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Securing the home-buyer’s place at the table: How two simple reforms can finally result in a full, uncompromised form of buyer representation . . .

Executive summary: This is long, and it’s written (I hope!) for ordinary people, not real estate professionals. But I want for real estate professionals to be aware of this argument, because I think it solves several of the knottier problems affecting our industry. Here’s a quick summary of the essay:

  1. Buyers should negotiate the buyer’s agent’s compensation in detail and prior to looking at any homes
  2. Sellers and listing agents should concede funds directly to the buyer to be disbursed at the buyer’s discretion to compensate the buyer’s agent

Either of these two reforms, or ideally both, will finally, fully empower buyers as supervisory employers of real estate agents in the way that sellers always have been.

If you discuss this in your weblog — and I think you should, in order to hear what your clients think — I would appreciate it if you would either link back to this essay or use the Technorati tag “compensation for buyer representation” (that exact keyword, without the quotes), so that I can track the conversation.

–GSS

Securing the home-buyer’s place at the table: How two simple reforms can finally result in a full, uncompromised form of buyer representation…

I was at a real estate seminar a few years back and the instructor happened to ask what kind of commissions Phoenix-area Realtors were getting on their listings. “Six percent,” someone said. “Five percent,” said someone else. “Five percent.” “Five-and-a-half.” And then a very beautiful young man, not quite overdue for his second shave, stood up and said, “Seven percent.”

“Just keep thinking that way,” the instructor replied. “Someday you’ll make yourself believe it.”

This is a true fact of real estate, widely if not universally known: Sellers negotiate commissions. Routinely. As a matter of course. “How much do you charge?” is often the first question blurted out at a listing appointment. You undoubtedly already know this, as well, if you’ve ever sold a home in your life — or talked to anyone who has. Yet for some reason, people persist in pretending that the six percent commission is still ubiquitous — if it ever was.

As a matter of disclosure, we routinely list for 5%. We’re not discounting, we’re taking away the seller’s price objection and removing the one differentiating factor that might make a competitor seem appealing. We list harder than anyone we compete against, bringing with us marketing strategies they simply cannot match. By pounding them on price, as well, we make sure we get every listing we want. There may come a day when we have more opportunities than we can fulfill. That’s when we’ll charge a higher fee.

But the question at hand is this one: If sellers routinely negotiate commissions, why don’t buyers?

Because they don’t know they can, for a very simple first thing. For the entire history of the National Association of Realtors, the real estate industry has infantilized buyers. Not from any evil intent, I am sure, but simply out of long-standing habit. Until very recently, buyers were not represented at all in a real estate transaction — and no one told them. They blithely went along with everything “their” agent told them, never knowing that “their” agent — and every agent — represented only the seller. Now we have true buyer representation — except that buyers are still often treated like children at the grown-up’s table.

As an example, the buyer’s agent’s commission — the co-broke — is a “secret” field on an MLS listing. If you’ve had listings emailed to you from a Realtor, you’ve probably been surprised at how much more detailed they are than listings you find on Realtor web sites or on Realtor.com. But the amount of compensation “your” agent is to be paid — money that you alone as the buyer will pay — is kept concealed from you. As your agent, I am required by law to disclose an infinite number of material facts to you, but I am not required to disclose — and, in fact, I am supposed to keep secret from you — how much I am being compensated for representing you — with every cent of that compensation being paid by you.

Does that make you feel like a grown-up in the home-buying process?

But wait. There’s more.

You are going to pay me that co-broke — usually 3% — whether I am a genius or a dunce. Whether I roll out the red carpet for you — or insist that you roll it out for me. Whether I provide knock-your-socks-off ’round-the-clock service — or you have to wake me up every time you want to see a house. Whether I work 200 hours in your behalf — or two hours. You’re going to pay me — never knowing what you’ve paid me until the very last minute — whether I have performed well, badly or barely at all.

Does that make you feel like a grown-up in the home-buying process?

Before I do any work to list a home, the seller and I are going to have a long, detailed meeting to discuss rights, privileges, responsibilities — and compensation. Every detail is going to be ironed out and reduced to legally-enforceable contract language before I lift a finger to market that home.

