There’s always something to howl about

Overcharging? A dedicated Realtor is a bargain . . .

Attorney Craig Blackmon issues a testy remark in a comment today, but the truth is, I could not be happier to discuss the underlying issue.

Sez Craig:

Well, it appears that even the “full service” agents are overcharging just a wee bit. It turns out that a successful agent must rebate nearly $69,000 a year to clients in order to charge a “fair” fee for the service. With this sort of transparency, I’m not sure Redfin has such a poor business model — at least they overcharge less.

I rebated more than half that amount in Q4 ’06 alone, so the number is not impressive to me.

Here is a number that has a very high priority for me today: Three.

That is the number of attorneys in two different states who tried with all their might — and failed — to kill one of my transactions.

They weren’t really trying to kill the deal — they were just being lawyers: Clumsy, stupid, ham-handed and — most particularly — slow. It took more than two weeks for the three of them to work out how to remove a bogus lis pendens that should never have been a cloud on the title in the first place.

I’m pretty sure each one of them made more on the house than I did.

But the important thing is, we closed the deal. A real estate attorney would have either killed the deal or bled the buyer white — for months. Lazy-for-less Redfin would have killed the deal. We closed today and my buyer moved in because I refused to let the transaction die.

I get paid for results, not ergs of energy expended nor drops of sweat spilled nor towering piles of paperwork. Results — not my time, not information, not obsequious service. I only get paid when I actually do the job I was hired to do.

Erg for erg, hour for hour, I lost my ass on this deal. But I don’t measure my life that way. I don’t have a job. I don’t get to eat one sesame seed every time I press the big red button. I work for days or for weeks without any compensation, and then, on some days, I get five-figure paychecks. I have worked for years for clients without getting paid for my efforts.

I don’t think I’m going to convince Mr. Blackmon of anything, nor do I wish to, but I can give thoughtful readers a lens for understanding “overcharging.”

If you paid for what you wanted and didn’t get it, you were overcharged.

Even if it didn’t cost you any money to lose what you wanted, you’re still out your time and that opportunity — possibly an irreplaceable opportunity.

If you got what you wanted when every other party to the transaction was working, intentionally or by default, to prevent you from getting it — you got good value for your money.

You’re not paying for an order-taker and you’re not paying for a good ol’ college try. You’re paying for results. If you’re not getting the results you’re paying for — you need to learn how to shop more wisely…

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    22 Comments so far

    1. Brian Brady January 31st, 2007 8:33 pm

      Why is everyone so hung up on the word “fair”? Nobody MAKES you pay a fee to a Realtor, mortgage broker, etc.

      I can’t wait until some freshman Congressperson introduces the “Fairness in Home Services Act of 2009″.

      Milton Friedman is rolling over in his grave.

    2. Russ January 31st, 2007 11:16 pm

      “They weren’t really trying to kill the deal — they were just being lawyers: Clumsy, stupid, ham-handed and — most particularly — slow.”

      It takes seven years of university education and passing a state bar exam to become an attorney. It takes three weeks of classes and passing a basic skills test to become a real estate salesman. I wonder which job attracts a greater percentage of MENSA members.

    3. Jeff Turner January 31st, 2007 11:41 pm

      Greg, what percentage of transactions fall into the category of “requires great skill,” as a result of the kind of title issues you speak of in this post, and what percentage fall into the “no problems” category? This is not a trick question, it’s a serious one. I have no idea.

    4. ardell dellaloggia February 1st, 2007 1:28 am


      I’ve been to the Mensa parties, I wouldn’t necessarily want any of them to be my Realtor :) But they are sometimes good at a lot of other things…especially the law. My sister is way up there on the charts in her mensa group, I just never bothered to get the card carrying member paperwork like she did. She’s much better at legal stuff than dancing in the streets with the people and the houses :) Always flunked gym that one.

      You saying a Realtor is not likely to be a member of mensa for some reason? I’m sure I could be a member if I wanted to…IQ 144 last they checked. I think that qualifies. I was going to, but I have a free pass to games night :) Big sis is somewhere over 170. We were all “stupid” next to her 1580 or so SATs. Perfect math score at 800 and almost perfect verbal. Not sure what she did in her LSATS back when thirty something wasn’t good enough, before they changed the system.

      I once asked some fellow agents if they thougt my having “mensa” as one of my credentials would be helpful to my career. They all said NAH, no one likes a brainiac.

