Are Real Estate Commissions Fixed?
Steven Landsburg points to an economic riddle about real estate commissions:
"In many real estate markets (including the one where I’m currently
shopping), the agent’s commission is equal to a fixed percentage of the
sale price. (Typically it’s 6%, though this is split evenly between the
buyer’s and seller’s agents, each of whom gives a cut to their
respective agencies, so either agent’s take-home is more on the order of
2%).
This means that if you sell a million-dollar house, you earn TEN TIMES the commission of your identical twin who sold a hundred-thousand-dollar house, though I doubt very much that you did ten times the work or bore ten times the expense.
Now, plenty of hundred-thousand-dollar houses are being sold, which means that plenty of agents are settling for the relatively dinky commissions. Question: Why are those agents not attempting to steal some of the high-end business by offering to accept a smaller percentage? After all, 1% of a million is still a lot more than 2% of a hundred thousand.
You might say that the agencies collude to restrain them — but what stops a rogue agency from busting the cartel?
So what’s going on? I see something that looks a lot like a competitive labor market where different workers receive substantially different wages for doing pretty much the same thing. Economic theory says that under very general circumstances, that can’t happen. Why is this market different from all other markets?"
Here are some related questions/puzzles:
1. Why is the 6% real estate commission typically fixed, regardless of whether the house sells in the first hour or day after being listed, or is sold only after a year of marketing, advertising, holding numerous open houses, etc.?
2. Why is the 6% real estate commission typically fixed, regardless of whether two agents are involved (one working with the buyer and one representing the seller), or whether a single agent is involved, e.g. selling a home at an open house to buyers who are not represented by a real estate agent, in which case one agent gets to "hog" both sides of the commission?
So I guess the basic question is: In a competitive market, and especially during a slow market like during the last three years, why don't we see more competitive and creative fee arrangements that might include adjustments for: a) the price of the house, b) the time it takes to sell the house, and c) whether one or two agents are involved in the transaction?
Some of the commenters on Steve Landsburg's blog point out that there are typically two agents involved in a transaction, and if the listing agent agrees to a commission below 6%, the agents working with buyers might be reluctant to show those houses. That seems plausible, but I thought I'd add some additional questions, and see what CD readers have to say. Perhaps there are some companies out there with fee arrangements challenging the status quo?
This means that if you sell a million-dollar house, you earn TEN TIMES the commission of your identical twin who sold a hundred-thousand-dollar house, though I doubt very much that you did ten times the work or bore ten times the expense.
Now, plenty of hundred-thousand-dollar houses are being sold, which means that plenty of agents are settling for the relatively dinky commissions. Question: Why are those agents not attempting to steal some of the high-end business by offering to accept a smaller percentage? After all, 1% of a million is still a lot more than 2% of a hundred thousand.
You might say that the agencies collude to restrain them — but what stops a rogue agency from busting the cartel?
So what’s going on? I see something that looks a lot like a competitive labor market where different workers receive substantially different wages for doing pretty much the same thing. Economic theory says that under very general circumstances, that can’t happen. Why is this market different from all other markets?"
Here are some related questions/puzzles:
1. Why is the 6% real estate commission typically fixed, regardless of whether the house sells in the first hour or day after being listed, or is sold only after a year of marketing, advertising, holding numerous open houses, etc.?
2. Why is the 6% real estate commission typically fixed, regardless of whether two agents are involved (one working with the buyer and one representing the seller), or whether a single agent is involved, e.g. selling a home at an open house to buyers who are not represented by a real estate agent, in which case one agent gets to "hog" both sides of the commission?
So I guess the basic question is: In a competitive market, and especially during a slow market like during the last three years, why don't we see more competitive and creative fee arrangements that might include adjustments for: a) the price of the house, b) the time it takes to sell the house, and c) whether one or two agents are involved in the transaction?
Some of the commenters on Steve Landsburg's blog point out that there are typically two agents involved in a transaction, and if the listing agent agrees to a commission below 6%, the agents working with buyers might be reluctant to show those houses. That seems plausible, but I thought I'd add some additional questions, and see what CD readers have to say. Perhaps there are some companies out there with fee arrangements challenging the status quo?
