Rain City Guide

1. Comment from Brian Brady
Time January 31, 2007 at 7:50 am

Pretty cool, Ardell. I like the way you define “fair compensation” to a customer

2. Comment from Dustin
Time January 31, 2007 at 8:23 am

Fascinating stuff!

3. Comment from ARDELL
Time January 31, 2007 at 8:59 am

Well, I don’t exactly define fair TO a customer, as it is a two way street. But I really was amazed at how fair was really quite obvious to both me and my client. It really didn’t take much thinking at all to determine fair. The hard part is knowing you can have X but Y is fair and so Y it is.

Sounds simple enough, and it got much easier as the year progressed but one or two times it felt like I kicked myself in the stomach. I didn’t have time last night to do the stories justice on my blog. I will keep at that until the combination of stories gives a clearer picture.

The wonderful part is that it spread to all of our clients, whether they came from the blog or not. The amazing part is that it spread to some of our agents as well. It has been our dream to have only consumer-centric agents and price ourselves to agents in a way that would give them room to be fair to consumers. Not necessarily to offer a one size fits all discount, but to evaluate every situation on a case by case scenario. That was our goal before blogging, but blogging afforded us the ability to turn it into more of a reality.

4. Comment from Tim
Time January 31, 2007 at 9:30 am

Awesome Ardell! Triple Smile

5. Comment from Marlow
Time January 31, 2007 at 9:58 am

Wow! $60K+!

How much did you pay to Dustin and Anna in referral fees?

I know Rain City Guide is supported by referral fees paid to them when buyers or sellers contact them to be referred to an agent (which I guess is YOU!)

I know you’re all about transparency in referral fees too…..

Thanks for sharing your success with all of us, and good luck through 2007!

6. Comment from Craig Blackmon
Time January 31, 2007 at 10:15 am

There is something seriously, seriously wrong with a system where a professional has to give back $69k (sixty nine THOUSAND dollars — nearly DOUBLE the average salary!) a year to clients in order to charge a “fair” fee. For the sake of the consumer, I hope all of those “alternative business models” continue to grow so that additional pressure is exerted on agents to set their rates initially at a fair level — and not rely on the generosity of agents to instead give back all sums beyond fair. Go Zillow — fight the power!

7. Comment from ARDELL
Time January 31, 2007 at 10:33 am

I think what’s broke is the concept that some percentage fits every situation and every price range.

Clearly if someone finds a property to buy the first day, is supremely qualified for the best of loan products available and buys something with zero inspection problems at a price fo $500,000 or more, they should not pay the same price for agent services as someone who took a year and bought something with two weeks worth of heavy duty inspection negotiations at the same price.

But it’s NOT Go Zillow, as much as it is GO REDFIN!.

Sellers have always been able to negotiate down from 3% to a flat fee, and everything in between, for varied services on their end. Zillow isn’t creating any change in the industry as far as I can tell. Sellers have had and will continue to have options all over the Country.

The big nut to crack is on the buyer side of the fence, and Zillow doesn’t do a whole lot to empower buyers (or sellers) nor does Zillow put pressure on the industry to create more options as to fee structure.  What Zillow IS, or MAY be is a one stop shop site where buyers can see both listed property and for sale by owner property in one place.  But not sure that will ever come to fruition.  My guess is not unless they change the way they are going about it.

It is Redfin that has started the “butterfly effect” changing an industry and turning it into a more consumer-centric model.  At times Craig, you are no more consumer-centric than the industry.  How does Zillow empower a consumer?  What does Zillow do to impact the industry?  If Zillow’s fee structure is Realtor dependent, not much.

Redfin, on the other hand, opens the door for BUYERS to be represented differently, and to have more control over what the BUYER pays for agent services.  Prying that door open is a monumental undertaking that will have National long term benefits to all consumers.  Getting the industry to stop saying it HAS to be 3% ALWAYS for a buyer agent fee is an idea whose time has definitely come, and in fact is 15 years overdue.

I don’t think the current options are necessarily the answer for buyers and sellers, and in some ways they do a lot of damage to the consumer.  But if it gets the rest of the industry moving in the right direction…then they should all be lauded, whether they succeed or fail as a business.