      What do you think. Is “mensa” a valid and usable credential in the real estate business? Do you think noting it would “add value” from the public’s perception?

    5. jf.sellsius February 1st, 2007 1:44 am

      The post lacks sufficient facts to determine if clumsy, stupid, ham-handed and slow are apt tags to attach to all three attorneys. For example, there is no mention of the title report or a lender. If the title report reveals a lis pendens, it MUST be removed, bogus or not, before a deal can close–no bank will lend on it. And it’s not as simple as going down to the courthouse and putting an eraser to it.

      If you could provide more facts, Greg, I’d join you in sending all three off to remedial real estate classes. They’d have to be really dumb out your way because residential real estate law ain’t that difficult.

    6. Phil Hoover February 1st, 2007 6:16 am

      There are many smart people who have no common sense.
      A good Realtor is a problem solver with a good amount of common sense tossed in.

    7. Michael Cook February 1st, 2007 6:22 am

      I didnt really want to jump into this testy argument, but Brian mention Milton Friedman turning over in his grave? Perhaps if the real estate market was anything close to a free market, I might support that one. Realtors work very hard to ensure that the real estate market will never be free. Even though the MLS has been pried away from their hands, they still push for their 5-7% commision. Seems if this was a free market, the price would at least fluctuate a bit? Perhaps decline as investors get more information, do more of their own marketing, and more of their own paper work. While there are some partial service brokers, this market is still a long way from being free. Dont get me wrong, I LOVE A GOOD AGENT. But I would put their hold on the market akin to the mob.

    8. Greg Swann February 1st, 2007 7:15 am

      > Perhaps decline as investors get more information

      I list for my investors for 4%. I don’t discount on the way in, which means I’ll get 2% – 3% when we buy. But my share is 1% on the way out. You should be able to negoitate a price like this with no problem. They can’t say yes if you don’t ask.

    9. Craig Blackmon February 1st, 2007 9:29 am

      Such venom, Greg. And so inconsistent with comments you’ve made previously. In your own words (in an earlier exchange between us regarding attorneys and agents):

      “[Attorneys] typically would not be involved in a Realtor-represented transaction in Arizona. If they were, this would be an added cost incurred by the person seeking legal advice — ALWAYS ENCOURAGED, rarely pursued.” “We tell people when they don’t need us, WHEN WHAT THEY NEED IS BEYOND OUR KEN, or when having us involved won’t do any good.” “No one here has ever said that Realtors are necessary or even appropriate for every transaction. What I said is that attorney-assisted real estate deals are the rare exception in Arizona, and attorney involvement MAY turn out to be harmful in certain circumstances.”

      It’s funny — when I read those comments I understood you to be saying that attorneys can be helpful (why else are they “always encouraged”) and, in those circumstances “beyond the ken” of an agent, they can be downright essential. I got the impression that there was indeed a place for attorney-involvement in real estate transactions. However, in the above post, you strike a far different tune.

      Regardless, I stand by my initial point: agents are overcompensated. You yourself refunded to clients over $100k last year — money that you “earned” based on your fee structure, yet nonetheless felt compelled to refund to the client. If you routinely earn more than you thinnk you should, perhaps your fee structure is out of whack. Shouldn’t the consumer pay a fair price up front, and not rely on the good graces of the agent for a refund that will return the fee to a fair amount? And, of course, as noted by Michael, the structure of the market is used to support those artificially (and apparently unfair) fee rates.

    10. Craig Blackmon February 1st, 2007 9:32 am

      Now let the personal attacks begin! Heaven forbid people attack the ideas, not the person…

    11. Jay Reifert February 1st, 2007 11:32 pm


      First, let me say, no attack intended here. Just the facts. Also, keep in mind that I’m a full service real estate broker who only works for home buyers…an exclusive buyer agent.

      While I don’t list homes, I would have to say to you that, listing side fees can be reduced with no rebate necessary. They just charge what they feel is fair, and then only collect the amount they are due, at closing.

      Buyer side fees, however–because of the way the system works–could only make their way back to a buyer client, normally, by some form of rebate to the client, or else the client probably isn’t likely to get the benefit of the intended lower fee arrangement.

      I’m going to start speaking some numbers here, but only for the sake of illustrating what actually happens, not to imply that there is any kind of standardized fee.