On the other hand, when you come to me as a buyer, we might just hop in my car and go look at houses right away. If you’re very clear on what you want, we might go ahead buy one on the first day, pounding out the purchase contract on the kitchen countertop. You better know we’re going to sign a Buyer Broker Employment Agreement — which actually will detail my compensation in mind-muddling legalese — but you’re going to be so enthralled by the house that you won’t give any of this a second thought.

Better yet, let’s go to a new home subdivision. They’re going to pay me 6% or more right now, without ever telling you, but you’re going to be so in love with your brand-new home-to-be that you wouldn’t notice it even if they did disclose the commission.

Here’s a bitter pill to swallow: One of the reasons the real estate industry treats buyers like babies is because they often act like babies. Sellers are normally coldly logical. They’re done with the house, and now their sole objective is to extract as much money as possible from it. Buyers — not just owner occupants, even some investors — can be charmingly, swimmingly, over-the-top in love with a house — to their own financial peril.

I have a solution for all of these problems, plus many more that I could name:

Don’t pay a co-broke to a buyer’s agent, concede the funds directly to the buyer and let the buyer negotiate the buyer’s agent’s compensation.

That addresses the issue from the seller’s and the listing agent’s point of view, but we can also do this from the buyer’s and the buyer’s agent’s perspective. I’ll come back to both in due course.

First we need to understand why the seller is conceding the commissions in the first place. As we said above, except in extraordinary circumstances (e.g., the seller owes more on the house than it is selling for), the buyer pays for absolutely everything in the purchase of a home. The seller brings a house to the closing table. The buyer brings money, either his own, his lender’s or some admixture of the two. Everyone walks away with some of that money except the buyer, who gets the house in trade.

By offering his home for sale, the seller originates the sequence of events leading to the sale, and Realtors traditionally regarded the commissions as having come out of the seller’s proceeds, rather than out of the buyer’s funds. This is why, historically, only sellers were represented. The real estate industry did not understand that the buyer’s money was as much a valuable consideration as the seller’s house.

There’s more to this, though. Many buyers do not have cash on hand to compensate a buyer’s agent. Even those who do would rather apply those funds to the down payment or closing costs. Lenders are not apt to look favorably on a request for a separate line item, apart from the purchase price, to pay for buyer representation. For these reasons and others, the buyer’s agent’s commission is set by the listing agent as some portion — usually but not necessarily half or more — of the total listing commission.

This is also necessary for an offer of cooperation in an MLS system. An agent can take an “exclusive” listing, which means that, even if a buyer’s agent is allowed to participate, he will not be compensated by the listing agent. But in order to put a listing “in the MLS,” the listing agent must make a unilateral offer of compensation to a cooperating agent. In other words, the listing agent brings the seller, the buyer’s agent brings the buyer, and they split the listing commission in some proportion as a consequence of their cooperation.

This doesn’t mean the buyer’s agent must take this and this only in compensation. If the co-broke is less than 3% — or if the price of the home is especially low — a buyer’s agent may well come to the buyer to negotiate a higher fee, to be paid out-of-pocket by the buyer. This may be the first time anyone has ever suggested to the buyer that commissions are negotiable!

The other end of this is, except in very strong seller’s markets, listing agents will almost always offer 3% of the purchase price as the buyer’s agent’s commission, regardless of how much the listing agent will make. The reason for this is the widespread belief that buyer’s agents will not show homes offering less than 3% commission — even though this would be a clear-cut violation of that agent’s fiduciary obligations to the buyer.

What fiduciary means is that your agent is obliged to put your interests ahead of all others, including his own. If your buyer’s agent is cherry-picking listings based on his own compensation, and not on your needs and desires, he is actively betraying your interests.

And this is another good reason to put the power of compensation in your hands and not the listing agent’s. It is long past time that we effected a true buyer’s agency, with buyers assuming the full responsibilities for employing their own agents. As long as the buyer’s agent’s compensation comes — or seems to come — from the listing agent, the buyer’s agent will tend to act in the seller’s interest, the listing agent’s interest, his own interest — everyone’s interest but yours.