8. Comment from Jillayne Schlicke
Time January 31, 2007 at 10:57 am

I wonder if 60 Minutes is going to interview Ardell, too.

The Seattle PI blog reports 60 Min already interviewed Redfin.

http://blog.seattlepi.nwsource.com/venture/archives/110938.asp

9. Comment from Craig Blackmon
Time January 31, 2007 at 11:04 am

Both Zillow and Redfin fall within the “alternative business models” that are undercutting the admittedly unfair 6% commission fee structure. Zillow does so by providing an alternative to the MLS. As long as the MLS is the de facto marketplace for property, the MLS will be able to exert direct control over what is paid to agents/brokers. Once sellers realize they can sell without agreeing to pay ANY commission, the MLS will no longer be able to exert such control.

Ultimately, Redfin is working WITHIN the system to change it. Its business, in the final analysis, depends on some commission to the buyer’s agent. Zillow, in contrast, is working towards an entirely new system where agents will have to find some other basis for their fees. Right now, the basis for the fees arises out of the MLS. No MLS = no basis for the fee. Then you’ll really see alternative methods of compensating agents.

10. Comment from ARDELL
Time January 31, 2007 at 11:23 am

Marlow,

I do not pay referral fees to Dustin or Anna, or let’s say have not to date as the future is up in the air. The original verbal agreement for me, in writing here, is that I would put a lot of work into it and I do not pay referral fees in exchange for my efforts.

The reason I accepted Dustin’s invitation to write here was to turn a referral fee type event, into a benefit for the consumer. I did not promise to do that, it was just my personal motivation and totally up to be to do it or not. I could easily have purchased “leads” from a lead seller for much MUCH less than over $68,000 last year but I saw no benefit to the industry as a whole in doing that.

By experimenting with different fee models, I can hopefully operate and write in a way this year that will help the industry as a whole “get on board” and moving in the right direction.

Redfin just doesn’t offer the right service for most people. Zillow doesn’t do much for anyone yet and the MLS ONLY options are really hurting the consumer badly.

The best thing that can happen for consumers is for the industry as a whole to stop all the bullshit. To stop predending that 3% of a $150,000 condo is worth it and so is 3% of a $2,500,000 purchase. Does anyone really thing the Average Joe is that stupid?

I’m sure Marlow, that you of all people can appreciate what I felt like when I saw it was over $68,000 last night. Probably why I have been up almost all night It’s tough to be fair. This kind of change really does hurt.

But we just HAVE to come to terms with the fact that technology HAS been cost effective for this industry. And we REALLY need to pass that saving feature of technology on to the consumer, and stop handing it over to 3rd parties, including mega referral fees to one another. Better the consumer have it, than the bottom feeders, I say.

A reasonable referral fee is one thing. But an $8,000 referral fee is just insulting to the consumer as in “I just lured you into my web and sold your name for $8,000″. And then not even TELL them that you did that! Sorry, but out of proportion referral fees is going to be my RANT for 2007. Nothing, nothing, hurts the consumer more today than the growing referral fee network…and it is totally undisclosed with regard to how much it actually costs the consumer. Even when the consumer knows there IS a referral fee, they rarely know that it could possibly be anything like $8,000!

With the median home price around here at $500,000, that would put the median referral fee at $3,750. That an awful lot of money to a buyer in that price range…enough to buy them a new washer, dryer AND refrigerator…and then some. No one should walk off with $3,750 or more of the buyer’s money without their knowing exactly what that amount is going to be BEFORE they are referred…not at the end of the game when it is too late…or worse yet NEVER!

Sorry…told you…that is my 2007 rant item. I’ll stop now. What is the correct amount? Not sure yet, Dustin and I may have to solve that one for the industry together. But I’m damn sure it’s not the current amount that hurts the consumers, both buyers and sellers, to a large degree every single day without their knowing about it.