      Let’s say a property is listed by a listing broker at six percent. Normally the listing broker–around here–would put that property on the MLS and offer half to whomever brings the buyer. The split can be any amount, too, but it is often–statistically speaking–half.

      Enter, for the sake of discussion, my buyer client. While I don’t consider myself to be a discounter, per se, my clients are usually going to be entitled to somewhere between a thousand and fifteen hundred dollars of my fee.

      Thanks to lending arcana, the only way I can get the funds necessary to give my clients what I promise, is to be paid through the transaction and then transfer the money to them at closing…taking away a lesser check than I would have taken, had I not offered my client those special things which cost me money.

      If I did not take all of the funds that were earmarked for the cooperating broker, either the listing agent, or the seller, would be the beneficiary, instead of my client.

      In reality, what you might call rebates are not that at all, to me. The monies I give my client, I was never contractually allowed to keep.

      By way of yet another example, my fee is always “x”. Anything above “x” goes to my client at closing. That way there does not appear to be an incentive for me to steer my clients toward properties that pay me better. On the converse, if we fall short of “x”, my client has to make up the difference. That way there does not appear to be an incentive for me to push clients away from homes that pay me less. (I have a number of other buyer-friendly incentives, besides.)

      Still…if the fee offered to whomever brings the buyer is higher than my contractually agreed fee, I still do have to collect it and return the overage to the client, or else the benefit will go to the listing agent or seller, instead of my client.

      So, on the buyer side, any “rebating” is really caused by not truly having independent control over aspects of what is offered to us in the first place. So, it isn’t a question of overcharging. It is really a case–in instances where buyer brokers do charge less–of being offered more compensation than that which is contractually agreed with the buyer.

      Truly…I don’t care what is offered, as my contract will still govern, and does operate in the best interests of my clients.

      Jay Reifert, Broker/Owner
      Excel-Exclusive Buyer Agency
      Madison, Wisconsin

    12. Craig Blackmon February 2nd, 2007 9:53 am


      You’re right — with your business model, you’re not “refunding” to your client. Moreover, you’re up front about the fee you charge, and the fee is only tangentially related to the listing commission. I think your model lends itself to a much higher degree of transparency and benefits the consumer, as frequently preached by Ardell DellaLoggia at Rain City Guide.

      My comment was aimed at the “traditional” agent who collects his/her commission and then routinely refunds some portion of it because the commmission is beyond a “fair” amount. Examples include Ardell, who refunded $69k last year, and Greg Swann, who apparently refunded well over $100k last year. To me, this looks like evidence of routine overcharging.

      That said, if you too routinely refund money to your clients, and thus take less than that to which you are contractually entitled to receive, then you too may be overcharging. Based on your comment, though, it sounds like you do not engage in such arbitrary rebates. Thus, you appear to be charging a “fair” amount for your services.

    13. Greg Swann February 2nd, 2007 1:02 pm

      > Greg Swann, who apparently refunded well over $100k last year.

      I don’t handle the money, so I don’t know how much we rebated over all of 2005, but I don’t think it was this much. In Q4 2005, I played with a flat fee for buyers and I sold a bunch of new homes that were offering five-figure commissions. I would expect we rebated more in Q4 than in the first three quartes altogether. It doesn’t matter anyway. The money was 100% lawfully mine. What I choose to do with it is my business. In the long run, we will routinely command 7% for listings, thus to contain demand.

    14. Kaye Thomas February 3rd, 2007 12:42 pm

      Craig: There is a huge difference between a real estate attorney and those who specialize in other areas of the law. Attorneys have a smattering of real estate law as part of their general education and many think they know real estate law when they don’t. Civil law and real estate law are often at odds. I can’t tell you how many times I have had to explain the difference to a non real estate attorney. Most were gracious enough to admit they were wrong.
      As Ardell noted… many of us are extremely well educated with high IQ’s… I also know a lot of people who went to law school, passed all their courses but could never pass the bar..

    15. Craig Blackmon February 4th, 2007 1:44 pm

      “Civil law and real estate law are often at odds.”

      I have no idea what you mean with this statement — you’d have to explain the difference to me, too. That said, attorneys may not be aware of the customs and practices of real estate agents (or even real estate transactions generally) and thus may not appreciate the subtleties of a particular transaction.