46 Comments:
So there is the company Redfin that is challenging this model in just this way.
They offer a refund of part of the standard 6% commission to home buyers. Note that they only operate in select markets (which have higher than average prices, on the whole), and they only offer the refund on homes above a minimum price.
So they're precisely offering a discount on the commissions on homes above a certain value.
You may want to read the letter to The Economist from Moe Veissi, President National Association of Realtors.
He states "Close to 70% of people selling their home discuss and negotiate the commission they pay."
Mark, I've always understood that commission to be negotiable and I know people have negotiated lower commissions. This is particularly easy to do if you happen to own more than one property or transact often (order flow also dictates commissions in the securities brokerage business). I do wonder why people don't attempt to negotiate commissions more frequently. Perhaps that's a cultural thing.
I disagree, though, that the expense of marketing luxury properties is the same as for lower priced houses. Brokers usually have to shell out for the best photographers, the best caterers and layouts in magazines whose target market are the rich. The local weekly circular, internet and a cheese plate just aren't going to cut it when hawking a $5 Million house.
Well, reading the comments above mine, I guess I was wrong and most people do negotiate commissions.
The last home I sold, I did try to negotiate commissions. What I found was that the very top producing realtors weren't nearly as flexible as those who did fewer transactions. This suggests that sellers do not perceive the services of realtors as identical -- i.e. they were willing to pay a higher commission to obtain what they think are superior services.
Let's not forget the growing FSBO crowd....
I would also take issue with equating the sale of even a one million dollar home to that of a 200k home (depending on area home prices)...the buyers and sellers are different, the opportunity for sales are vastly different and level of expected service isn't even comparable.
one could look at this the other way. i am actually left wondering why any Realtor would even list a $100k house.
$6k in commissions, split 2 ways and broker fees leaves you with $2k for a month of work.
granted, you can do more than one at once, but some sales will fail as well.
you'd been to sell 25 houses a year just to make a median income (and 25 is A LOT of houses).
it may be that the reason no one drops fees is that if they do, they starve.
i would expect that past a certain home value, fees would get much more flexible in direct proportion to price.
i also wonder about quality of brokers. buying a home is complex, and getting somehting wrong can be a nightmare. if you are dropping $1 million on your house, do you really want to skimp on $10-20k in fees and risk a bad outcome?
i did a study of this in college on reputation formation in repeated agency transactions, and it showed over and over that in a simulated IPO, the underwritee would overpay for a presumed high level of service, even if such higher fees were uncoupled from results (this was not known to the contractees) but was, instead, random.
you pay up to feel it will be done right. Realtors vary a great deal in terms of quality. it may be that fee cutting risks signaling that you are low quality and desperate.
Mark, I was thinking the same thing. It would be interesting to also see that breakdown by market segment and by the number of homes RE brokers sell.
"Close to 70% of people selling their home discuss and negotiate the commission they pay."
That means that almost 1/3 of sellers don't discuss or negotiate the commission and just accept the standard commission rate offered by the real estate agent. And for those who do discuss the commission, what fee does the agent agree to?
It would be interesting to see a breakdown of real estate commissions, to see how much variation there really is. I'm thinking that the commissions are probably very highly concentrated at the standard fee of 6% (or 7% for some areas), without a lot of variation, but I could be wrong. It would great to see any data that might be available.
Keep in mind that in a typical transaction, the companies with whom the agents are affiliated usually get about half of the commissions. So if there are, say, $50,000 in commissions, the companies on the buy and sell side probably get $25,000 of that. Which means that the selling and listing agents get $12,500 each. So the amount of negotiation flexibility that a listing agent has is relatively small.
the other possible explanation is the 80/20 rule and quality.
it may be that a good realtor does provide more than 6% in value.
if they get you the best price faster, that may be worth more.
it's better to sell at $500k and 6% commission than $$480 and 4% or it's better to sell in a month than 6 months. that would be worth 1-2%.
as in most sales professions, real estate has an 80/20 rule. 80% of biz gets done by the top 20% of salespeople.
they are likely the top because they get the best prices, do not mess up deals, and get things sold quickly.
they do not have incentive to cut price and comprise most of the market. it's not a catel per se, just a bunch of folks who do not need to cut price, just as the top names in investment banking do not unless you are a really big, juicy customer. facebook gets a deal, but "carpe technologies" with $50mm in revenues is going to pay full rate at a top firm or takes it's chances with a 3rd tier guy who may charge less, but may also get them a worse deal price/botch the deal.