11. Comment from ARDELL
Time January 31, 2007 at 11:24 am

Jillayne,

They called me around the same time they called Redfin. I declined the invite. I don’t trust them as far as I can spit

12. Comment from ARDELL
Time January 31, 2007 at 11:27 am

I am however going to do a Podcast on Inman the first week of March with some other Bloggers you know and love. I’ve turned down Komo News, HGTV for a hosting spot and both the PI and Seattle Times. But I’ll do the Inman Podcast. They called me yesterday, regarding my blog, not RCG.

13. Comment from ARDELL
Time January 31, 2007 at 11:55 am

Craig,

Either you don’t understand the inside view of this industry, or you are running a commercial for Craig’s FSBO option. Sellers haven’t been locked into 3% for a very long time, if in fact they EVER were. Many heavy listers only charge the seller 1%, especially on high end. Builder’s never pay 3% and there is no such thing as 6% except for the “thieves” who take advantage of unrepresented buyers.

The seller’s commission is not visible to anyone until close of escrow. The seller already has “get a lockbox and a bicycle lock to attach it with in the mail for $500″, options. They have a $2,000 flat fee option. Sellers have tons of options. You just sound like a commercial for Craig’s new and improved “you don’t need to stinkin’ agents” product. You are supporting that which is self serving, and yes, I fault your for that as it is totally contrary to “public policy” orientation, and I expect more from a lawyer.

Clearly ALL people being totally unrepresented, “on the street” in real estate transactions, regardless of their abilities to represent themselves, is NOT a step forward. Until you are willing to get the day and night phone calls, and perform the “we have to write this offer right now” services the industry affords them, it is not fair for you to lead people in the direction of thinking no one needs this type of service ever. It is just not true.

More options Craig…not just the option that feeds Craig’s personal business model. Get into the conversation and stop pretending that all buyers and sellers are fully capable of representing themselves in real estate transactions always. That’s as bad as Realtors saying they are ALWAYS “worth” 3% regardless, like a freakin’ hair dye commercial.

14. Comment from Marlow
Time January 31, 2007 at 12:16 pm

Ardell,

I’m just curious…..Do you think it’s wrong that Rain City Guide’s business plan for this site is to make money by making referrals to agents and then collect a referral fee? I mean, after all, Dustin and Anna set up the site, monitor it, update it and pay the hosting fees to keep it going.

Without their efforts none us would be posting here!

If it’s ok, what referral fee would be appropriate? I notice that Anna does not mention how much she charges for a referral, but she is clear that they maintain the site by charging for leads ( http://www.raincityguide.com/agent-recommendations/ ). Anna “looks into her Rolodex” and makes a phone call…… in your opinion, what would be the dollar value on this act?

Does she give you all the leads for free but charge other agents? I wouldn’t normally ask, but I know how much you value transparency!

15. Comment from ARDELL
Time January 31, 2007 at 12:16 pm

Marlow,

Full disclosure on referral fees for 2006 for me:

Zero with regard to RCG

Zero as to referral fees paid by me (though the Company did pay one on a sale that was’t mine when I was in L.A. helping my daughter through a personal crisis).

$750 referral paid to me, but I reviewed all contracts with the buyers before they signed them, and did the actual closing papers with them, clearly a first and last for me The buyers were here…the property was on the Coast. Vacant lot for about $80,000. Nothing to scream foul on. Just a service to a valued client.

I split a fee of $4,590 with an agent from another company, 2/3 me and 1/3 him, for helping me find an off market cheap condo for one of my clients. I paid it as a “referral” fee, but really it was a joint effort for my client and not a “pick up the phone and give a name” referral. He worked very hard for his pittance. The seller wouldn’t pay him and in fact only allowed 2.5% total for both sides, so we worked out a way for him to at least get something for his efforts.

That’s it for 2006. 2007 may be different, as doing what I did last year with commissions - experimenting- may be part of my game plan as to referral fees in 2007.

I actually referred at least two people this year with no referral fee, and forfeited the whole $15,412.50 referral fees, which is NOT included in that $68,750 total, as I don’t know who benefited. All I know is it wasn’t me, and the consumer had the ability to benefit, and I didn’t steal that opportunity from them. I’m sure they benefitted somehow, but I did NOT include that $15,412.50 in my “direct benefit” total of $68,750.

