Real Estate ethics question

[muck]

have no realtor is not fair to the other couple but again I say good for Muck if it goes through

She is being unethical if she does that..Not you. Her commission rate for this home is totally unrelated to your listing that she doesnt have yet. If she drops her rate she is in essence giving you a kickback which is a capitol offense and can have her liscence revoked. You are not being unethical but you are presenting her with a deal that if she accepts would be unethical on her part. If she is going to deduct 1% from her commission it should go to the seller not the buyer based on a future listing.

 

 

How does it (or at least a part of it) not go to the seller in the form of a better net offer?

 

It's pretty common (or at least it appears common to a non-industry member) here in KC to have agents agree to cut their fee if they provide both sides of the transaction. And, I've been in RE deals where the agent will cut their fee a little to get a deal done. How is this not the same sort of thing?

 

Other couple: Gross offer of $100,000 / net offer of $93,000

Our offer: Gross offer of $99,000 / net offer of $94,050

 

"Mr. Seller, as you remember, I told you up front that if I provided the buyer, I'd cut the commission from 7% to 5%. We received two offers, one from someone I found and one from another agents clients. Here are the prices they're willing to pay and here is the net proceeds to you. Which one looks like a bettter deal?"

 

"I don't know, what do you think?"

 

...are you telling me, Whomp, that the sellers agent would be breaking the law if she expressed her opinion here?

Edited May 8, 2007 by muck

[wiegie]

Muck cant say he is his own agent or get a cut because he isnt licensed. You cant pay a fee from real estate commissions to someone that is not licensed.

This is a perfect example of a regulation being enacted to protect entrenched powers rather than helping markets become more efficient.

 

In other words, this specific regulation is a bigtime POS.

[muck]

FWIW, the agent just now told me that she couldn't tell me what the differential is in the commission rates, just that there was a differential.

[whomper]

This is a perfect example of a regulation being enacted to protect entrenched powers rather than helping markets become more efficient.

 

In other words, this specific regulation is a bigtime POS.

 

 

 

A person who is liscensed pays insurance and is held to a strict guideline as to their conduct and can have their liscence , which they pay to renew every year, revoked if they dont follow these guidelines. If you want unliscensed people getting paid for real estate transactions for doing nothing more then buying property an already unruly industry will become the wild west

[whomper]

Muck..There is a difference between a realtor knocking a point off to get a deal done and a realtor shaving a point off based on a promise of a future listing. My advise is to call the national association of realtors and anonymously ask them. Tell them you want to be sure you are doing no wrong. In my opinion telling you its OK to underbid an existing bid because you dont have a realtor is unethical to the first bidder and the realtor shaving a point based on a promise of a future listing is shaky at best..Im interested to see Darins opinion on this as he is very schooled in RE transactions..I hope you get the best deal possible and think you are doing no wrong but I think this listing agent is a little shady.

 

 

You are right though her knocking off a point would benefit her seller I wasnt thinking clearly on that one but her doing it based on your future listing isnt fair to the original bidder and if the original bidders realtor knew that they would have a very strong case with the NAR IMO.

[Azazello1313]

i guess what i'm still left wondering....if the agent is ethical, and your offer is the best net offer to the sellers...why should you even have to sweeten the deal for her? she should be legally obligated to lay out the offers to the sellers in a way that makes clear where their best net offer is. i think i'd remove the future listing from the equation entirely, not because it would be unethical on your part, but because it should be unnecessary here (if i am understanding everything correctly). i tell you one thing though....if they end up taking the other offer, i would go to the sellers directly (and to your local real estate board or whatever) and spell out exactly what the agent told you about yours being the best net offer and all of that.

Edited May 8, 2007 by Azazello1313

[wiegie]

but her doing it based on your future listing isnt fair to the original bidder and if the original bidders realtor knew that they would have a very strong case with the NAR IMO.

 

this is what I don't understand (unless the NAR is set up to protect realtors and not the people they are working for (which I actually expect is the case))

[whomper]

this is what I don't understand (unless the NAR is set up to protect realtors and not the people they are working for (which I actually expect is the case))

 

 

 

If you were the original bidder and found out you lost out on a home because the listing realtor knocked a point off of her comission based on the winning bidder giving a future listing wouldnt you feel slighted ? The NAR would be there to protect you in that case . Anyone can go to the NAR not just realtors. Realtors , especially shady ones, arent all necessarily big fans of the NAR. If she told muck yes I will knock off a point if you promise me your listing she is essentailly kicking Muck back for his listing. The money may not be exchanged in an envelope but its money muck wont have to spend.