      As for IQs, I agree — one should stay away from general, sweeping statements that approach stereotypes. (I had nothing to do with the IQ comments above.)

    16. Brett February 4th, 2007 2:15 pm

      Credits from an agent to a client are not inversly proportional to overcharging. There are many reasons for an agent to credit a part of their fee to their client. Sometimes it is because a buyer or seller needs a credit in order to close. I have had a couple of transactions where the seller (who borrowed too much money against his/her home) were $500-$2,000 short after all of the closing costs, negotiated repairs, etc are accounted for. I could have refused to lower my fee to cover the seller’s deficit but that would have been ridiculous (and a deal killer). In those cases, a discount was provided as a customer service and good business. Not because the previous fee was unfair. As for a buyer’s credit, from time to time it is a nice gesture to give a buyer a credit who really needs it. I regularly work with first time buyers and these buyers are on a tight budget. When it comes to purchasing blinds, a washer or a dryer; it is a stretch for many of them. I am fortunate to make a good living (as a result of my hardwork and great customers) and as a kind gesture I will help those customers out who need it. Would I have overcharged if I did not credit a customer $500 for a new washer? No. These are just a couple of examples of how an agent may give a credit to a customer. Credits are given every day by hardworking, customer service oriented professionals who are just trying to make things as easy as possible for their clients. Just because a credit is given, does not mean that the customer was being overcharged in the first place.

    17. Craig Blackmon February 4th, 2007 2:38 pm


      You’re absolutely right — in those instances, those credits are unrelated to any “overcharging” of the client. However, my comment related to a post on another RE blog where the agent specifically confessed to reducing the agreed fee in order to be fair (“I then changed it at the close of escrow, to what I perceived to be a fair value for the services rendered.”). A credit under those circumstances indicates the client was being overcharged in the first place (or, at the very least, the fee structure was insufficiently flexible to insure that the client paid only a fair fee when payment was due).

    18. Jeff Turner February 4th, 2007 2:56 pm

      Craig, how is what ARDELL!!! did any different that an attorney charging a retainer and crediting back the unused portion? Is the attorney over charging?

    19. Craig Blackmon February 4th, 2007 3:05 pm


      Vastly different, and no the attorney is not overcharging. The fee agreement with the attorney requires the client to provide a retainer in a specific sum, against which the attorney bills. If the representation does not require the attorney to bill as much or more than the amount of time for which the client paid, then the remaining funds are returned. This is all specifically spelled out in the fee agreement. The attorney legally must return the unused portion of the retainer.

      In contrast, the rebate by the agent is NOT required by the agreement between the agent and client. Rather, it is simply a “gracious” act by the agent (as noted by Greg’s comment above). The agent is legally entitled to keep the entire fee, but essentially makes a gift of some portion of it by giving it back to the client.

    20. Jeff Turner February 4th, 2007 3:19 pm

      Craig, indeed they are vastly different. Thank you. Your explanation clearly points out the differences.

    21. I just posted a long blog on Rebating and rebates in Arlington Virginia and Washington DC. I used to do it, but I don’t do it anymore. I respect those that do, it is just a different business model.


    22. Russ February 21st, 2007 2:02 pm


      “Russ, I’ve been to the Mensa parties…
      You saying a Realtor is not likely to be a member of mensa for some reason? I’m sure I could be a member if I wanted to…IQ 144 last they checked. I think that qualifies.”

      I forgot about my comment here and just came across it while cleaning up my bookmarks. I did not state that a dues-paying NAR member, a.k.a. a realtor, is unlikely to be a MENSA member. I did state that based on the academic hurdles overcome, a licensed attorney is probably smarter and more likely to qualify for MENSA membership than a real estate sales agent. Greg Swann described lawyers as clumsy and stupid in his post.

      “We were all “stupid” next to her 1580 or so SATs.”

      I decline to be included in this “we.”

      “I once asked some fellow agents if they thougt my having “mensa” as one of my credentials would be helpful to my career. They all said NAH, no one likes a brainiac.”

      I disagree.

      “What do you think. Is “mensa” a valid and usable credential in the real estate business? Do you think noting it would “add value” from the public’s perception?”

      Sure, why not.

      My main point was that calling attorneys stupid is a bad call. That is especially true for the holder of an Arizona real estate license, since the exam can be successfully prepared for by reading sample questions and answers for an hour over lunch at the Casa Grande Burger King. Ask me how I know?