Ilyce Glink's Blog
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Thursday, August 16, 2007
Agents Bad Behavior
Is this what it has come to with exclusive buyer agents? Here's a letter I just received:
Dear Ilyce:
First of all, I want to THANK YOU FROM THE BOTTOM OF MY HEART for writing the wonderful book - 100 Questions Every First time Home Buyer Should Ask. You have touched upon ALL the essential points that somebody like me (a first time inexperienced home buyer) would need to keep in mind.
While looking for an agent, I took the advice from your book and contacted the NAEBA. They gave me a couple of agents' names and I met with one. There were a few things that he mentioned as part of the agreement, which I need your opinion on.
1. He stated that his commission was 4% of the total price of the house. 3% of which must be paid by the seller agent and 1% by me. And the combined should be a minimum of $10,400 (if the 3+1% of the home price doesn't come upto 10,400, I have to pay whatever is remaining). Is this the norm? Or is he asking too much?
2. He also stated that he will show only a maximum of 25 houses excluding open houses that we attend on our own. His point was that people usually choose from 10-15 houses that they see. If we do not find a suitable one within the first 25, the Retainer fee of $1,500 will have to be forfeited.
Is this reasonable?I appreciate your input towards these questions. Once again, thank you very much!
This sounds to me like an agent who wants to be well paid -- but not work too hard. A bad apple, he gives all agents a bad name.
Or, is this more common than I imagine? Labels: Agents, Home Buyers, House, Real Estate
posted by Ilyce Glink at 10:16 AM
3 comments
 
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3 Comments:
As a member of NAEBA I would like to respond. We do not know what the buyer’s criteria, service needs, and market context are. I would ask why he/she has not used good consumer sense and interviewed the other agent. The answer to the questions may well be in the next interview. Compensation and service agreements are a matter of negotiation between the parties. There is no norm in terms of fees or service limitations especially among exclusive buyer agents who tend to be a much more diverse than your typical real estate licensee.
posted by
barry@buyerbrokeragerealty.com | August 17, 2007 4:55 PM
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This is not a norm, but the policies of only one. Generally speaking, this is in no way a reflection of how other EBA's operate. This person should talk to other exclusive buyer agents until they find the one that works well with them, and whose policies are fair.
posted by
Suzette West, RECS, EBA | August 17, 2007 5:07 PM
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Whether something is fair or not is in the eye of the beholder - and depends a lot on the facts of that local market and situation.
I'd ask the agent what their past price-off performance statistics were - in writing. If the agent could consistently demonstrate "price-off" that was 3-4% above average - and you are paying 1% more than you might with another agent - you would be 2-3% better off.
Plus - you still had no chance of dual-agency representation, you got shown all FSBO properties meeting your criteria - and perhaps you also benefited from your agent knowing how to save you tens of thousands on your loan - instead of steering you to an "in-house" lender as a traditional agent might do "for your convenience."
I inform prospective buyer clients of what the typical co-op is in the market - and what our fee is (which can vary case by case...depending on many factors)
Our clients are never out of pocket anything to us. They could choose to be out of pocket to us - if they wanted to be - but they typically opt to have us have the seller pay for any shortfall with extra closing cost credits.
Unlike traditional agents (and even some EBA's) we believe that we should make a little less when our buyer's price goes up - and a little more when it goes down.
I believe that when you hire someone - the financial interests of both parties should be aligned.
It is human nature that everyone "works for their scraps" - even dogs...
Our clients enjoy the fact that we are bonused for price off and that the seller will end up paying it.
But some clients may choose no bonusing at all - and that is up to them. Every situation is different.
Our commission might be the typical payout plus a certain bonus per thousand that only kicks in after the first X thousand (5, 10, 15, or 20 or more depending on the price range) off of the purchase price.
If what is paid out is more than what our buyer contracts with us for - our buyer client receives a rebate. So - we can have no home showing biases based on what the "co-op payout" is.
We believe in showing prospects our past price-off statistics, closing cost credits, home inspection credits and loan-shopping savings -- and then give them options in how they want to compensate us.
Value is a combination of what someone charges - and what they produce. Most often in life - you get what you pay for.
Because Exclusive Buyer Agents are specialists - their negotiation power typically far outweighs any minor shortfall between what is paid out by the selling side - and their rate.
If you can negotiate something that guarantees that you will have a positive return on investment (they must get at least X% off for you if they are to earn x%) - then that might be another solution for you to propose and discuss. Most EBA's are willing to work with you to make sure you are satisfied in all aspects - including how you want to compensate them - and the results that were actually obtained.
They - more than traditional agents - depend on your future referrals - because they don't have the advantage of "sign calls" "calls off listing ads" or "open houses" to gain new buyer clients.
4% might have been a bargain if that agent had great negotiation skills. The only way to evaluate value - is to look at the facts of each situation.
Expert neuro-surgeons may charge more because they are worth it. And if you don't have to pay out of your own pocket - so much the better.
Rick Hauser, ABR GRI Broker/Owner
Relocation Advisors Group Inc. - Chicago's #1 Exclusive Buyer Brokerage
posted by
Rick Hauser | November 26, 2007 6:55 PM
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