I gripe about the meager little 350 words I get in my column in the West Valley sections of the Arizona Republic. What I want is 1,500 words on page one of the Sunday Buiness section! But today’s column (permanent link) is an example of how 350 words can effect a radical change:
For-sale-by-owner sellers can help move real estate market into new buyers’ world
For now, if you want to negotiate a lower buyer’s agent commission, you have to assert yourself by saying those five little words: “How much do you charge?”
Even though buyers traditionally have not done this, asking that question will be doubly profitable. You could save thousands of dollars and you will learn right away whom you are dealing with. Does the agent think you exist for his or her benefit, like a cow to be milked for commissions? Or does your Realtor know that you are the boss and you have every right to exercise a boss’ authority over your employee’s compensation?
There is an even better way to do this, but it’s one that will require a change in the Way Things Have Always Been Done.
Instead of offering a hefty “co-broke” commission, sellers could offer a nominal commission in the MLS, then concede 3 percent of the sales price directly to the buyer — to be used at the buyer’s discretion to pay for representation, closing costs, etc.
With that one simple reform, we would go from buyers having to initiate fee negotiations with reluctant agents to agents very eagerly bringing the topic up themselves. In essence, buyers would be on the same playing field as sellers, bargaining with agents who know they are applying for a job.
Will this reform be put into effect? Not easily, and probably not soon. The “co-broke” commission predates buyer’s representation, and sellers — and many listing agents — still treat it as a bribe to get the buyer’s agent to betray the buyer’s interests.
But there is one type of seller who has no stake in the Way Things Have Always Been Done: for-sale-by-owner sellers. Homeowners selling through limited-service brokerages also can afford to take a chance on a new idea.
These sellers are essentially unrepresented, and they don’t care if their buyers come with or without a buyer’s agent. The buyer’s agent commission is still built into the price — but it’s under the buyer’s full control. This is a whole new world of real estate.
Technorati Tags: arizona, arizona real estate, compensation for buyer representation, phoenix, phoenix real estate, real estate marketing
marc says:
Greg, wouldn’t the buyer’s agent still be strongly influenced to show his/her client listings that offer a traditional co-broke? I can see that if the client finds the FSBO him/herself there’s opportunity to negotiate. But the agent can simple “overlook” the type of FSBO listing you describe as is already done if the co-broke is weak.
October 13, 2006 — 8:30 am
fsbohomz says:
I don’t believe a thing real estate agents say. I don’t hate them just the tricky and unexperienced ones. Which in my opinion is most of them. Take the “no obligation market evaluation” for example, the oldest and most unoriginal term you will see advertised. Do they think people are stupid? The real definition should be, “yes I will come over to your home, tell you what it’s worth, then I will bug the hell out of you until you list it with me. In the meantime they will send you some “awesome” fridge magnets, calendars and pencils just so you don’t forget them. I have written at length about this, I’m NOT selling anything, just a frank, real world discussion.
http://www.fsbohomz.com/fsboblog/
http://www.fsbohomz.com
October 13, 2006 — 10:35 am
darin persinger says:
caveat emptor!!! you get what you pay for. House, car, haircut, or real estate agent. Any agent that brings nothing to the deal, does nothing of value, provides no real service would be perfect for this since they can’t get business any other way. A buyer’s agent that can’t negotiate their own commision sure isn’t going to be a good negotiator for that buyer. BUYER, if you think this is a good idea, do yourself a favor and save the money and just hire a real estate attorney instead.
October 13, 2006 — 2:49 pm
Greg Swann says:
> A buyer’s agent that can’t negotiate their own commision sure isn’t going to be a good negotiator for that buyer.
This of course is a rebuttal taught in Realtor seminars.
But, what the heck? I’m game. I’m ready to buy a $1 million house. I know exactly which house, I know what I want to pay, and I have every good reason to think the seller will accept my price. I want representation in this transaction becasue my own time is valuable. BloodhoundRealty.com says they’ll do the whole job for $5,000. Why should I pay you $30,000 instead?
If you can defend this when the nature of the co-broke commission is fully disclosed, you’ll be the first. If not, it would be gracious of you to admit it.
