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Everybody Wants a Piece

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I was talking to a friend of mine this morning about an escrow of hers that closed a week ago. The seller was upside-down on his home but was prepared to bring cash to the closing table to get out from under his mortgage. The catch? He didn’t have enough if the full commission was included.Since the buyer came off a sign call, there was no second agent to pay. And so my friend, after discussing the situation with her manager, decided to reduce her commission to make everything work. The buyers were happy. The sellers were happy.It should have been a happy ending, right?

Well, not quite.

This seller happened to be a member of USAA and came to my friend through their MoversAdvantage program. (Disclosure: I am certified in the program for another 32 days – though I can’t utilize that certification since I left my former brokerage.) As part of the program, buyers and sellers receive cash back on their transaction funded by a 35% referral fee levied against the real estate agent.

For all the complaints about corporate relocations and other such programs, agents who work with these clients generally go in with their eyes open. We know what we’re paying out when the process starts. And so there was no problem there.

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No, the problems came when it came time for the split that the brokerage takes from the commission. This company has one split for agent generated business and a 50-50 split on company generated business.

Logic would have dictated half the commission be paid under the agent split (for the buyers’ side) and the other half under the company split (for the sellers’ side.) Which it was.

Oh, but there’s also a standing company policy that says if a listing is taken under a pre-determined commission rate (which is allowable, incidentally), the split’s 50-50.

So by doing the right thing for her clients on both side of the closing table, my friend lost not only the additional commission agreed upon at the beginning but also another four figures to the company just because.

The company’s reasoning in a nutshell (paraphrased): “It’s not up to us to step in and make sure the owner can sell the house. If they don’t have enough money to pay everyone, that’s not our problem.”

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Beautiful attitude, no? Really embodies the spirit of customer service. (Here’s hoping Ardell sees this as I know she’ll love that line from the company.)

Everyone wants a piece of the pie. Few actually care about the buyers and sellers involved. Relocation companies sure don’t. Third-party referral vendors don’t.  Sadly, many brokerages don’t either.

It’s lonely at the front lines.

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Written By

Jonathan Dalton is a Realtor with RE/MAX Desert Showcase in Peoria, Arizona and is the author of the All Phoenix Real Estate blog as well as a half-dozen neighborhood sites. His partner, Tobey, is a somewhat rotund beagle who sleeps 21 hours a day.

16 Comments

16 Comments

  1. April Groves

    January 28, 2008 at 11:36 am

    OMG! I don’t even know what to say…I do know that I am awful curious how you stay at a brokerage after that. I know things in business aren’t always sunshine and daisies – but, dern…are you serious? I mean, you have an ethical agent giving up money to ensure the deal closes and the clients are all well taken care of. Had she not, everybody would have gotten zilch and she would have been labeled “just another agent only worried about her commission”. She was in a lose lose. I just don’t get it…

  2. Jonathan Dalton

    January 28, 2008 at 12:11 pm

    She told the head of the relo department that is it’s their preference, she’ll just let the listing expire. The company will get nothing, she’ll get nothing and worst of all, the clients won’t get their home sold.

    It’s amazing how a couple of short-sighted decisions can send good agents running for the door.

  3. Courtney Cooper

    January 28, 2008 at 1:16 pm

    Wow Jonathan – That is just unacceptable. RELO companies are interesting – I have dealt with a lot of representatives that do seem to care, but the blatant lack of customer service in this case is terrible. Nice that your friend was willing to help the seller. Some out there wouldn’t.

  4. Charles Woodall

    January 28, 2008 at 1:43 pm

    Hold the phone a minute. While I do think that the company should have been willing to relax the rules a bit, I also believe that this agent did not earn a full split. She likely knew this scenario was a possibility and should have prepared accordingly, mainly by approaching her broker ahead of time (at the time of listing).

    It is easy to hide behind “doing the right thing”, but everyone has to give something. I have walked in both sets of shoes, and a compromise would be in order here.

    Flame away.

  5. April Groves

    January 28, 2008 at 2:56 pm

    Charles, I think you raise a valid point (no flaming here 🙂 Except…she did talk to her manager prior to…that has to count for something…

    I dunno, just seems like it could have been handled better by the company. There had to be more of a compromise that an out of hand dismissal.

  6. Larry Yatkowsky

    January 28, 2008 at 10:31 pm

    Jonathan

    This reminds me of a bank advertisement we have running up here where everybody stands around with their hands in someone elses pocket.