What this means is that before you run off to look at houses, you and your prospective buyer’s agent are going to have to have a long, detailed meeting to discuss rights, privileges, responsibilities — and compensation. Every detail is going to have to be ironed out and reduced to legally-enforceable contract language in advance. If you wait until you’re in the house you want to buy, you’re probably too late. Even if you can keep your eye on the ball, you’ve already missed the perfect time to take your swing at it.

When is that? When the agent is still competing for your business. When the notion of buyer representation was first proposed, the idea was the the Buyer Broker Employment Agreement would protect the agent. In fact, deployed properly, that contract is your best protection in the purchase of a home.

Even allowing that sellers and listing agents will continue to do as they have always done, if you negotiate the Buyer Broker Employment Agreement to protect your interests, you’ll do fine.

What are you negotiating for? Compensation, first, and you might structure things in such a way that your agent will be paid more for achieving critical benchmarks — timeliness, location, price — whatever is most important to you. The contract language might look something like this: “Buyer’s broker is to be compensated as follows [....] with any additional funds conceded by the seller or the listing broker as a cooperative broker’s commission, bonus or other form of compensation to buyer’s broker to be conceded to buyer by buyer’s broker at close of escrow to defray buyer’s down-payment, non-recurring closing costs, loan costs, pre-paid interest or other costs.”

Second, you want to include a simple “firing” clause, so that you are not stuck with an agent who is just not working out. This language will suffice: “This agreement will be terminated upon written notice by either party.”

That much can be done now, with no change to the way things are done. Buyers simply need to assert the right they already have to negotiate fees appropriate to the level of service they want to obtain. Do you want to conduct an unfocused search for months, looking at ten houses every Saturday? Pay the full 3% and be grateful. Do you already know which house you want to buy and need an agent to negotiate the best price and take care of all the knotty transaction details? For work like that, you might consider a flat fee or an hourly rate. Do you plan to buy the builder’s home you have already put together on-line? Do take you agent with you to the builder’s sales office — after you have agreed to how much of the builder’s commission he will be throwing at your down payment.

You should expect to pay for everything you get. That’s only fair. But you shouldn’t pay for more than you got, more than you wanted, more than you needed.

There is an even better way to do this, but it requires a radical change in The Way Things Have Always Been Done — which means it could take time and will almost certainly occasion much moaning and griping among Realtors.

But picture this: Instead of conceding a huge buyer’s agent’s commission, what if listing agents were to specify a nominal co-broke fee, say $10, to satisfy MLS rules, with this language included in the publicly-visible remarks in the listing: “Seller to concede 3% of purchase price to buyer at COE to be used at buyer’s discretion to pay for buyer’s representation, closing costs, etc.”

Now you are no longer wrangling with “your” agent over “his” money, he is negotiating, very politely, for what he believes should be his share of your money. It’s has always been your money, but structuring the listing this way assures that everyone involved in the transaction is aware of that fact.

The instant objection to this would be that agents won’t show homes with less than a 3% co-broke. But the agent is no longer the only party to know how much money is available and how the funds are to be disbursed. Listings are everywhere. If a bigger broker adopted this policy, it could advertise that fact: “Buyers, we don’t pay your agent, you do!”

A built-in advantage of doing things this way is that the buyer’s agent will want to have that long, detailed meeting before doing any work, even if the buyer just wants to rush out and buy a house. The original ideal of buyer representation was the idea of “listing the buyer” in the same way that we list sellers. By openly acknowledging that the funds belong to the buyer — not to the buyer’s agent, not to the listing agent — we confer upon buyers exactly the same kind of supervisory power as employers that sellers have enjoyed all along.

In other words, this one simple change in the way we list houses for sale would transform the buyer into a fully equal principal in the transfer of ownership of real property. No more babying, but also no more acting like a baby — at least not without having addressed the grown-up responsibilities first.

But: Don’t expect this change to happen fast. We’re going to try it when we can find a risk-loving seller. If the house sells fast — which it easily could — we’ll try it again. If it works as a marketing idea, it will be an irresistible force. But if the houses don’t get shown… That’s a problem.

