Greg Swann has joined Glen Kelman in the way they both think and talk about the amount of commission, the splits and how it can be divided and allocated.
There isn’t some “set commission amount” for groups and companies to “divide for the public”. This kind of thinking is one of the primary flaws with the Redfin business model. For example, we charge our sellers less commission if we handle the buyer side and are not paying an outside agent. Almost all listing agreements are signed by sellers who are agreeing to pay the listing agent. To suggest that the purchase price the buyer pays for the house has “the buyer really paying it” would
also be saying that the buyer has a right to tell the seller how they should spend any and all of the money they receive from the sale of the house. Why stop with the sales commission?
The idea and concept of the buyer pays the commission is absurd. It is flawed logic. What if some seller (or buyer?) came into my office and started ordering my staff around, explaining that “they paid them”? I pay my staff with MY money. I may have received that money from a commission paid to me by my seller but it is then MINE. The home seller is in the same position. It is their money that they have agreed to pay to an agent. Under the present system, the buyer has
made no such agreement.
I’ve commented elsewhere on why divorcing the commissions will never happen anyway – but just didn’t want to let this particular bit of poop sit. Damn, I haven’t posted anything in a while and right now have a plane to catch. This got me out of hibernation, so thank you! LOL.
Jeff, I will mentor you for the same fee I charge everyone else. The amount most buyer agents currently charge buyers. This is the same price I always charge. My goal all along has been to make charging nothing really mean something.
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Greg Swann says:
Sorry, Russ, you’re simply wrong about this, although you’re hardly alone.
First, I’m pretty confident this change will happen. If it doesn’t happen at the behest of lenders, then the brokers will do it just as soon as a judge rules that the present way of doing business is a de facto sub-agency, with several liability assessed against the listing brokerage.
Second, if Glenn Kelman has any brains — certainly open to debate — Redfin should hate this idea, since its entire business model is based on buyer’s agents getting paid for doing nothing. When buyers expect service for the money they are already paying, Redfin will start to smell pretty fishy. This would explain why they campaign for bogus reforms while ignoring the reform that would truly empower buyers.
Third, as the chart neatly illustrates, buyers are already paying for everything that gets paid for. The argument about who is ordering whom around doesn’t really mean anything. Buyer are already paying for for zealous representation — and for the most part not getting it.
July 15, 2007 — 12:19 pm
Bruce Hahn says:
Russell Shaw has it all wrong.
Buyers bring the money to the table. The commissions are all paid out of that money, not by check from the seller.
Also, if a buyers agent chooses to rebate his part of the commission split to the buyer, that’s between the the two of them and none of the seller’s or sellers agent’s business. Why should they care what happens to the buyers side of the commission anyway?
July 15, 2007 — 1:36 pm
Jeff Brown says:
Hey everyone – who has the commission deducted from THEIR proceeds, the buyer or the seller? The one paying for everything is the one who is lighter in their bank account when it’s all said and done.
Amen Russ – I’ve been hearing about this since Nixon was in his first year. It didn’t happen then, and I’m thinking it won’t happen any time soon.
But watching the debate is more fun than watcher grass grow. 🙂
July 15, 2007 — 1:47 pm
Jeff Kempe says:
Heh. The fact that your mentorship is free, Russ, means I’m no longer interested…
But a couple serious points:
1. You don’t take your office analogy far enough. If I as a buyer or seller – or mentoree! – walked into your office and your staff was rude, or the office was filthy, or your secretary was having it on with another agent in the conference room, I’d pull my business immediately. So in a very real sense you DO operate at the dictates of your clients. If you didn’t, you wouldn’t be the success you are, and wouldn’t have the money necessary to pay anyone. Greg’s scenario is perfectly valid.
2. When people engage in commerce they want control; paying for something gives them that, and the more they pay, relative to the market, the more control they have.
Thus I have no problem returning a toaster that fell apart and cost me $100; if I were given the same toaster I’d have no basis on which to complain, so would likely just throw it away and go buy one that fit my needs.
Buyers right now don’t think they have that control. The mistake is in thinking they don’t want it…
July 15, 2007 — 3:20 pm
Michael Cook says:
This discussion has gotten so interesting, I thought about writing a post from the buyers perspective, sadly I have to go to the DMV on Monday. But a few quick points…
Regardless of how great or poor the buyer’s agent is, the commission that the seller of the property has chosen to charge will reflect their pay. I think that puts the seller in sole control. Perhaps less scrupulous agents will simply avoid showing those listings, but when they do sell the buyers agent will at most get half of the fee unless there is some kind of side agreement.
The more important issue is the quality of representation. Buyers agents would inevitably have to compete on price or quality of service. Its a much better sell to a perspective client to say I have saved my clients on average 10% off listings vs. saying I will only charge 2% instead of 3%. Even a first time buyer can calculate 10% of a future home purchase. With the current structure that sell is really not there.
Hopefully this change will come, but in my personal opinion, I think there are just too many below average realtors out there to pass this through. This would destroy many of the fly by night agents, making transactions much easier on both sides.
July 15, 2007 — 4:31 pm
David G says:
“if a buyers agent chooses to rebate his part of the commission split to the buyer, that’s between the the two of them”
Not in Tennessee where it recently became illegal to rebate commissions to buyers. So my question is; how is it that buy-side commissions in Tennessee are negotiable and if they are, how are the monies handled?
July 16, 2007 — 11:24 am
Rob Green says:
The whole notion that a buyer doesn’t pay for the services the agent provides is utter non-sense! If that was the case, agent’s would happily show homes outside the MLS with no hesitation because, after all, their servcies are free so why should the seller have to pay for a free service?
All philanthropic tendencies aside, most buyer broker agreements specifically dicatate that the buyer is, in fact, completely responsible for the commission that is to be paid to the agent, REGARDLESS of the property being in the MLS or not. No matter how you spin it, that doesn’t sound free to me.
Today’s buyers are becoming much more informed and educated and can no longer be duped into such deceit which sounds too reminicent of “I did not have sexual (financial) relations with that woman (buyer).”
Rob Green
Smart Choice Realty
July 16, 2007 — 12:15 pm