1. One can negotiate real estate commissions. I have gotten them down to 4.
2. In many corporate relocations, the company pays, so you get some of the third-party payer issues where the the actual home seller is indifferent to rates. I had 4 corporate relos and couldn't have cared less what the rates were
3. I do think agents shun homes with low-cost agency deals. For one house purchase we looked at over 200 houses (we spent a long time at it and we are fast, seeing 30 in a day). Zero of the homes shown me by an agent were for sale by owner, though we passed many for sale by owner properties in the neighborhoods we were searching.
Morganovich,
I think many agents look at a 100k home as an investment in future business. The agents I know probably understand income-mobility better than anyone and stay in touch with those who have been involved in low-dough homes, knowing they will probably get a repeat customer in just a few years. Most of these agents do a lot of turn-and-burn...not doing much work and usually listing the house at the low-end of the comps leading to quicker sales and minor effort.
As already pointed out RE commissions are easily negotiated in most markets. The 6% 'standard' commission is like the sticker price for a new car. You can definitely do better if you are knowledgable and shop around a bit.
And BTW; 6% of $100,000 is quite a bit less than 6% of $1,000,000.
I would add that having shopped for and sold homes since around 1985, there is much more price competition in real estate services today. The Internet has done the most to help, breaking the monopoly lock on the information in the MLS that realtors had.
mike-
i can see that argument about investing in future business, but it's still unclear to me why they would want it. selling that house later is still lots of work for little money.
the owner moves, but to where? real estate licenses and expertise are pretty localized.
who is to say to would even be permitted to represent them in a new buy?
it would seem a much better business to track the high end buyers. the buy more houses and pay more for them.
Morganovich,
I understand what you're saying, believe it or not, I just had this conversation with an agent friend the other day. Her repeat business in-market is far higher than I would have expected (not to mention word of mouth)...she has dozens of listings at any given time, plus dozens in which she acts as buyers agent...she makes a very good living and certainly doesn't focus on high-end (not that she turns down high-end).
Of course, "good living" is relative and may not be what you'd consider good, but she also has a very loose schedule and a decent amount of schedule freedom.
I do think that an agent must put in some lean years to get to where she is though.
mike-
that's interesting about the repeat biz.
that said, my bigger issue was this:
it takes as much work to sell a $100k house as $1mm one. it just pays 1/10th as much.sp ti seem like selling 4 $1million houses a year is a better bet that 40 at $100k as a business.
that said, my cousin does real estate. he spends a huge amount of time keeping in touch with possible buyers and competing for listings. perhaps at the low end, this competition is less intense and so you are spending more time on transactions, you spend less on listing acquisition etc and buyers are easier to satisfy.
I knew of a real estate agency in Oklahoma that charged 3%. I don't think they actively marketed the properties but you were listed with MLS.
Morganovich,
Based on my 2nd hand knowledge (2 good friends and a father-in-law who are agents) in this market (Houston) one can turn-and-burn dozens of homes a month with the most time spent being at closing and initial listing. Depending on the agency, they sometimes turn busy work over to junior agents for a negotiated price between them.
Once you get up over 400k, the sellers demand a much higher % of your time and the buyers are much more picky. If I had to guess based on what they tell me, you can sell 5 100k houses in the time you can sell 1 400k house if you're experienced and established enough to have that kind of traffic.
Of course this is anecdotal and has to be extremely different in a market like SF or NY....far more < 300k, and fewer million dollar homes here.
Methinks: "I do wonder why people don't attempt to negotiate commissions more frequently. Perhaps that's a cultural thing."