16. Comment from Dustin
Time January 31, 2007 at 12:46 pm

Marlow,

It’s definitely an interesting issue you’re bringing up… and one you’ve brought up in the past as it is probably the area on RCG where we are falling into the same-old, same-old trap. I’d love to do something more innovative on the referral side, but I simply can’t think how it might work.

We’re not particularly transparent, because Anna and I really do review the needs of each person who comes through… We’ve given more than a few leads with an email to an agent along the lines of: “I feel so bad for this person because of they got screwed by XYZ…. We know they are going to be a difficult client, but if you’re willing to help them out, we’d be grateful. No need for a referral fee.” (Ardell, in particular, has helped a few of these people out!).

However, when someone does come that could really benefit from an agent who will take care of their needs (out of state movers come to mind), then we feel pretty comfortable going with the standard 20 to 25% referral fee.

With all that said, I’m much rather we had some flat fee for agents to advertise on RCG for their services and continue to let consumers pursue those people on their own. But then I’d have to get into invoicing, quality control of leads, and other hassles that I simply don’t have the time for. Nonetheless, any ideas on how to make a referral model work that was more transparent would definitely be appreciated.

17. Comment from ARDELL
Time January 31, 2007 at 12:48 pm

Marlow,

The original plan was that I would receive no leads from Dustin and Anna, and for the most part that is how it played out. If people called me direct, as a result of my writing here, they were not referrals, and Dustin and Anna don’t even know who or how many there were. That was the deal and mostly everything has gone “according to that plan”.

There were three people that were an exception to this rule, if you include Dustin himself, and none of those three are in the 2006 closings. All three are closed or currently in escrow, but that’s for 2007, so you’ll have to wait until 2007 for that story

As to what’s fair or not fair as to referral fees, it really is the same as commission issues. It depends on what the referring agent does.

For example if I show someone property, and meet with them for weeks, and then I figure out that their needs are better served elsewhere as a result of those meetings and showings. Then I “hook up” with an agent “there”, if it is not an area I feel I can add the right amount of value in. I also keep the door open for that person to call me anytime, if they have any problems or questions up to the day they close escrow. Now THAT is a referral service worthy of a fee.

But if I get an email from a guy in Illinois (as I did) and find him a very good agent, who can really help him with his problem where he is, and just put them together, well, let’s just say that’s something I do for the Karma of it. I know a lot of agents in a lot of places. I don’t just pick up the phone and find someone who “will pay me” without regard to how well matched that agent is to the consumer’s needs, as most referrals have turned into. That is just disgusting.

I’ve gotten several emails from people around the Country of course this year, in addition to local calls and emails. I helped those people at no cost.

I also helped a couple of people who were relocating here and needed rentals, though I generally don’t do them, as an RCG “courtesy”, one with full agent services for two days for free (not me…I assigned it out to one of our agents), and one where I pulled off a freakin’ miracle for them and took the $500 rental commission.

I’ve gotten flowers, someone started a fan club in CA and someone sent me a $50 gift certificate to Starbucks, just for a bunch of emails back and forth to help them to think through their approach so they could fix their own problem.

If you put yourself “out there” you have to help people who contact you best you can, whether you get paid or not. It’s been an equal amount of consumers and agents who need blogging advices, like Wally down there. So far pointing them in the right direction has just seemed like the right thing to do. But if it got to be too time consuming, or a full time job answering people’s questions and helping them with no compensation, I’d have to draw the line somewhere. So far, I haven’t had to do that.

I have been working 24/7 from early morning until late at night without a break since the 4th of July. We’re going to go to the Rockabilly Convention in Vegas in April…until then…no day off in sight

18. Comment from Marlow
Time January 31, 2007 at 1:05 pm

Thanks for sharing all that with us.

Dustin, just wondering, if you did, as you said, have agents advertise on RCG and then charge them for that, and the agents were from different brokerages, could you still have the MLS feed? Or did you straighten that controversy out with the NWMLS? I remember a year or two ago the NWMLS was giving you a hard time for allowing other agents from other brokerages on your site, and they were going to disconnect your IDX feed.

