Friday, January 11, 2008

Thoughts for Sellers on Agent Commissions

I certainly understand why people try to save money by doing a For Sale by Owner (FSBO). Others turn to agents who agree to take a smaller percentage in compensation. I have no problem with sellers who choose these type of agents, so long as they realize what it might mean.

What I'm talking about is broker cooperation, or co-broking as it's called. What that means is that there are two agents involved in the transaction - one on the seller's side (the listing agent) and one on the buyer's side. The typical way that it works is this: The seller's agent is responsible for advertising your property as they see fit (fodder for a future post). One way they can advertise is by placing the property on a multiple listing service (MLS), but that's optional.

Some seller's agents may tell their sellers that "if the buyer is interested, he will come to me without the agent", but this is only true a small percentage of the time. Buyers choose to work with their own agents because they want someone in the transaction who is working only for them.

That's right - when there's only one agent on the transaction, that agent suddenly is not able to give his all for either buyer or seller, because as a dual agent, he has to protect the interests of both parties. This means he can't give you advice in pricing negotiations, among other things. Buyers know that listing agents are working for the seller, so they want to work with their own agent. So yes, it's possible that those buyers may abandon their agents to buy a property through a non-cooperating agent, but you better believe they'll be at the end of their rope before they do.

Some discount selling agents will offer a property for co-broke only after 6-8 weeks on the market, and some never do. Think about that - do you want to be the seller whose property can't sell after 8 weeks, and then know that your property is finally being opened up to buyers with their own agents?

I've heard some agents say - "sure we can work together, but your buyer has to pay your fee". Hmm, let's think about this: if a buyer pays his agent's fee, he has to come up with it in cash at the closing table. On the other hand, if the seller pays the fee, it gets paid from his proceeds at the closing table - the seller (usually) doesn't have to come up with cash to do this, just gets a little less. Essentially, the buyer mortgages his half of the commission. That's why the seller traditionally pays the fee - generally banks don't agree to pay an agent's commission with the mortgage, and if the buyer pays it out of pocket, then it lessens the housing price he can afford.

What I would suggest to sellers who are shopping for a listing agent is the following: ask if an agent co-brokes. If they do right away, then great! If they don't, tell them that you expect them to. I've heard some agents give excuses such as "a lot of times buyer's agents don't qualify their clients well, and you can get into a contract that falls through because the buyer couldn't get the mortgage." Well, there's a really simple way to combat that - before the contract is signed, have your agent request documentation verifying income and assets from the buyer (or agent, if applicable). That way, you'll know what you're getting. And if you do go with a non co-broking broker, then make sure you understand exactly what your agent will do to promote your listing.

As a member of the Real Estate Board of New York (REBNY), my firm offers listings for co-broke immediately. We also earn our fees by making sure that all our listings are advertised with professional photos, layouts and virtual tours. Our website is one of the top three most visited in New York City and has recognition throughout the five boroughs. The search is easy and can be done by street address. Print advertising in leading newspapers is automatic every week. In addition, I do postcard mailings and extensive Internet advertising. And most importantly, I'm very careful to make sure that listings are priced correctly to attract the most buyers. I also counsel sellers on things they can do to help their property sell faster and for more money.

The old adage holds true: You get what you pay for. I welcome the competition, because I know who will come out on top!

1 comment:

Dasha said...

Thanks for sharing this article. I find it informative. I've recently found a service that can be useful for fsbos. It is called drivescore . It shows a map of what establishments are in your neighborhood and calculates a Drive Score based on the number of places within a convenient driving distance