I haven’t had a good rant in a while… and unfortunately, I don’t have enough time to have one right now – so the Reader’s Digest condensed version will have to do.
Most agents who have been in this business a few years or more know when something doesn’t look right. We’ll see something – and although we don’t know the underlying logic… we instinctively know it’s just not right.
This morning, I was perusing some rental properties for a client. As with listings for sale, it’s not uncommon to find some agents who are offering a ridiculously low co-broke. This morning was no different.
This particular agent is offering a 10% co-broke if you show the property. Since many brokerages charge transaction fees – the co-broke on this listing could easily be less than the transaction fee. Kinda gives “co-broke” a whole new meaning.
Now don’t get me wrong – a 10% referral fee for sending the client to a property shown by the listing agent is just fine. But 10% for bringing the tenant and showing the property is a non-starter – I don’t care who’s doing the paperwork.
Just for giggles and grins – I pulled up this agent’s recent history. One sold listing and more than sixty leased listings. Every single one of them offered a measly 10% co-broke… and all but two were leased out by – drum roll please – the listing agent.
[snarky comment] What an unexpected surprise! [/snarky comment]
Of course, both of those co-oped listings rented out for full asking price… while nearly every single one of the double-ended listings involved a rent reduction… sometimes several hundreds of dollars in rent reduction.
Now maybe you think that I’m just whining about some agent who is too greedy to offer a more generous co-broke – that’s fair. Maybe you think that I believe that a co-broke of 25% is more appropriate. I will tend to agree with you on both counts.
But there is an underlying ethical problem here.
When you list a property for lease and offer a ridiculously low co-broke – you are denying your client the best possible chance for achieving a quick lease at the highest possible rent.
And therein lies the rub.
If you are an agent who practices this kind of real estate – you should be ashamed of yourself. This behavior may not be illegal… but like any other kind of criminal, merely changing the law probably wouldn’t deter you from being a dishonest cheat.
If you’re a home owner who has run out of time to sell your home in a declining market, and you’re considering renting your property to stop the red ink from flowing – it’s time to wise up.
Listing your property with an agent to get it rented quickly is a good idea – but if you don’t know your agent well enough, maybe you should remove the incentive for them to be disloyal. Make sure your rental listing agreement includes language that guarantees a reasonable co-op brokerage fee is offered.
Without it, you might get an agent like the one I found this morning who would rather your property sit vacant than lose 15% of one months rent in commssion.
UPDATE
I put a call in to an agent who has a rental listing. Here’s the exact conversation
“Hi this is Zack”
“Hi Zack – Doug Quance with Solid Source Realty here… how are you?”
“I’m doing well, Doug – how are you?”
“I’d be doing better if you told me your rental listing on Bonaventure was available and that you’re offering more than three dollars on the co-op”
“That’s what I’m offering.”
“Are you serious?”
“Yes, I’m serious.”
“You have a nice day.”
Three dollar co-broke on a $2500/mo rental property! My client got a big chuckle out of that.
James Boyer says:
I feel for you man. I felt that way with some of the new construction builders, actually 1 in particular who would offer virtually nothing, or would have a couple of models out there, but if the buyer wanted to buy one of the other 5 models that are prominently on display when you get there, well, no commission. Thankfully that builder has moved on.
January 30, 2009 — 2:51 pm
Doug Quance says:
>James: I’ve seen the same behavior here in Atlanta – and it is despicable.
To make matters worse, my last ethics class said that writing an offer that specifies a higher level of compensation than is offered by the listing agent (although such compensation IS agreed to in your buyer brokerage agreement with your client) is unethical. 😈
I still don’t understand that. You would think that someone offering a ridiculously low co-broke would be the unethical party. Go figure.
January 30, 2009 — 4:18 pm
James Boyer says:
NAR’s ideas on some matters leave lots to be desired. Not looking to get into a NAR bashing session but I think that they are not helping us all that much.
January 30, 2009 — 6:16 pm
leanne finlay says:
I think it is more unethical to both your buyer/renter and the seller/landlord NOT to write in a higher level of compensation if that is what you and your buyer client agreed to in your buyer brokerage agreement.
The seller can always say no. It’s simply a point of the offer, and shouldn’t be considered unethical, as long as the rules of your MLS spell out that it is acceptable to do so and you have it in the buyer brokerage agreement.
January 30, 2009 — 7:23 pm
Doug Quance says:
>James: I hear ya.
>Leanne: I agree.
However, some agents send offers in with 5 or 6% written in for buyer’s agent compensation – when 3% is offered. That is unethical, in my book. But writing 3% into an offer when the buyer’s agent has that written into their buyer agency agreement should not be an issue – but apparently it is.
I don’t make the rules. I just do my best to follow them.
January 30, 2009 — 8:53 pm
Nigel Clarke says:
In Virginia at least compensation can only be changed/negotiated between brokers. I’ve had agents write in 3% on a 2.5% REO listing and had to refer them to thier broker for failing to understand the REB rules.
Short sales are also a problem where the compensation offered in the MLS cannot be amended/reduced without the agreement of the selling agents broker. Woebetide any agent should the bank reduce the compensation to make thier numbers work. They have to take all the reduction om compensation themselves.
February 2, 2009 — 4:06 am
Doug Quance says:
>Nigel: I have seen instances where listing agents have offered 2.5% – while keeping 3.5%… or even 4.5% – all without the seller’s blessing, I’m sure.
When I first got into this business, I worked for one of these “top” agents, who would routinely offer 3% and keep 4% of the brokerage fee. It sure pissed off a lot of buyer’s agents at closing when they found out.
In short sales, the banks will often get a brokerage reduction because the agents involved are WEAK and roll over for the lender. If the numbers make sense – they make sense. It’s the listing agent’s job to make sure that message is communicated. The property doesn’t belong to the bank (yet) and the listing agreement is with the seller – not the bank.
But that’s a whole ‘nuther subject altogether… 😆
February 2, 2009 — 7:51 am
Jose Lopez says:
Ten percent is the norm in our market. But, then again, why get into leasing? Wait…that might be just the thing since I have not sold anything in months.
Sarasota Foreclosures
February 3, 2009 — 9:07 pm
Susan says:
Many sellers do not understand how the commission breakdown works and that they are getting being well represented.
February 5, 2009 — 7:53 am
Doug Quance says:
>Jose: Ten percent of the whole years lease (or one month lease payment) is the norm for a rental brokerage fee – which is then shared by co-op brokers. My bitch is that instead of offering 25% of said brokerage fee… this agent was only offering 10%. Ten percent of a ten percent lease equals ONE percent of the total lease… for example, a lease of $2000 a month for one year ($24,000) would pay the broker who brought the tenant a measly $240 – while the listing agent would keep $2160.
>Susan: Unfortunately, you are right. Many sellers have little idea as to how this part of our business is transacted… because many agents do not want to discuss it – sometimes because they are being deceitful.
February 7, 2009 — 9:54 am
Doug Quance says:
See the update.
February 13, 2009 — 10:15 am