19. Comment from Jillayne Schlicke
Time January 31, 2007 at 1:10 pm

All,

This story was just posted on Inman this afternoon. It will go behind their “members only” site at midnight tonight. Very intriguing.

“How to use Zillow to Buy a house without commissions”

http://www.inman.com/hstory.aspx?ID=61913

20. Comment from ARDELL
Time January 31, 2007 at 1:16 pm

Dustin said: “We’ve given more than a few leads with an email to an agent along the lines of: “I feel so bad for this person because of they got screwed by XYZ…. We know they are going to be a difficult client, but if you’re willing to help them out, we’d be grateful. No need for a referral fee.” (Ardell, in particular, has helped a few of these people out!).”

There was really only one like this that I know of, and it was the most God-awful story I’ve ever heard in this business AND I ASK DUSTIN NOT TO REVEAL ANY MORE ABOUT IT, then I am going to here, as I am a stickler for confidentiality. A lovely, lovely woman inside and out who was totally screwed over by “the system”. And things just kept going from bad to worse. It was just mind blowing, and took an immense amount of empathy and work to turn it around best I could.

I’d love to give the detail, but transparency has its limits, and client confidentiality is one of those big lines I must draw.

But I’ll share this little ending tidbid for Dustin’s benefit as well, excerpted from an email when all was said and done. “Just a quick note to say how grateful and appreciative I am of all the work you did …You guys were great.” We did good Dustin, or at least the best that was humanly possible under the circumstances.

Full disclosure. I have a partner and would NEVER be able to have done what I did this year without one AND the help and support of one of our agents too. I could never blog as much as I do AND do it all as well.

I don’t delegate clients, except that one rental, but I also do not always go out to take lockboxes off of doors when a property closes or run over to open a property if someone just wants to measure for curtains. I’d be dead by now if I blogged this much, answered all of the mails AND did all that too.

I did give that person an amount that exceeded the amount I would have paid as a referral fee to Dustin and Anna. She did say that we should take the full amount as we earned it…but under the circumstances, it was the least I could do to help put a smile on her face at the end of the day, under the very worst of circumstances.

I will give this advice as a result of her experience, be VERY WARY of an agent who wants you to buy before you list your house. They may come back with a completely different story of what your house will sell for, after you buy your new home. Then you are trapped. At least get your property on the market, if you can, and get a feel for the fact that offers will be forthcoming at that price, before committing to a mortgage on the home at the other end of your journey. Carrying two mortgages and selling your home for less than you thought, AFTER you purchase, is no fun. Doing it with an appraisal in hand supporting the claims of the agent, is even worse.

I’m not saying you should never buy before you sell, sometimes it is necessary as it was in this case, but do so with WORST CASE SCENARIO in mind, and not some pie in the sky promises or even an appraisal to support them.

I’m not even comfortable saying that much, but maybe it will help someone out there to NOT get into the same mess. So I’ve taken that small risk and ask that no one try to figure out who it is we are referring to. The message is in the warning to others, not some gossip story of who it happened to and who did it to them. I thank you for that.

21. Comment from ARDELL
Time January 31, 2007 at 1:20 pm

Jillayne,

Yesterday there was a guy in Craig’s List, with a house for sale in View Ridge, with two offers on his house posted there. How is Zillow different than that? How is it a “new and innovative” thing to have happen? Not saying whether or not it is good for both parties to be unrepresented, just asking “What’s so NEW about that?” It happens every day and Craig’s List fully supports that model already.

22. Comment from Craig Blackmon
Time January 31, 2007 at 1:20 pm

The old Ardell is Back! It’s ON! First, you need to take a deep breath — when you post while agitated, you get clauses like this one: “yes, I fault your for that as it is totally contrary to ‘public policy’ orientation.” You fault me for? Public policy orientation? Not sure where you’re going there.

As for substantive issues, I’m not sure why you’re attacking me — I merely pointed out how screwed up the current system is, given that you needed to give back more than most people earn in a year in order to be fair to your clients. Thus, those other full service agents who don’t give $69k back to their clients (or a roughly corresponding percentage of their income) are charging an unfair fee for their services. I further pointed out that the “alternative business models” will help to change this dysfunctional system (well, not dysfunctional from the agents’ standpoint). You and I then disagreed about the impact of two different alternative business models, Redfin and Zillow. I have no idea how that led to me leading “people in the direction of thinking no one needs this type of service ever.”