But your part of the problem, as a buyer, is already solved. All you have to do is remember those words sellers have been blurting out for decades: “How much do you charge?” That one simple question will tell you whether or not your prospective buyer’s agent sees you as an grown-up — or a baby. When you get to the one who knows that you are the boss, with the power to take your business elsewhere, make the deal and then go shopping — in that order.

If listing agents help by conceding the funds directly to the buyer and not to the buyer’s agent, so much the better. But even if they don’t — or even if that particular battle takes years — all you need to do as a buyer is assert your right to compensate your buyer’s agent by mutual agreement, not by default, and your battle is already won…

 
The divorced real estate commission file: This is an organic compendium of weblog posts and internet-based articles arguing for and against the idea of divorcing the residential real estate commission — eliminating the co-brokerage compensation from the listing agreement, with buyers contracting for and arranging compensation for their own representation. One way this might be effected: Lenders could permit buyers to expense representation on the HUD-1 form as sellers do now. The entries collected here represent the full gamut of opinions on what may be the most important issue facing Realtors today. To submit additional posts or articles for inclusion on this list, fill out the form at this link.


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  • 32 comments

    32 Comments so far

    1. [...] Negotiating the Buyer Agent Fee September 6, 2006 Greg Swann over at Bloodhoundblog wrote a lengthy piece on his feelings with regard to changes that are needed in the real estate industry. [...]

    2. Dave Barnes September 7th, 2006 7:11 am

      How about I just agree to pay an agent an hourly rate (say $150) to help me find a home.

    3. Greg Swann September 7th, 2006 7:48 am

      > How about I just agree to pay an agent an hourly rate (say $150) to help me find a home.

      I’ll do it for $147.50!

      I plan to write about this later today. Hourly rates (in general) are better for tasks that are well-defined and measurable. Nebulous work invites time-wasting or phony billing. I can generally show about 3 houses an hour, allowing for prep-time and travel time. How about you pay me $50 a house for that part of the process, and we’ll iron out details for the other parts of the transaction. This has the benefit of making you choosier about what you want to see. If there are houses I think you should see but didn’t choose, I may throw them in as ‘freebies’. You’re definitely on the right track, though.

    4. Tom September 7th, 2006 11:36 am

      Greg,

      Outstanding article. I will be interested to see the comments that you will get from those determined to maintain the status quo.

      My feeling is the playing field is going to change as the technological tools are going to empower the buyers over the sellers agents. You are doing a great job of getting ahead of the battle and positioning yourself and your company to win.

    5. Greg Swann September 7th, 2006 11:44 am

      Bless you. Thank you. It should be a fun show no matter what!

    6. [...] Ardell says buyers and agents need to feel each other out before committing to each other. I don’t hate this idea, provided that buyers remember to nail down the terms of their representation before they run out and fall in love with a house. [...]

    7. Dave Barnes September 8th, 2006 4:36 am

      Greg wrote: “Hourly rates (in general) are better for tasks that are well-defined and measurable.”

      What?
      How do lawyers bill? Talk about nebulous?

    8. [...] Richard was all over the idea of being a risk-loving seller, offering “broker participation” in such a way that a buyer can choose what, if anything, to pay for representation. This is the language he’s using on his promotional materials: Buyers or buyer-designated brokers receive 2.5% of sale price at closing. [...]

    9. John K September 10th, 2006 5:11 pm

      Lawyers do charge flat fees for some things, Mr. Barnes. For example, to write up a will, and, more relevant, to be a buyer’s attorney or closing attorney.

      It’s impractical for a real estate agent to be paid on a per-hour basis. If you’re buying a year from now, you’re willing to be billed, monthly, for the time and effort? What if you never buy? No buyer would be willing to take that risk.

      If I have ten clients, and two are buying in the $500,000 range, when I search MLS for new listings, am I supposed to charge each client, or charge each client half, or what?

      There are too many tasks that are not tied to any one client – how do I charge for that?

      Flat fee might be one way to be compensated, but I don’t think per hour makes any sense.

    10. [...] My essay on empowering the buyer to negotiate the fees for their own representation is included in this week’s Carnival of Business at My 1st Million at 33. Frugal accuses me of being unfocused, to which my sole retort is a diffused glare, but adds this: It really angers me that the sellers and the agents just don’t know who comes up with the loan or cash to pay their bills. Real estate is probably the only industry that doesn’t respect fully the person who pays. [...]