I suspect that most people have little knowledge of the nuts and bolts involved in a real estate sale, and are willing to agree to a commission amount without much negotiation.
It may be a matter of not knowing exactly what the service includes, making it hard to bargain, as it might be when faced with a major auto repair.
"Well, reading the comments above mine, I guess I was wrong and most people do negotiate commissions."
No, you weren't wrong. Your question is valid no matter how many people do negotiate. :)
I negotiated 4% commission. You can negotiate. Just tell them what you want or find another realtor.
While you are figuring it out for real estate agents, you can also tell us why AA ball players make so much less than major league, and why Taylor Swift makes so much more than the girl singing at the bar down the street. Oh, and why hedge funds that are closed except to billionaires and hedgefunds that will take $25,000 from a barely "qualified" investor tend to charge the same 2%/20% fee.
I think the way the commission is doled out, with the seller typically putting in the MLS listing how much he is going to pay a buying agent, distorts the information in half of the transaction.
Set the rate too low and even though a buyers agent is supposed to be looking out for your best interests, he isn't going to show you a house that might be perfect for you if the commission is too low to make it worth his while.
Buyers agents extol the wonderful virtue of not having to "pay" for their services.
For my current home I had the selling agent show me the home and later called him and explained I wasn't working with an agent and would he cut the commission he was going to pay out to a buyers agent off the final negotiated sales price to be applied toward my closing costs. He blew up and threatened to not accept any offer from me...so I had to go get a buyers agent anyway and he had to pay the 2% out anyway.
This whole system is purpose built to obscure the process making it hard for "buyers" of these services to value what they are getting.
A 'fair' market price would be something like $10,000, or 1%, whichever is higher...
I am surprised that the Internet (redfin, etc.) has not done to this what it has done to so many other industries.
In 1993, when I was a kid, I remember that even 'discount' stockbrokers charged $30 per trade...
It is not the same thing, of course, but still, RE commissions seem resistant to forces that have displaced many items that might have seemed harder to displace.
RE commissions seem resistant to forces that have displaced many items that might have seemed harder to displace.
Of course they are. Realtors are a legally sanctioned monoply, just like lawyers. They jealously guard this monopoly: in most states receiving a commission without a license is a felony. You could do as much time as a violent crime like robbery.
There is also collusion among agents: anybody trying an alternative business model gets ostracized and stonewalled. This is so even if, at the margin, said alternative would add to the bottom line of the ostracizing agents. In some cases the alternatives are illegal, eliminating the competition entirely.
Try getting a non-exclusive deal. Realtors won't sign them, because then they only get paid if they do the work, instead of being paid even if somebody else does the work. Even agents running on their last fumes won't take them. It should tell you something when even desperate agents refuse earning opportunities.
Real innovation and disintermediation is thus essentially impossible. Any innovation will be either crushed by non-cooperation, or failing that the realtors will get their buddies in the legislature (and I find it rather odd how much influence realtors have in legislatures) to render their competition illegal.
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I'm a real estate broker.
The commissions are split between the listing broker & the selling broker, and when I'm negotiating a commission with the Seller I first ask myself "what selling commission do I need to offer to cooperating agents in the MLS so that they will show the home to prospective buyers?" In my market right now the answer to that question is at least 2.5%, & there is not much need for it to be over 3% due to diminishing returns. If I offer less than 2.5% commission I would not expect that listing to be shown by very many cooperating brokers, & since most sales are co-op sales it is VERY important that the listing broker offer a competitive co-op fee.
Next I need to figure out how much I as the listing agent want to earn on this sale (assuming that in most cases I won't also earn the selling broker commission) on the listing side. Well, on the listing side I'm going to have some out-of-pocket marketing costs, i.e. signs, flyer boxes, & color flyers. And if it's a luxury home, the owners will likely expect a professional photographer, virtual tours, magazine ads, catered open houses, etc.