For the record: there’s a role to be played by agents. Such a role has a cost — which in today’s marketplace can be significant. Some consumers may decide that they are better off by foregoing the services of an agent. Some consumers may decide — OMG! — that they don’t need any sort of representation at all. They’re adults and it is still at least a largely free country.

That said, I think you and I are in agreement: the current PREVAILING business model is unfair to consumers, and any change in that model is welcome.

23. Comment from ARDELL
Time January 31, 2007 at 1:26 pm

Craig,

I’m going to go eat my sandwhich before it gets cold. Be right with ya.

24. Comment from Marlow
Time January 31, 2007 at 1:39 pm

Ok, I gotta butt in here…..

What Ardell chooses to do with her money is irrelevent. If she gives some, half or all of it away does not prove that other agents are “charging an unfair fee for their services”.

I won’t comment on what that may mean for her, but your earlier comments about the “admittedly unfair 6% commission fee structure” only proves your bias against real estate agents. As Ardell said, it’s all completely negotiable and sellers and buyers can choose what, if anything, to pay.

Now, I’ll shut up and let Ardell fight her own battles, as I’m sure she’s done with that sandwich by now.

25. Comment from ARDELL
Time January 31, 2007 at 1:52 pm

I just got a call from Inman and I need to send a two paragraph “blogger bio” for the podcast ad. Anyone want to write that for me, while I go up there and correct enough typos to be able to read, comprehend and answer Craig’s comment Taking deep breaths Craig…

26. Comment from ARDELL
Time January 31, 2007 at 2:01 pm

First let’s handle the “where Craig loses Credibility” factor. It’s the same as an agent who grabs onto any tidbit that allows them to say “rates are down! or “Get in before the market rises further!” The Redfin model doesn’t benefit Craig, the Zillow one does. The Redfin model offers more advantages to the consumer, with regard to Industry changes with regard to commissions; the Zillow model does not afford a seller any more advantage than they now have, through many and varied means, and have had for a very long time.

So in the future, just say “Go Zillow!; Go Redfin!” and I’ll give you the benefit of the doubt on the credibility issue. Fair enough?

I’ll answer the rest in a separate comment since I took a break to get my bold going. 

27. Comment from ARDELL
Time January 31, 2007 at 2:14 pm

Craig,

Maybe you don’t understand real estate commissions, as well as I think you do. So I’ll give you the benefit of the doubt and go through why Redfin is the issue and not Zillow.

First we have to remove the smoke and mirrors and agree that there is no longer (or should no longer be) such a thing as a 6% commission. That’s a leftover from the days when the Realtor was “The Wizard of Oz”.  There is no 6%.  6% only exists if the agent is trying to take the money reserved for the buyer agent, which they should not be permitted to do without the buyer’s express understanding and written consent.  Yes, World According to Ardell time.

The ONLY reason the Seller’s Agent was EVER permitted to keep “both sides” of the fee, IF AND WHEN the buyer had no agent, was because BOTH agents represented the SELLER.  Once buyers were separately represented, there was no reason whatsoever for the agent for the seller to walk off with the buyer agent fee, if the buyer had no agent in tow.  But who is going to scream that from the mountaintop?  The guys who still want to take it?

When a Seller lists a property today, there IS or SHOULD BE two discussions.  One is what the Seller’s agent will charge, that is the person in the room talking to the seller (usually somewhere between 1% and 3%, depending on the sale price).  Secondly and separately there is a discussion regarding what allowance within the sale price, the seller is going to OFFER in the MLS as a Buyer Agent Fee (usually 2.5 to 3% but often more, and in weak markets sometimes MUCH more). 