    11. jf.sellsius September 12th, 2006 6:33 pm

      There is certainly room at the table for your model. Buyers & sellers will always decide if a new model works better than the prior. It is all a matter of time, perception and marketing. And marketing is the perception alternator and time accelerator.

      As an attorney, I can tell you there are various payment arrangements available. In NY where attorneys are an essential part of the real estate transaction, lawyers traditional have charged a fixed rate for closings. But there remains a(minority) group that charge a % of the purchase price. Habits of a particular market die hard but as George Harrison once wrote, All Things Must Pass.

    12. Greg Swann September 13th, 2006 9:44 am

      We’re starting to play with it, to see who salutes. If you bring me a five-hour transaction, I can do two a day. At that point, I hit my daily nut at $1,500 a pop — which puts 80% of a 3% commission in your pocket. With licensed assistants, I could probably bring the costs down from there — and still keep doing the more laborious transactions. All that has to happen is for buyers to learn five words: “How much do you charge?”

    13. [...] My take on the subject: Buyer’s need to learn the five little words that sellers mastered long ago: “How much do you charge?” The agent may not be required by law to disclose commissions, but you can condition your working with that agent on his willingness to negotiate his compensation with you. [...]

    14. tabjohnson September 16th, 2006 5:52 pm

      How much do I charge? I charge you nothing, because my compensation comes from the seller! If I rebate, I pay you to buy! As long as lenders cap the amount that buyers can receive at closing, and as long as the states prohibit cash to unlicensed participants in the transaction, I think this is the best we can hope for. BTW, builders really pay buyer agents 6% in Phoenix? All houses or smelly old spec inventory?

    15. Greg Swann September 18th, 2006 3:45 pm

      > I charge you nothing, because my compensation comes from the seller!

      Except in a short sale, the buyer pays for everything.

      > BTW, builders really pay buyer agents 6% in Phoenix? All houses or smelly old spec inventory?

      They pay what they think they have to to move inventory on their timetable. Specs don’t last long enough to get smelly. I’ve never sold a spec home that was actually finished when the contract was written.

    16. [...] Like this: “I’m going out today to put a deposit down on a spec home. I know they’re paying very high commissions. You can come along with me and keep 2% of that commission if you will agree in writing to concede the rest to me.” [...]

    17. [...] Breathe deep, boys. There’s a clue in the air, and, if you’re very lucky, you just might catch it… [...]

    18. Aaron Dickinson - Edina Realty MN September 24th, 2006 9:46 pm

      I’ve been tossing around something similar. The problem with your current proposal is that I know of few lenders that will let the buyer receive cash back at closing and as such if you slightly modified your position I think that it still gets the point across:

      “Seller to pay buyer broker compensation and/or reduce the purchase price of the home to a total amount of x% of the list price.”

    19. Sue September 25th, 2006 7:33 am

      Hi,

      How are you doing? I have one question for you, if you kindly can help me that would me much appreciated.

      If I am selling my house with one agent and buyer does not have any agent. My agent brings the buyer and they put an offer. What’s the % should take the agent? Is it 5% or 2 and half %? Please let me know.

      Best regards,
      Sue

    20. [...] Ardell raises some questions at Rain City Guide about my column in this morning’s paper on negotiating the buyer’s agent’s commission. I’m going to address some of her remarks here, but my fullest statement on the topic is quite a bit more comprehensive. In the newspaper, I get 350 words a week, with the result that I am splitting this one topic over 5 (or possibly more) weeks. I’m thinking, too, that we should create a category for these weblog posts, because both Cathy and I are writing quite a bit on the subject. [...]

    21. [...] Greg Swann of the BloodHound blog makes a very compelling argument for two practical reforms that may help remedy: NAR ‘monopolistic practices’, MLS disclosure issues, and ‘fair compensation for buyer representation’.  The Rain City Guide’s Ardell DellaLoggia has engaged Greg in a ‘point’ – ‘counterpoint’ thread stemming from the initial post.  This is definitely an issue that deserves the attention of all professionals in the real estate services industry, as well as consumers.  [...]

