number are doing exactly that. And if faced with dropping a price 5% or raising commissions 2% on a slow moving home, sellers will happily choose the latter.
Less conspicuous: As Chris notes, we’re all vulnerable to our bottom line, to greater or lesser degrees. If the BAC shows .5%, are you going to show it if it fits your buyer’s needs? How many FSBOs are on your first tour with a buyer? If a FSBO refuses cooperation and your buyer isn’t under contract, are you going to show the home anyway if it’s right?
June 25, 2007 — 9:17 am
April Groves says:
Jeff – I can see we are going to have to agree to disagree – because to answer your question – yes, I would – yes, I have, and I am not in the minority.
I can’t help that I feel like introducing this regulation implies that a “fairly substantial number” do what’s bad for our clients in return for what is good for us. There are enough people saying these thing about us without us saying it about ourselves. If it were true – I would shout with you, but I don’t think it is.
I agree that the bottom line is important – that makes my number one concern, as do most of us, service – before, during, and after.
June 25, 2007 — 9:44 am
Jeff Kempe says:
April ~ I applaud your passion for your customer, something I agree with entirely [https://www.bloodhoundrealty.com/BloodhoundBlog/?p=1464], though I stop considerably short of working for free.
Harris Interactive has done two polls in the last couple years that rank real estate agents next to last among professions in 1) Esteem; and 2) Trust. At least some of the reason for that can be laid at the foot of the people you’d like to think don’t exist. They do.
More, the industry itself is complicit in that it sanctions through silence the kind of marketing that encourages the behavior you, again, insist is inconsequential. That was a real flyer I cropped for the post, and I get several similar ones daily. Think that has anything to do with the perception people have of us? How, exactly, is ignoring that going to help?
Incidentally, divorcing commissions wouldn’t be a new regulation. It would at most be a modification, more accurately deregulation, the opening up of the market.
More to come.
June 25, 2007 — 9:17 pm