434AT3M3 above boasts that he negotiates a 4% commission. He may not be doing himself any favors. At some point you stop saving yourself money, and you start shooting yourself in the foot, i.e. at a 4% commission where you are offering a co-op fee at 2% you will have very few if any brokers bother to show your house, and you will likely receive much lower than average service on the listing side as the listing broker also has less motivation to perform at a high level. So commissions aren't just a cost to get your house sold, they an inducement to motivate both your listing agent, and also an unknown selling agent to perform.
Another factor in high commissions for million dollar homes is the prestige that is associated with the broker and the brokerage. A Ford Taurus is about the same size as a BMW 525, and both cars generally perform similarly in transporting passengers from one place to another, but for some funny reason people will buy the Beemer even though it may cost around double the Ford Taurus. People hire luxury home selling real estate brokers just like they buy BMWs.
Getting back to some of Landsburg's original questions:
"1. Why is the 6% real estate commission typically fixed, regardless of whether the house sells in the first hour or day after being listed, or is sold only after a year of marketing, advertising, holding numerous open houses, etc.?"
Me: He's incorrect to say that it's fixed. To answer his main question here I've always believed that generally people think that if the broker sells the home quickly, that he/she is justly rewarded for doing his job efficiently, and with less hassle imposed on his/her client. And if the marketing and sale does drag on for many months that people also generally believe that the broker worked hard enough over time, accomplished his/her objective (even though it took longer than the client may have preferred), and should be rewarded by receiving the full commission.
"2. Why is the 6% real estate commission typically fixed, regardless of whether two agents are involved (one working with the buyer and one representing the seller), or whether a single agent is involved, e.g. selling a home at an open house to buyers who are not represented by a real estate agent, in which case one agent gets to "hog" both sides of the commission?"
In most cases this is not the case. It is very common for there to be an agreement between the seller and the owner that the commission is to be lower if the listing broker also finds the buyer. This amount is almost never half as the listing broker and the owner will typically agree that the listing broker should be compensated beyond the normal listing side commission for finding the buyer on his own, but just not the full amount.
I have asked those questions many times. My observation is that if the home sells quickly, it is because the broker persuaded the seller to set a low price. If it does not ell quickly, the broker will be the first to suggest a lower price, since his loss is nowhere near the loss incurred by the seller, the interests of the two are not well aligned.
I'm surprised sellers even sign an exclusive sales contract (Co-op fees notwithstanding). Why not just post an ad on Craigs list offering the job (with whatever commission you think is fair) to whoever brings the best offer to the table within 60 days? If a private buyer brings the best deal, give him the commission.
I find this an interesting discussion, especially since I’m a real estate broker as it provides insight into how it looks from the “outside”.
The main oversights/misconceptions I see in the comments above are 1) the idea that real estate agents (and their respective skills, experience, services provided, etc) are fungible, and 2) a minimum accounting of risk.
Not all homes listed are sold; and sellers may repeatedly change listing agents before their home eventually sells. Other risks are more obscure, but there’s little benefit in talking inside baseball.
As a 30 year practitioner I don’t really have a dog in this fight. Most of my clients are repeat and referral and I don’t compete on price. But I am open to alternate compensation methods that better suit a client’s needs.
If you’re looking to pay the lowest real estate fee possible (whether buyer or seller), I suggest you formulate an agreement wherein you pay your agent a retainer fee against an hourly fee billed monthly. Obviously, you’ll also need to specify the services in which you want them to engage, as well as what marketing fees you’ll want paid out of your retainer.
If you’re engaging a selling agent (a buyer’s agent), you’ll specify any selling side commissions realized (in the event you actually purchase) will be an offset against your retainer (RESPA only disallows fees paid to outside parties).
If you’re engaging a listing agent, you’ll still need to offer a selling agent commission if you want your house shown. But this can be an amount you specify (although some MLSs preclude selling office commissions of $1 or similar). Certainly you can specify a fixed dollar amount.
The obvious deterrents to the above include the need to pay the retainer in advance of a sale. Many people don’t have the funds to do so and instead rely on the buyer’s ability to obtain financing as the source of funds to pay the real estate fees.
By varying the hourly compensation you offer you can select an agent who will provide the level of service and expertise you desire. Don’t need a lot of expertise? Find an agent willing to accept a lower hourly fee. Expect to pay more if you’re at the other end of the scale.