    I would like to empathize and offer an alternate solution but I left brokers like that a long time ago.

  7. Jonathan Dalton

    January 28, 2008 at 11:31 pm

    Charles – she went to the manager for this office and was told she’d be fine. Nothing could be done at the time of listing because the situation didn’t arise until the contract was received. It’s the broker who overruled it, as best we can tell after it was presented by the manager of the relocation department.

    Interestingly enough, the relocation department in this company theoretically is self-sufficient. And they have proven in the past they’ll suck every last penny they can out of a commission check, even if it doesn’t make the slightest bit of sense.

    A compromise would have made more sense. After all, if she had let the listing expire then there would have been no money coming back to the company either. And it would be one more client who could report back to USAA that this company didn’t sell his home.

  8. Benjamin Bach

    January 29, 2008 at 4:49 am

    I cringe whenever I hear stories like this. I used to operate my business out of an office where I wasn’t completely comfortable with the ownership – they were very old school, secretive, didn’t side with their agents etc – and after moving to an open book company where the ownership group is very helping, it makes a world of difference.

    I just heard a very similar story to yours from an associate at my former office. Surprisingly, the broker took the extra $$ needed out of her split, while his son still got paid (not on his deal). Only one of the reasons I took my business elsewhere 🙂

  9. Charles Woodall

    January 29, 2008 at 8:03 am

    Agreed that a compromise of some sort would have been the best way for the brokerage to handle this. What I took from your post (mistakenly it sounds like) was that the agent felt she was entitled to a full split. Maybe that’s just seeing things through my broker glasses. Then again, maybe its because I have seen and heard agents get on the “I did the right thing” stump to try to justify their belief that they shouldn’t have to share the pain in situations just like this one.

    Of course, nothing like this ever happens in our office 🙂

  10. ARDELL

    February 5, 2008 at 10:19 am

    Jonathan,

    Doesn’t surprise me. I’ve seen many offices whose policy is that the split drops to 50/50 when there is a referral fee to be paid, or anytime the total is less than x percentage. I think it’s old fashioned, but clearly not a new concept.

  11. Jonathan Dalton

    February 5, 2008 at 11:22 am

    Hi, Ardell!

    Usually the 50-50 only applies to one side, whichever is impacted by the referral. The issue was the buyers side also dropping to 50-50 because the agent reduced her overall commission to make sure the deal got done.

    There’s company policy and then there’s unmitigated greed. She also had been told by her manager that the second side wouldn’t go to 50-50 but he was overruled by the relocation department, which seems to run the show there.

  12. ARDELL

    February 5, 2008 at 12:24 pm

    In my experience, which was with Coldwell Banker some years ago, whether the drop was elective, by necessity or due to a referral was irrelevant. Commissions dropped to 50/50 in all of those cases.

    It’s not a penalty. It’s a business decision. Company policy is not “greed”. There are way more greedy agents than greedy companies, as this post points out.

  13. Jonathan Dalton

    February 5, 2008 at 12:45 pm

    It’s a business decision that easily could lead an agent to not make the accommodation to help a client in the future, though. And that’s unfortunate.

  14. ARDELL

    February 5, 2008 at 2:18 pm

    Companies with said policy are rarely the innovative types that encourage more options for consumers…and they are many. Clearly any agent who wants to be innovative and consumer-centric, needs to find the right fit as to Company. Most are not.

    Personally I think the whole relo system will be revamped in this decade and become somewhat obsolete as to it’s current funding structure.

  15. ARDELL

    February 5, 2008 at 4:02 pm

    OMG. I just saw this in Inman! Talk about predictions…

    “Financially battered relocation giant Sirva Inc., which conducts about 300,000 relocations per year, has filed for bankruptcy…”

  16. Jonathan Dalton

    February 5, 2008 at 7:23 pm

    I was thinking of your second comment as I read the first. Theoretically (and I’m not sure that I believe it) these companies run on very thin margins. Again, I don’t really believe it but I’m also a cynic who’s paid them too much over time.

    I agree with your point about consumer-centric thinking. That’s one of the reasons I’m not with that company anymore. True, relo leads were “found money” inasmuch as it was business I wouldn’t have had. But when you’re making 3/4 of one percent, far less than the broker and the relo company and you’re the one looked to for flexibility when needed, it’s a losing proposition.

    I’ll still work relos where I am but I’ve got a heck of a lot more flexibility to do what’s needed.

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