    22. [...] ‘The United States of America’ vs. ‘The National Association of Realtors’ October 1st, 2006 . by The XBroker Couldn’t refuse the title. ‘DOJ Intent Leaks Ahead Of Meeting With NAR, DOJ Denies Leak’ from The Realty Times reports. Things are not looking good when the Government is threatening your organization with an aniti-trust suit, I don’t care if you’re innocent or guilty, hope you have deep pockets…which segues nicely into: Greg Swann of the BloodHound blog makes a very compelling argument for two practical reforms that may help remedy: NAR ‘monopolistic practices’, MLS disclosure issues, and ‘fair compensation for buyer representation’. The Rain City Guide’s Ardell DellaLoggia has engaged Greg in a ‘point’ – ‘counterpoint’ thread stemming from the initial post. This is definitely an issue that deserves the attention of all professionals in the real estate services industry, as well as consumers. [...]

    23. [...] On top of all that, we took one of Cathy’s listings “private”. The house had been MLS-listed, but it wasn’t getting good traction, so Cathy and seller agreed to take it to the kind of hybrid listing we’ve been talking about: Cathy will continue to market the home as an “exclusive” listing, except that the 3% that had been offered as a co-broke through the MLS is now offered directly to the buyer, to be used at the buyer’s discretion. [...]

    24. [...] Woohoo!! Merv’s got it DOWN!! October 17, 2006 At first glance it might appear that Greg Swan and I are like-minded when it comes to commission issues. but not so. Greg and I do agree that the buyer should not be led around thinking they are getting a free ride compliments of the seller, and we are both part of a growing minority in that regard. We do in many ways lead the cause of buyers controlling their side of the fence, though sometimes Greg goes a little over the net on that one. [...]

    25. [...] The solution, obviously, is to divorce the buyer’s agent’s compensation from the listing agent’s compensation. I have suggested a way of doing this, and, ten days ago, while reading Jim Duncan’s Real Central VA, I found a better answer, as presented in Mark Nadel’s white paper on real estate commissions: Buyers Should Know that Mortgages Can Include Fees Paid Directly to Buyer Brokers [...]

    26. [...] Similarly, writing the listing agreement to concede any shared sales commission directly to the buyer effects the same sort of divorce. We are doing this with one listing right now, and I gather that Ardell has just done something similar. [...]

    27. Gary October 30th, 2006 8:19 pm

      Greg and all?

      I’m not an agent, but married to one. My question is this; when you go buy a car do you ask the sales person to lower their commission? No. Do you go to the sales manager, and ask them to lower his sales person’s commission? No. Then do you go to the sales person and say, ok, lower the price by 3% (since that’s what he makes). He will take offence. Just offer a lower price that you will buy it for, your done. Now, when you sell something on consignment, your given a set commission charge by the company that is offering to house and market your item. I as a buyer can’t go in the store and say I want you to lower the price on that ‘widget’ because your price is too high due to the commission you charge. The consumer won’t buy the ‘widget’ at your store, that’s all. So, why would any Broker/Seller have the right to tell me what I can charge for my commission? In effect they do. Typically a broker gets 6%, as a buyer’s agent, they get somewhere in the neighborhood of 2-3% . Since you found the house that the buyer truly wants, do you work for free? No. The Seller/Broker says how much they will pay you in commission; since the avg. a boker/seller offers is 3%, a currently accepted norm. So, I am for letting the market adjust as it will. We don’t need more government control.

      Now as far as the MLS data goes. In my view if ‘they’ succeed it will push the industry backwards. It will only support “corralling” listings. You will see bye bye to co-op brokerages and then the MLS will die. The big players will try to muscle what they can, but if an independent small brokerage doesn’t agree with the way you run your business, then why should they be forced to give away a competing products ‘wholesale’ details, etc..?

      Why not force sellers/brokers to ONLY put a listing in a certain newspaper? This begs the question; who is going to manage all of this data? Who is going to pay for it to be managed, marketed, etc..?

      If I want to buy a car this one car that’s in another city…I can’t go to my local dealer and tell them I want that car? They’ll laugh me out of the parking lot.