[wiegie]

If you were the original bidder and found out you lost out on a home because the listing realtor knocked a point off of her comission based on the winning bidder giving a future listing wouldnt you feel slighted ? The NAR would be there to protect you in that case . Anyone can go to the NAR not just realtors. Realtors , especially shady ones, arent all necessarily big fans of the NAR. If she told muck yes I will knock off a point if you promise me your listing she is essentailly kicking Muck back for his listing. The money may not be exchanged in an envelope but its money muck wont have to spend.

 

I might feel slighted, but boo-hoo to me. As long as the people who are selling the house get the most money for their sale, I don't see a problem. If the seller's agent does anything (or fails to do something) that would cause his clients to not sell their home for top-dollar, then there is a problem. But baring that, too bad.

 

If I come into a situation using a buyer's agent and I am against someone who isn't using one, how could I possibly expect to get the house unless I was willing to pay extra to compensate my buyer's agent for his services.

 

Basically, the NAR regulation seems to be there to protect buyer's agents, by making sure that people who don't use an agent don't get an advantage over someone who is using an agent. (Which to be frank, is absurd.)

Edited May 8, 2007 by wiegie

[muck]

Whomp ... I appreciate your perspective. Thanks.

 

1) I don't know if the other couple knows about the two different commission rates or not. I am not a RE pro, but this sort of thing has been a part of pretty much every residential RE deal I've ever been a personal party to -- "I'll list it for a 6% commission ... 3% to me and 3% to the buyer's agent ... but, if I also find the buyer, I'll do it for 4.5% commission" ...

 

2) I haven't talked about the listing with the sellers' agent yet (was waiting to get some feedback from the collective braintrust here).

 

3) We're meeting with the sellers' agent tonight to formalize our verbal offer from yesterday. She's taking our offer and the other offer to the sellers right after we're done writing our offer. I believe we're going to have to up our verbal offer from last night due to the presence of the other offer.

 

4) The sellers' agent hasn't done a single thing that would smack of impropriety.

 

I'd love it if I could ask the sellers' agent something like, "So, do you think we'll have a chance with our offer?" ... hoping she'll tip her hand a little that the other offer is above, at or below our offer. Do you have a problem with us asking and her answering that question, Whomp?

 

I don't want to get anyone in hot water...but, I do want to get the house (at $1 over the other couples' offer, if possible).

[The Irish Doggy]

Sounds like this agent has some scruples, Muck. She presents both offers to the seller and they decide. If it was disclosed to all parties that the agent gets 4.5% or some such by providing the buyer - instead of 3%, that sounds like its OK to me. All bidders can make counter-offers unless the seller just accepts one and moves forward. Hope you get the house.

 

Side note: it amazes me the seething attitude some people have towards real estate agents. How dare people be motivated by money? Good lord, let's outlaw commissions in all industries. LMAO.

Edited May 8, 2007 by The Irish Doggy

[muck]

Side note: it amazes me the seething attitude some people have towards real estate agents. How dare people be motivated by money? Good lord, let's outlaw commissions in all industries. LMAO.

 

 

It's a very similar 'problem' as stockbrokers who are compensated for transactions, rather than a clients P/L.

 

Personally, being paid on a clients P/L is the only way to have someone on the same page. If I could hire a RE agent that would (say) work for a split of any amounts above $XXX,XXX for a house, where $XXX,XXX is sort of the minimum I want, I'd jump at that all day long. Problem is that I've not met any that'll work under that sort of an arrangement...alas...

[Azazello1313]

ok. so you don't actually know that your offer is the best net offer, you're just hoping so and surmising that the difference in commission could potentially be the kicker that tilts it your way. well then i wouldn't bring up the possible future commission. all you're doing with that is trying to tempt her into doing something unethical. i think you just put your best offer forward, and assume she'll do her professional job in presenting both offers, with all of their pros and cons, accurately and truthfully to her client. if yours is the best offer, you'll get the contract.

[polksalet]

Sounds like this agent has some scruples, Muck. She presents both offers to the seller and they decide. If it was disclosed to all parties that the agent gets 4.5% or some such by providing the buyer - instead of 3%, that sounds like its OK to me. All bidders can make counter-offers unless the seller just accepts one and moves forward. Hope you get the house.

 

Side note: it amazes me the seething attitude some people have towards real estate agents. How dare people be motivated by money? Good lord, let's outlaw commissions in all industries. LMAO.

 

 

I have no problem with commissions but a commissioned person shouldn't act like they are working in your best interest. I receive a fee regardless if the sale goes through.

