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Two Myths For the Price of One

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photo credit: Enrico Fuente


Noticed this one on Jim Duncan’s blog but I’m going to start with the other myth from the same post on RealEstateJournal first:

“Plus, a new kind of agent emerged over the years, the ‘exclusive buyer agent,’ who is responsible to the buyer alone and doesn’t list homes. I highly recommend that buyers seek out such agents, as they’ll not only keep your confidence, they’ll also drive you around, give you valuable insight into market conditions and negotiate hard on your behalf — without any possibility of a conflict of interest. “

I’ve worked with buyers. I’ve also listed homes. How exactly is it a conflict of interest for me to work with buyers on homes in Glendale’s Arrowhead Ranch when I have a listing in Avondale, some 15 miles away? And how is it that simply because I’ve listed homes that I’m unable to discuss market conditions in depth and negotiate on a buyers’ behalf?

Or that I’m unable to keep a buyers’ confidence (even though it’s my fiduciary responsible to do so as a buyers agent, EBA or not) simply because I also list homes for a living?

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These are thoroughly ridiculous assertions without the slightest bit of merit. I’d actually argue that I’m in a somewhat better position to negotiate, having actually sat at a table with sellers when presenting offers and having some knowledge of the emotions on the other side. But that’s just me.

As for the other myth, here we go again …

“But like everyone else, buyer agents don’t work for free. At first glance, it seems like the seller pays them, since most are paid at closing from the commission costs that the seller pays, just as in the past. In reality, buyers pay for everything, since sellers routinely factor these costs into the asking price for the home”

Again, we’re pretending there’s one side to the equation. Yes, the buyer brings the money to the table. But the seller is the one bringing the home. And just as the buyers’ mortgage total is impacted by the commissions so is the sellers’ net. It’s two sides of the same equation, indivisible.

Further, the statement that commissions are factored into the list price is specious. Let’s say the average commission in some area was 10%. Tomorrow we magically divorce commissions and suddenly there’s no need for a 5% co-broke to be paid.

Are you going to tell me list prices instantly would fall by 5%?

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Are you?

But that would have to happen if commissions truly were factored in. Similarly, show me the homes being sold by unrepresented sellers where the list price is lower than the MLS-listed homes around it by the amount of a co-broke fee.

It doesn’t happen. I’ve yet to run into an unrepresented seller who looks at all the comps then deducts the commission that’s not coming out of their net. If you have, please share.

One final note specific to this article … the person answering completely missed the question. The question was about an agent requiring a non-refundable retainer, not an agent working on a flat-fee basis.

I realize I’m leaping to conclusions but I tend to doubt the agent with 28 years experience was planning to work for $395. Yet that’s what’s implied at the end of the post.

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More tremendous advice for unsuspecting buyers out there.

Sheesh.

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.

6 Comments

6 Comments

  1. Lani Anglin

    January 31, 2008 at 12:28 pm

    It seems to me that anyone can get a few pieces of information and then have the magical ability to speak from an omniscient standpoint as an expert and make assertions based on their few facts (or opinion blogs) they’ve read, as I feel the author of the “myths” did. In this environment, everyone is trying to “revolutionize” something. Enough.

    Real estate has been tweaked and re-tweaked but it is still recognizable whether the “business model” is good or bad. The author proves that just like he/she did, buyers and sellers can read an unimaginable amount of information online, access countless data points, but still be confused and overwhelmed which is why the professional will always be employed at full price- THEY know how to translate the massive info dump online (among other places) to the specific buyer or seller’s needs and that service will never be $395.

  2. Jim Duncan

    January 31, 2008 at 1:10 pm

    . Let’s say the average commission in some area was 10%.

    It would be inhabited almost entirely by Realtors.

  3. Jonathan Dalton

    January 31, 2008 at 1:27 pm

    Wasn’t arguing that was a reasonable commission, Jim. But you know that.

    Just using a random figure that doesn’t coincide with the random numbers that everyone else seems to use lest the impression be given that there’s a set commission rate. Which there isn’t.

  4. Jim Duncan

    January 31, 2008 at 1:31 pm

    I know.

    I’ve yet to run into an unrepresented seller who looks at all the comps then deducts the commission that’s not coming out of their net.

    That depends on where they’re pulling their comps. If I’m taking an offer on an unrepresented seller’s house I do an full CMA that does in fact take into account commissions, or lack thereof. In that case, I do pull the commissions out. Determining market value is an artful science, and all of the factors have to be weighed.

    If we were to break for simplicity and have the sellers pay their representation and the buyers pay theirs, I argue that we would all benefit.

  5. Jonathan Dalton

    January 31, 2008 at 2:14 pm

    You may do it but I don’t the unrepresented sellers do it themselves. “Let’s see. Bob’s house sold for $200K but he paid commissions so we’ll price it at $185,000 (or whatever.)” More often than not the house is priced at the last sale (if they’re even close to aggressive and/or serious.)

    >In that case, I do pull the commissions out.

    Except you never absolutely know what the commissions are. Maybe a difference of 1% this way or that doesn’t matter a great deal, but you’re throwing an unknown variable into the mix.

  6. Jim Duncan

    January 31, 2008 at 2:16 pm

    Maybe a difference of 1% this way or that doesn’t matter a great deal, but you’re throwing an unknown variable into the mix.

    And we don’t know accurately what they are today … we just use our best educated professional guesstimate.

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