Similarly you’re able to only pay for time spent in the event your home sells in an hour, or you’re a buyer who has already found the home you want. (Note many states do not allow a real estate agent to be paid only to generate a purchase and sale agreement as it infringes on the domain of the attorney cartel.)
It may or may not obviate the compensation issue when a listing agent also acts as the selling agent. Personally, I won’t engage as a dual agent unless the buyer and seller already know each other and I’m acting purely as a facilitator. I’ll find another agent to provide independent representation for the buyer.
If you have concerns or doubts about your agent performing, you should engage a more suitable agent.
Just my perspective on the issue.
"I have asked those questions many times. My observation is that if the home sells quickly, it is because the broker persuaded the seller to set a low price. If it does not ell quickly, the broker will be the first to suggest a lower price, since his loss is nowhere near the loss incurred by the seller, the interests of the two are not well aligned."
Why do you believe every business relationship must be adversarial?
What you call an observation is really just a guess, as there are a number of reasons a property sells quickly, and you have picked one that makes the broker and seller adversaries.
Why would you expect a broker to refrain from suggesting lowering the asking price of a property if it appears to be too high due to lack of interest from buyers?
While you can't possibly know what a broker suggests to their client, or when they suggest it, surely you can understand that sellers may have unrealistic notions of their home's value to others, and a broker is working in their interest by suggesting lowering the asking price to attract serious buyers.
"...since his loss is nowhere near the loss incurred by the seller, the interests of the two are not well aligned."
There is no "loss" involved here for anyone. Speculating that you could have sold at a higher price doesn't result in a loss.
The interest of the seller and broker are identical: To not just sell, but close escrow, at the highest possible price within a reasonable time. "Reasonable" is defined by the seller.
Incidently, the market "value" of a home is what a seller and buyer agree it is when they exchange property rights.
"I'm surprised sellers even sign an exclusive sales contract (Co-op fees notwithstanding)."
Your lack of understanding of human nature is showing.
"Why not just post an ad on Craigs list offering the job (with whatever commission you think is fair) to whoever brings the best offer to the table within 60 days? If a private buyer brings the best deal, give him the commission."
Let me know how that works out for you.
Your lack of understanding of human nature AND your lack of understanding of the RE market are showing.
lee:
"The main oversights/misconceptions I see in the comments above are 1) the idea that real estate agents (and their respective skills, experience, services provided, etc) are fungible, and 2) a minimum accounting of risk."
Over the years I have worked with a broker who sounds a lot like you. In my "outside" opinion you have nailed it - especially #2.
Incidently, the market "value" of a home is what a seller and buyer agree it is when they exchange property rights.
No. That is not necessarily the market value. That is the price it was sold for, which is only one data point in the spectrum of what the market considers as value. Its particular selling price may be above or below market value, for a variety of reasons.
OK, so you attacked me for the Craig's list idea, but you offered no explanation of what is wrong with it. You advertise a property and a commission on a silent auction basis, and see who responds with the best offer. Free market. What is your objection?
For what it is worth I used that technique recently. I had a large hay order, but I could not make the delivery. I advertised the delivery with a specified price per mile, to include loading and unloading the truck.
I got four offers in an hour.
Why do you believe every business relationship must be adversarial? What you call an observation is really just a guess,.............
You are guessing about my observations, and the data behind them.
I do not believe that every business relation is adversarial, but many are, with both sides angling for advantage.
I once had a broker who did NOTHING to sell my house. After enough time had passed, she made a lowball offer on the place herself " to do me a favor" .
Craig's list didn't exist in those days, but I'm sure it would have worked better than she did.
I don't expect the broker to refrain from suggesting lowering the price if it is really too high. That being the case, why would the broker accept the contract at that price.
He agreed to put his best effort into selling at that price. weeving made the agreement I expect him to stick it out for more than a week.
"For what it is worth I used that technique recently. I had a large hay order, but I could not make the delivery. I advertised the delivery with a specified price per mile, to include loading and unloading the truck."