October 13, 2006 — 4:39 pm
darin persinger says:
I don’t even know how to respond. Why would I even need you, a Realtor, if I know what I want to pay and the seller will accept it? If you want someone to just handle the transaction, why wouldn’t you hire a qualified real estate attorney that probably won’t even cost you $5000? That would be like going in for a haircut and telling the hairstylist, “I know how I want my haircut, just give me the scissors and I’ll do it myself, but I’ll pay you $5 for use of the scissors.”
October 13, 2006 — 4:53 pm
For Sale by Owner Center says:
Greg, another excellent post.
In fact we have been discussing and working of this very concept for some time for release on our for sale by owner site. I totally agree with you that this makes the most sense. Especially if you consider that 64% of the time buyers actually find the home he / she actually purchases on their own (Source: 2005 NAR Buyer & Seller Profile Report – see quote below). This leads me to believe that agents don’t have as much control over buyers as they perceive.
Additionally, since the buyer is doing some of the work they will automatically begin to expect a discount (when this is advertised more) because the real estate agent did not have to perform that traditional part of the work.
We feel that when buyers are presented with this option, they will be drawn to these types of transactions (much like REALTORS / builders offer buyers credit in listings to attract buyers). Those agents who are unwilling to service these types of listings for the buyer will cause tension (and blog posts) and the buyers’ agent role will be diminished over time. Non-traditional models like Zip, Redfin, Buyside will heavily advertise the ability to receive a buyers rebate (be it a traditional listing, Flat-fee, or FSBO) and the tech savvy, do-it yourself Gen X & Y (which will represent the majority of buyers in the next few years) will flock towards the rebate.
Especially when you consider that the Zip Realty web site gets more traffic than Century 21 and Re/Max according to Alexa and they are not even national yet, so alot of people already know about it.
It just time… my hat’s off to you Greg for thinking about the future because by the time you read this it’s already the past.
* Source: NAR 2005 Buyers and Sellers Profile.
“When asked where they first learned about the home purchased, 24 percent of buyers identified the Internet, up strongly from 15 percent in 2004 and only 2 percent in 1997. Although most buyers use an agent to complete the transaction, 36% first learn about the home they buy from a real estate agent and 15 percent from yard signs; five other categories were 7 percent or less
October 13, 2006 — 7:40 pm
Greg Swann says:
> Why would I even need you, a Realtor, if I know what I want to pay and the seller will accept it?
So your claim is that you bring no value to your clients once the contract is accepted? I’m kinda guessing that you will have a tough time defending a co-broke of any sort once your clients learn to wonder what you’re doing to deserve it.
October 13, 2006 — 7:59 pm
darin persinger says:
why didn’t you handle my attorney question or hairstylist question?
We have two different views of a real estate agents. I look at them as professionals that provide a service. You seem to operate as an order taker working retail like at a GAP store.
Let’s discuss E&O also. But at a later time.
October 13, 2006 — 8:50 pm
Greg Swann says:
I’ve said nothing of an affirmative nature with respect to your remarks. So far, running MLS searches and driving around is worth $30,000 — which you say you can defend — but the work that comes after that is not worth anything. If, as you seem to concede, I don’t need you to help me obtain the home, why would I need you to help me find it. And how is any of this worth $30,000? I can and do make the case for the work I do. You make the FSBO/BUBBA argument exceptionally well. In any case, I don’t believe you can defend your commissions. You think you can, but that’s because you’ve never had to. Someday soon you will.
October 13, 2006 — 10:08 pm
Greg Swann says:
> But the agent can simple “overlook” the type of FSBO listing you describe as is already done if the co-broke is weak.
Hi, Marc. Your assumption is that the buyer’s agent controls the search. That may be the case, but it doesn’t have to be. In any case, this is just wedge-driving. The ulimate goal would be to have every home — including all MLS listed homes — offered this way. This is not the only way this oucld be achieved, but it works with current lender and escrow practices.
October 13, 2006 — 10:18 pm
darin persinger says:
I will email you my formula and break down on the BCS. I could never make it work. No inerest from buyers. Do with it what you want. I love your consumer based thinking, I just think there is to much anti-realtor thinking with it. Hard to tell through a few blogs and not really knowing you though.
October 14, 2006 — 9:29 am
Greg Swann says:
Fair enough. I’m not hostile to Realtors, for what it’s worth, just to lazy and lax representation.
October 14, 2006 — 9:37 am