When all agents represented sellers there was a total fee of 6% for Seller representation.  Sometimes one person fully represented the seller client via a buyer customer.  And sometimes two agents represented the seller in a combined effort (one walked around with the buyer, but represented the seller) and they split that 6%.  That is NO LONGER the case.  No one took the lead on explaining that because of greed.  No one wanted to explain that seller representation turned into 3%, once the buyer was represented for the other 3%.  Because they didn’t want to rock the boat, and lose the opportunity to treat a buyer the way they always had treated buyers, and keep the whole thing when the buyer waltzed up without an agent in tow.

More and more sellers are offered full service to the seller at 1% or 2% fees for seller representation, day and night, especially if the seller is buying a new home through the same agent.  Sellers can get a lockbox in the mail, and FULL MLS ACCESS, for about $1,000 bucks.  So why should they not utilize this almost free service if FSBO will do, for their house.  Sellers already have the option of BEING A FSBO IN THE MLS!  They can do that with me, they can do that with Eilleen, they can do almost that with Redfin, they can do that with MLS4U (sorry for not knowing all the ones that do that). 

So Zillow is NOT a better option than Sellers have right now, and is not even the BEST option, as being a FSBO IN the MLS is a whole lot better for the seller than being a FSBO NOT in the MLS.  I think we all all agree there that most sellers would be willing to pay $1,000 to be in the MLS vs. nothing to not be in the MLS.  At least after trying “not in the MLS at all”, for a 30 day or less period first.  There are problems with these options if you do not have a house that will sell itself.  But they can be dealt with, if you know what they are.  But that’s another topic.

Digest that while I go look up “public policy” and make sure I’m using it as intended.  Until you can see that there really is no 6% commission, but two separate 3% commissions, one that is more negotiable and one that is “to be negotiated by the buyer and his agent”, you will not be able to understand the difference between Zillow and Redfin.  So try to get that part first.

28. Comment from Craig Blackmon
Time January 31, 2007 at 3:09 pm

Marlow:

With all due respect, I don’t think it is “irrelevant” what Ardell chooses to do with her money, particularly when she shares that information with the world. Ardell is an experienced, diligent, hard-working, and successful “full service” agent. She decided that, after working for a full year, she needed to refund to her clients $69k. She refunded this money to reflect “a fair value for the services rendered.” Thus, in her eyes (experienced, diligent, hard-working and successful eyes, no less) she overcharged her clients $69k based on the services she actually provided.

Now we have no way of comparing Ardell’s services to those of every other agent, but I’m willing to bet that they stack up favorably. At the very least, she is representative of the services provided by full service agents. I’m assuming further that Ardell charged a “market” rate for those services (6%?). When she compared her services to her rate, the rate was generally too high, to the tune of $69k annually. Yet I’m guessing she’s the only full service agent to consistently refund her fees. Therefore, by extrapolation, every full service agent who does NOT refund a corresponding percentage of their income is NOT charging a fair rate.

Now, you may not like Ardell refunding the $69k, and you may like even less the fact that she shared this with the world. But irrelevant? Hardly.

29. Comment from ARDELL
Time January 31, 2007 at 3:18 pm

Craig, get that 6% out of your head. Every client equals 3%…two clients equals 6%. A buyer client is 3% and a seller client is 3%. There is no stinkin 6%, read my comment above. 6% is called ” a double pop” and is a leftover from when no buyers were represented. 6% equalled two agents who both represented the seller, and no one represented the buyer. That does not exist anymore.

30. Comment from Craig Blackmon
Time January 31, 2007 at 3:25 pm

Ardell:

No fair — you corrected your initial typos in your post and in my comment. Where’s the integrity? That said, I understand your use of “public policy,” as long as it appears in a coherent sentence.

As for the substance of our exchange, two points: 1) Go Redfin! Go Zillow even more! (as it is more consistent with my own business model). Regardless, whatever helps the consumer to pay a “fair” rate for services is good in my eyes.

2) Unfortunately, it costs more than $1k to be on the MLS, as the seller also has to agree to pay the buyer’s agent’s commission. So the MLS typically costs $500 plus 3% of the sale price. Regardless, I understand there are two comissions (that often total 6%). I understand further that the Redfin model ultimately protects agents’ ability to get those commissions (the agents must simply convince their clients that it’s worth paying more). Zillow’s model, however, does not offer such protection, and without the MLS compensation really will be an issue entirely between the client (whether buyer or seller) and the agent. I work outside of the commission structure, you work within it. I favor Zillow, you favor Redfin. We agree, though, that both are ultimately beneficial to the consumer, given that the consumer routinely overpays for the services provided by a full service agent.

