I wrote this as a comment at Rain City Guide (which thread is very worth visiting), but I’m echoing it here:
> Who pays the commission is all semantics, really.
I would disagree with that. Buyers have been persistently misled about who pays the commissions, which skews their behavior.
> The buyer will not pay LESS for the house if there’s no buyers agent involved
Let’s put the buyer’s agent’s compensation under the buyer’s control and see what happens. A buyer who hires me to help execute a transaction he or she has already decided to undertake should pay less for my representation than a buyer commencing a completely unfocused home search. Do you disagree?
Ours is the only sort of business where compensation is completely uncoupled from effort and costs. That’s absurd, particularly as home prices surge upward. Doubly absurd when you consider that there is a glacial glut of real estate licensees.
> I don’t see the point for all the discussion here.
How about because the things most worth talking about are the ones no one ever wants to talk about? 😉
Technorati Tags: compensation for buyer representation, real estate, real estate marketing
ardell dellaloggia says:
Greg,
Galen thinks I’m splitting hairs when discussing this topic with you. He is correct that there is one hair in this discussion that needs to be split between you and I.
You keep putting yourself into the picture of “why”. Your motivation for the buyer understanding that he is paying the fee has something to do with you.
My reason for discussing the topic is to get more and more agents to understand their relationship with the buyer. If buyer’s act like they are paying for their agent and agent’s act like they are being paid by the buyer…many, many things would be fixed in this industry. And you don’t need a buyer agency agreement to make the correction. We only need a change in mindset, not a contractual change.
Why do I harp on this contract issue? Because the NAR ABR class teaches that for buyers to have basic buyer representation, they need to sign a contract. Not only is that not true, it sets a bunch of agents out on the street thinking that they do not represent their buyer clients UNLESS said client signed a buyer agency agreement. That is not true. That is a dangerous class. Your tying buyer representation to a written agreement exacerbates and encourages that kind of misinformation to be spread.
Do you have a subagency default in Phoenix. Do you by agency law represent the seller UNLESS a buyer signs a written agreement? I don’t think so…I hope not.
Do you in fact treat your buyer clients who have signed contracts differently than those who did not? I hope not.
October 1, 2006 — 9:41 am
Jeff Brown says:
Once and for all, the money paid for representing a buyer OR a seller is based upon only one factor: The ultimate value perceived by the client. Is the client better off being represented by you than not represented period? Is he better off with you vs. another agent?
The rest of this issue is hot air. Expenses don’t mean a thing and are absolutely irrelevant.
My wife designs and sells bridal head-pieces, veils, etc. to retail stores. One particular piece costs her $13.05 to make. She then wholesales it to the largest bridal retailer in the country for about $27. The retailer then sells it for $149! Their bottom-line expenses are the lowest in the industry due to their size, experience, and superior expertise. The profit is huge. Why? Because the brides perceive $149 of value.
If the market didn’t pay it wouldn’t be worth it. Period.
(Apparently the market sees this value too as this retailer is about to be sold for almost $1Bil)
Sometimes I think the only thing some people in our industry are worried about is that someone is making more money and providing more value than they are. There’s absolutely nothing wrong with Greg’s way of doing things. He’s an honorable and highly trained and skilled agent. He values his services the way he sees fit, and that’s as it should be.
But the value he actually provides is ultimately the value perceived by the end user. Greg’s expenses don’t mean a hill of beans to his buyers. The fact that I’d value Greg’s services at a higher dollar value than he does is simply a difference in our opinions.
October 1, 2006 — 10:13 am