[polksalet]

Tell the property owner to call you once the listing contract expires. Realtors love that stuff.

[muck]

Tell the property owner to call you once the listing contract expires. Realtors love that stuff.

 

 

Funny thing is that we approached the seller months ago (when we found out he was going through a divorce) to tell him we'd be interested in buying ... when the agent told him that one of the interested parties was us, he said, "Oh yeah, I was supposed to call them before I listed." :homersimpson:

 

That said, the house will sell quickly. So, we either ante or we're dealt out.

[whomper]

Tell the property owner to call you once the listing contract expires. Realtors love that stuff.

 

 

 

If the property was shown to Muck while under contract the listing realtor would still be entitled to a commission even if Muck wanted to buy the house after it expired.

[whomper]

Muck,

 

I strayed from my original thoughts when I read this thread. Your original question was about the offering of your listing in exchange for her knocking off a point on this listing and as stated IMO she not you would be unethical to accept that. As far as your bid vs the other people. If the arraingement is as you say and there are 2 different commisions based on who procures the sale then she should advise them to take the best deal as long as she is advising them based on the best deal for them and not her. When I originally read your post I thought you said that the realtor told you to come in lower and that would be considered coaching you and would not put you and the other bidder on a level playing field. If she did not advise you to do that then advising them to take a better net deal for them is fine as long as the commission arraingement is what she says it is. If she mislead you about the commission arraingement which was my initial impression then it would be wrong to try and sway the deal to you so she could double dip.

[The Irish Doggy]

I have no problem with commissions but a commissioned person shouldn't act like they are working in your best interest. I receive a fee regardless if the sale goes through.

 

 

Well, one could argue that you have no motivation to do a good job at all. You could do a crummy job and get paid the same.

 

It all depends on the person.

[polksalet]

If the property was shown to Muck while under contract the listing realtor would still be entitled to a commission even if Muck wanted to buy the house after it expired.

 

 

That is not the case in Texas.

[The Irish Doggy]

If the property was shown to Muck while under contract the listing realtor would still be entitled to a commission even if Muck wanted to buy the house after it expired.

 

 

 

Heh, so that's why they always want you to "sign in" at open houses.

[muck]

I just spoke with an appraiser friend of mine who has access to MLS.

 

I know what her commission is, and (therefore) I know what her discount (probably) is.

Edited May 8, 2007 by muck

[wiegie]

Well, one could argue that you have no motivation to do a good job at all. You could do a crummy job and get paid the same.

 

The incentives for realtors look like this (assume a $200,000 home and 5% commission for simplicity).

 

Realtor's options:

1) price home at $220,000 and bust but for two months until it sells. Commission = $11,000.

2) price home at $200,000 and work for about a months until it sells. Commission = $10,000.

3) price home at $180,000 and work for 1 day to sell home. Commission = $9,000.

 

As a realtor, which option do you take?

Edited May 8, 2007 by wiegie

[whomper]

I might feel slighted, but boo-hoo to me. As long as the people who are selling the house get the most money for their sale, I don't see a problem. If the seller's agent does anything (or fails to do something) that would cause his clients to not sell their home for top-dollar, then there is a problem. But baring that, too bad.

 

Boo Hoo to you if everything was done above board. If you lost the house due to a kickback then you should have the right to defend yourself or an organization that regulates realtors and the industry in general.

 

If I come into a situation using a buyer's agent and I am against someone who isn't using one, how could I possibly expect to get the house unless I was willing to pay extra to compensate my buyer's agent for his services.

 

 

In most cases the commission rate is a set figure and doesnt change based on who sells the house . If the seller is paying a flat commission rate of say 5 % the fact that you are using a buyers agent doesnt cost you or the seller an extra nickel . The 5 % is either all going to the sellers agent or getting split between the 2 agents

 

Basically, the NAR regulation seems to be there to protect buyer's agents, by making sure that people who don't use an agent don't get an advantage over someone who is using an agent. (Which to be frank, is absurd.)

 

The NAR has many functions for all the players involved in a RE transaction. Sellers have gone to the NAR because of things their own agents have done many times. I knew a guy that wasnt fielding calls for a listing while his seller was mulling an offer on the table because the offer came from someone that worked in the selling agents office. He wasnt showing the property until they made a decision. A couple called the seller direct and told them the realtor wasnt calling back . The seller went ballistic and called the NAR .

 

[whomper]

Heh, so that's why they always want you to "sign in" at open houses.

 

 

 

Exactly and on the sign in sheet there is usually a section asking if you are working with a realtor