Craigslist is a wonderful tool for connecting supply and demand, including soliciting bids for hay delivery, which is a simple transaction, and not much prone to misunderstanding. You are an expert in this field (pun) and it would be hard to go wrong.
Are you also an expert in home sales? If so, you have no need for a broker, and can manage the entire sale yourself, including soliciting bids on Craigslist if you choose.
Otherwise, you should be aware that there's a lot more to successfully selling real property than paying for high bids. If you offer to pay for something, you are almost certain to get offers, but unless you are also an expert in evaluating such offers, you would be well advised to leave that stuff to your broker. Otherwise, why have you engaged one?
You should also know that in some states you are required to respond in writing to every written offer to buy that you receive, whether it's legitimate or not. This supposedly demonstrates that you are not discriminating against any class of people, including crooks. You could waste a lot of time doing that.
"I once had a broker who did NOTHING to sell my house. After enough time had passed, she made a lowball offer on the place herself " to do me a favor" .
And, obviously, you paid her nothing for her non-efforts.
My "guess", based on other comments you have made, is that you started with an unrealistically high price, and wouldn't budge off it. She, realizing that she would never attract a serious buyer at that price, reasonably decided not to waste her time. She made better use of her time and talent with sellers who actually wanted to sell their property.
Is that pretty close?
"I don't expect the broker to refrain from suggesting lowering the price if it is really too high. That being the case, why would the broker accept the contract at that price."
I doubt he agreed to sell your property at a fixed price. If he did, you should have walked away. RE people understand that everyone wants top price for their home, but often have unrealistic expectations, and are insulted when buyers don't share that high regard. Part of their job is to adjust the sellers unrealistic perception of what the property is worth, to one that buyers will actually consider. You may have also had some idea of how long you wanted the property to be on the market before it sold.
Sale price and time on the market move in the same direction. You decide what you consider an acceptable balance. Your broker can advise you on that.
"He agreed to put his best effort into selling at that price. weeving made the agreement I expect him to stick it out for more than a week."
It's possible he DID put his best effort into selling at that price. Did he agree to try at that price for more than a week? Was that expectation written into your listing agreement? How long did you want to wait for a sale?
In addition, I don't believe a broker can legally refuse to list a property. That discrimination thing again. But hey, regulation is a good thing, right?
You may not have noticed the lawyers hanging around outside your broker's office waiting for a potential lawsuit to present itself.
It is my "observation" that you have a seriously inadequate understanding of human nature, and unreasonable expectations of others.
I suspect the problem here is you.
It's possible he DID put his best effort into selling at that price. Did he agree to try at that price for more than a week? Was that expectation written into your listing agreement? How long did you want to wait for a sale?
==============================
Oh geez, what a lot of crap. weren't you accusing ME of think of trade as an adversarialo condition? Now you are suggesting that every facet be written down?
I have a ninety day contract. I am not unreasonable, if we are 60 days in and I have a string of lowball estimates, we can negotiate.
I have previously been on the other side of this, where I was a buyer. The broker showed me a place I was not particularly interested in. Then he says, make an offer, there must be some price that meets you rneeds. So here is a guy who s working for the seller, actively soliciting lowball bids.
So when a broker brings me two lowball bids, and wants the price lowered, I remember. I tell him I want to see a larger sample size before I decide.
Our incentives are not aligned. If I have a place offered for 600k and he wants a 15% lower offering price, thats 90k to me and $1800 to him (if he nets 2%).
If it take me another 90 days to find the person who falls in love with my place, all it costs me is the interest on $90k. He probably needs his 10 or 12k a lot more than I need to sell my house, so he has very little incentive to spend the time and do the work.
I'm perfectly willing to let his contract expire, and find a new guy. there is nothing wrong with that, and we agreed to a fixed term. I will expose the offers I recieved, and se if he is still willing to take on the job.
I suppose it is an unreasonable expectation for someone to DO HIS JOB.
It is perfectly leagal for a broker to turn down a listing, same as I can turn down an offer of a contract to paint a house. In point of fact, I probably won't say no, but I will set the price very high.
