“Who’s on First?”
May 5th, 2007 by Rich JacobsonAs many of you know, Buckwheat and I are moderators for ActiveRain, a very popular network and blogging platform for real estate professionals. With close to 30,000 members, there’s a wealth of excellent and relevant information being shared each day.
Recently, one of the members of our network expressed his extreme disfavor with what he considers to be an illegal and unethical practice that is becoming rather prevalent in his market. Evidently, Buyers are electing NOT to use the services of an Agent to represent them in a home purchase. They’re circumventing the process, and going directly to the Listing Agent. By doing so, they hope to negotiate a better price on the property, since they feel the Buyer’s Agent portion of the commission no longer applies. This member goes on to cite two specifc instances where this happened to him:
In the first instance, he was holding an Open House for another agent in his office. During the Open House, a very interested Buyer came along. He naturally asked them, “Are you currently working with an agent?” To which they replied, “No.” So he proceeded to ask if they wanted him to help them write up an offer. Their response was, “No offense, but everyone knows if I call the Listing Agent on the sign, they’ll cut their commission and I can save a lot of money.” He relates that the Listing Agent did in fact receive a phone call from this Buyer, dropped the commission, and worked out a deal.
In the second instance, he claims he had been putting in a lot of effort, working with some Buyers for over 2 1/2 months. When he had found them the ‘perfect’ home, he prepared to write up an offer for them. To his dismay, the Buyers said, “No offense, although we really like you and appreciate all the time you’ve spent with us, it’s common knowledge that if we call the Listing Agent on the sign, they’ll cut their commission so we can save a bunch of money.”
This member goes on to say that it’s time to start suing these highly unethical agents who are ‘illegally’ breaking their Listing contract with the Sellers by cutting the negotiated commission percentage.
The timing for his little rant was rather coincidental. Just recently, I myself had dropped my commission on one of my listings. I had received a phone call from some Buyers off my sign, asking if I could show them the house. It was actually the subject of an earlier article of mine. Anyway, the Buyers were unrepresented and asked me if I would assist them in writing an offer. Evidently, these folks were also aware of the ‘common knowlege’ commission cutting craze. After discussing their options for representation, they still expressed a desire for my help. They instructed me to draft an offer that was just $ 10K below the listing price. After discussing all the options with my Sellers, we agreed to adjust the commission amount to help offset the discounted offer price, and countered to a reasonable compromise. Long story short – the Sellers netted what they wanted; the Buyers got a good deal; and I was paid for my services.
If this was illegal or unethical, I’m just not seeing it. From my perspective, I was representing my Seller’s best interests throughout the process. My primary goal was to do everything within my professional and experienced ability to help sell their home, period. At the same time, I provided all of the normal duties and responsibilities of a general licensee to the Buyers.
In response to this member’s first case, he should have negotiated some kind of agreement with the Listing Agent prior to the Open House. One could certainly argue that he was the procurring cause for the Buyer, since they came through during the Open House. At the very least, the Listing Agent should have provided a referral fee. Definitely an instance to cry ‘fowl!’
In the second case though, it is clearly the fault of this member to have neglected the importance of obtaining a written Buyer’s Agency Agreement. If an agent is going to spend a considerable amount of time and resources working with a Buyer, the least the Buyers can do is commit to using this Agent by signing a Buyer’s Agency Agreement.
As long as there are homes for sale, there will always be Buyers who are looking to save money and strike a bargain deal. And, as long as I don’t exclude or circumvent an obvious existing agency relationship, I will endeavor to relentlessly assist my Sellers in successfully achieving their goals. As a Listing Agent, my Sellers always come first!
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