At one point or another, all of us have thought, “Man! That agent has no clue what they’re doing!” or “I can’t believe that agent did that – that could cost their client or them (insert here)!” Personally, that thought is often followed by, “Where the heck is their managing broker and how have they not caught this and corrected it?”
I do not believe that ignorance is an excuse so I blame the agent. But I equally blame their broker. Their broker is supposed to be overseeing and managing them (hence the name “Managing” Broker).
Are brokers really “managing” their agents?
Some brokers are not – they’re failing to oversee or manage many, if not all of their agents. Heck, some brokers don’t even look at their agent’s paperwork nor the listing in the MLS before or after it’s been submitted. This is sad and inexcusable. It’s also a HUGE liability for the agent, the broker and the livelihood of the entire office – owner, staff, brokers and agents – and all of the clients the office represents.
The $300,000 mistake…
In my local MLS, the Metropolitan Regional Information Systems (MRIS), the policy for broker co-operation and compensation is as follows,
Compensation specified on listings filed in the service (the MRIS) shall appear in one of three forms:
a) by showing a percentage of gross sales price
b) by showing a definite dollar amount
c) commission may be paid on Net Sales price (Sales Price minus seller concessions) or on base price in new construction if specified in the system
Keeping the rules/regulations you just read in mind, let me share with you what I often see written in the “Broker co-op” (aka compensation) field of short-sale listings: “50%”
Now imagine that a property/listing that had “50%” in the “Broker co-op” field sold for $600K (I ran across such a listing several days ago). What impact does having “50%” in the “Broker co-op” field have on the commission?
Think about that for a few seconds…
It means that the Listing Broker owes the Selling (Buyer’s) Broker $300,000 in compensation/commission.
The Selling Broker should (and from what I hear, always does) win their case in arbitration – the MRIS rules and regulations are clear, concise and the listing broker (and the agent) signed a legally binding form that says (in more words), “I have read and understand all of the MRIS rules and regulations in their entirety and I agree to follow them as part of being a member of the MRIS”.
Now imagine if a Listing Broker had to pay out $300,000 to a Selling Broker – in this market. If it’s a small or medium sized office, that one huge payout could potentially put the office out of business. Even a large office of 100+ agents would have a tough time swallowing a sudden $300,000 hit like that.
And think about what would happen to everyone that worked in that office if the office closed – their licenses would be sent back to state, they’d have to rush to switch offices (and all the headaches and money that goes along with that) and their clients would technically be without a broker or agent (that’s a whole ‘nother set of troubles in itself).
One “little” mistake and look what can happen.
Know what you’re doing. Not knowing is not an excuse – learn, learn and learn some more. Don’t just do something because others are doing it – that doesn’t necessarily make it “acceptable practice” or right. And if you haven’t done it or experienced it before, ask your broker. If they “don’t have time”, tell them they’d better make time.
You’d better start truly managing, overseeing and leading your agents. This recent market has brought significant changes to the rules of old and a complete new set of rules have been created – you better know them and more importantly, your agents better know them and follow them.
By not managing or overseeing your agents properly, you’re putting yourself, the owner, every agent in your office and every client your office represents at risk. There is no excuse for not managing and overseeing your agents – none whatsoever. It is your job and you get paid to do so. So do your job.
Or…if you really, really like me and want to pay my broker $300K in commission for selling your $600K listing…don’t do your job 🙂