      Right now most homes for sale are available to be seen via someone’s web site. It doesn’t mean that that home will be bought through that buyer’s agent who owns the web site. They are only providing a IDX link to the MLS. So, doesn’t it come down to providing good customer service, and in the real estate industry most of the business is referral driven anyway.

      Please stop the regionalization/nationalization of how we are governed. Take away local/states rights, and you don’t have a united states, you have one state with too much power for the few.

      It breathes anti-constitution and anti-independence. Let the people decide what the market will bare. I would bet if this issue was on a national ballot, or local one for that matter, home sellers would balk. Home buyers don’t really care as its not out of their pocket. This could even drive it to a “fee” that is paid out of closing to the buyer’s agent. But, still the market will drive what this rate will be. So, then your back the way it was, only the government told you to do it that way. Is this what you really want?

    28. Cathleen Collins November 3rd, 2006 11:09 am

      >My question is this; when you go buy a car do you ask the sales person to lower their commission? No. Do you go to the sales manager, and ask them to lower his sales person’s commission? No. …

      You compare a car salesperson with a real estate buyer’s agent, but in many/most states, Arizona among them, this is an invalid comparison. When I deal with a car salesperson, I know he works for the car dealer, so the saleperson’s commission should be negotiated between him and his employer, the dealer. When I buy a car, I am the car salesperson’s customer, not his client. This is an important distinction. I have a friend, an automobile aficionado, who once toyed with the idea of hiring out his services to find the perfect car and negotiate the price for his clients, who would pay him for his expertise and the convenience of not having to research, negotiate on their own. Now how would it have looked had my friend agreed to find the perfect car and negotiate the price, and then accepted his commission from the car dealer who he told his client to buy from? Don’t you think that would have looked disingenuous?

    29. Gary Hodges November 3rd, 2006 12:51 pm

      If this is your only “wise” response to what I had to say, then I guess I miss your point. Are you saying most homebuyers do not know that their agent works for a broker; not that that has anything to do with the tea in China. However, if an agent works with a buyer without proper disclosure, as to whom he/she truly works for on a specific transaction, I believe this is un-ethical, if not illegal in some places. Nevertheless, this is still far from what I was saying in my post. My WHOLE point was if you as a buyer want to get a good deal then deal with the seller, they set the price and the commission with the listing agent/broker. The buyer’s agent had nothing to do with that. Granted a buyer’s agent can “give” away his/her commission if they want to. However, and this was my final point, why have the government tell you to do that when it will only cause enormous hate and discontent. If the market drives this rate down, then it should also do this for the profit (sales price), and the listing agents commission. Why would there be a need to ONLY go after the buyer’s agent anyway (which is not my point). Take the government out of the picture; let the market drive the rates on all sides. It will do so anyway, and is. Sorry Cathleen that you missed my whole point.

    30. Cathleen Collins November 4th, 2006 8:46 am

      Gary,

      Since you use analogy to make your point, you need to draw an accurate analogy. Otherwise you are equating your point with a wrong analogy, which will add up to your point being wrong as well. It is inappropriate to compare a buyer’s broker, who represents his client, to salespeople who clearly represent the sellers of cars, widgets, whatever. In other words, perhaps I did miss your whole point, but if so, the fault is that you based your point upon faulty logic.

      If your point is that the government should not dictate market rates, then I wholeheartedly agree. You will not find anyone at Bloodhound who would ever suggest that the government socialize the market. The only people who should set the buyer’s compensation are the buyer and his agent. Negotiation between interested parties should always be the basis for compensation, whether those interested parties are in an employee/employer relationship or an agent/client relationship. When anyone outside those two interested parties uses force to hold those parties to a different standard, whether that force is exerted by the government or unions or PACs, or in the case of a real estate seller influencing the negotiation between a buyer and his agent, it ruins the workings of a free market system.

      So, it looks like we’re on the same side of this specific argument :)

    31. [...] The Bloodhound Blog offers a compelling solution on how to negotiate with buyers agents here. [...]

    32. [...] Which brings me to Greg Swann (BloodHound) who makes a very compelling argument for two practical reforms that may address apparent NAR anti-trust practices, MLS disclosure issues, and “fair compensation for buyer representation.” [...]