The broker is in the business, and he will have the contract already written to his best interests, same I. I will write the house painting contract and offer it to my buyer.
It is more likely that I will turn down the broker if I don't think he has done his homework before suggesting an offering price, same as my house customer will turn me down if he does not like my offer.
Regardless, once the contract is signed we have an agreement, mututally made, and ther eis nothing wrong with me expecting the other side to live up to it, and not imeediately try to change the terms.
However, the broker does have an obligation to take every offer, no matter how bad or who it is from, to the seller. That is where the discrimination thing shows up.
A listing agreement has a start date and a termination date and a list price at which it will be offered for sale. There are other terms such as commision, cooperation with other brokers, disclosure of previous offers etc. but basically it is no more complex than a contract for hay delivery: you contract for work to be done, and you expect it done.
I don't expect my truck driver to get halfway there and then tell me his truck is overloaded, he needs more money. On the other hand I did have offers that included a truck I considered too small for the job. I turned them down and they ARGUED with me. "No problem we just stack it up higher". They had not done their homework, and ignored the specifications, so I turned them away, same as I would turn away a broker that I could not reach agreement with.
But once we have an agreement, I expect a broker, not a weasel.
And, obviously, you paid her nothing for her non-efforts.
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And you think that makes the execution of the agreement fair?
She paid me nothing for my wasted time.
She made an agreement which she failed to honor. She made the mistake of assuming I was in a crisis sale position and she thought she could capitalize on it.
And she was a well known local agent, I expected better of her.
I eventually found another broker who did a good job, but I don't see that this kind of serial broker shopping is any different than going to craigs list and shopping concurrently.
"Oh geez, what a lot of crap. weren't you accusing ME of think of trade as an adversarialo condition? Now you are suggesting that every facet be written down?"
Making sure everything is understood and mutually agreed by writing it down helps prevent disputes. You proved that point when you wrote that you and your broker had different views of how long they should work hard to sell your property at some price that may have been unreasonable. I can see I'm wasting my time here.
"I have a ninety day contract. I am not unreasonable, if we are 60 days in and I have a string of lowball estimates, we can...blah, blah, blah,..."
I had to stop reading. this is just more of your usual nonsense supported by personal anecdotes that are outside the experience of normal people, and therefore are of no use to others reading your comments.
I can only conclude that it must really suck to be you.
You proved that point when you wrote that you and your broker had different views of how long they should work hard to sell your property at some price that may have been unreasonable. I can see I'm wasting my time here.
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The broker agreed to a ninety day contract, and agreed to a selling price. and then tried to renegotiate it after a week. If he did not like the terms, he should not have offered them.
There was nothing unreasonable about the price, since the next broker sold it easily.
The reason you are wasting your time is that you do not know the facts, so you invent 'what if" scenarios. That, and you do not have any kind of a reasonable argument.
There are good brokers and bad ones. I have had three good ones and two bad ones. My observation is that this system has room for a lot of improvement.
Maybe it wil come from the many brokers using Craigs list to advertise.
We did not have any disagreement on the lenghth of the contract when it was written down. I had no problem with waiting.
The disagreement only arose when the broker wanted an easy commission sooner, largely at my expense.
I think everyone can agree to disagree, if both parties agree then there really should'nt be an issue. I can definitely see both sides.
Mario Sanchez
As for selling a house, I can see a home owner might want to pay the full 2.5% - 3% to the listing agent to get the house sold quickly and for top dollar. Houses sell within a week or two around here. However, if I am in the market to buy in one small geographical area that I am very familiar with, and I do not need or want traditional hand-holding when looking for a house, why has it been impossible to get a realtor to agree to some sort of nominal commission rebate to keep me from going to Redfin? The only reason I hesitate with Redfin is that several agents told me flat out they did not like redfin and would not entertain offers from redfin agents with the same seriousness as from fellow Realtors. In the SF bay area, a typical semi-decent home is $900K-$1mil and it seems ridiculous to have 5% of that go to commissions. These are not million dollar luxury homes where the extra $10K or $20K is no big deal. I have to take on a huge and difficult debt and the 5% commission makes it that much harder.
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