31. Comment from Craig Blackmon
Time January 31, 2007 at 3:29 pm

Ardell, the unfortunate fact is that only the seller pays the commission. Moreover, only the seller has a contractual obligation to pay it (via the listing agreement). The MLS rules then dictate that the commission be shared. Regardless, the seller is required to pay one commission. There is ONE number — whether its six, five, four, or some other percent.

32. Comment from ARDELL
Time January 31, 2007 at 3:29 pm

I am clearly not the only agent who does not ALWAYS charge a seller 3% for seller representation. That horse already left the barn.

The INNOVATION, the Technological Advances that create opportunites for buyer consumers to do the same as seller consumers have in the past, is the secret. I didn’t break that news…Redfin did. In fact I likely would not have totally “gotten it”, if Redfin hadn’t provided the clarity with their original “$11,000 paid to Redfin clients”. Clearly my post is modeled after Redfin’s original transparency, and my experiments were to see how easily it could be done in the marketplace. But truth be told…I ran a huge experiment along these lines, long before I ever heard of Redfin or blogging.

The issue is not about the seller, Craig. We all know agents who list big volume at 1% fees to the seller. The big deal is about buyers who are paying up to 5% all by themselves, PLUS the seller’s fee.

Marlow and I and every other agent gets flyers every day saying “4% SOC! Bring your buyers and get paid more over here! or 5% SOC…bring your buyers and get EVEN MORE over HERE!

The issue is the Buyer Agent Fee, not the seller’s side of it. That fee is already well negotiated with many, many options exist in the marketplace.

On the buyer side there are only two that I know of. Zip Realty who gives the buyer 20% and Redfin who gives the buyer 2%. A full service, better option is where the buyer needs more choices. Or at least they need more and more people to recognize that the Buyer Agent Fee isn’t a big fat worm or carrot to lure Buyer’s Agents with. It is a Fee that the Buyer should be privvy to, and be in agreement with, and be able to negotiate. Not a doggy treat.

33. Comment from ARDELL
Time January 31, 2007 at 3:33 pm

Craig,

You are on the NAR side of that coin. You may want to spend some time emptying the brain on that one.

IF you are CORRECT, then HOW does REDFIN return 2/3rds of it to a buyer????? Not correct, that’s why. Correction…you are “correct” you just aren’t “right”.

That is the “times that are a changing”, not the seller going FSBO to save $1,000 bucks. That is just your view because that is your business model. But from an industry standpoint, you are standing on the wrong side of the fence to see true innovation and industry change.

34. Comment from Craig Blackmon
Time January 31, 2007 at 3:52 pm

Seller pays listing broker per listing contract; listing broker splits commission (in some percentage, not necessarily equally) with selling broker per MLS rules; if selling broker is Redfin (or Ardell, perhaps?), selling broker then refunds some portion its commission to client/buyer. That’s how Redfin does it.

Now, if there was no MLS, there would be no rule requiring the commission to be shared. If the buyer’s agent wanted a commission, it would have to be negotiated with the buyer. ShaZAM! The buyer is now privy to and in agreement with the commission, and in fact is responsible for negotiating it (unlike the current system). The SOC would no longer be used as a doggy treat. That’s the world you want, and it will happen in a world without the MLS, guaranteed.

Speaking of emptying the brain, if a seller goes FSBO and without the MLS, how is it the seller saves only $1k?

35. Comment from Marlow
Time January 31, 2007 at 3:59 pm

Craig,

If I have an attorney that charges me $100 an hour and YOU, Craig Blackmon, charge $200 an hour, are YOU overcharging?

Or are you charging what your market will bear? Are you charging for what you think your time is worth?

Does it matter to you that my attorney only charges $100? Isn’t it irrelevant what my attorney charges? In that circumstance, do you think, with your unique set of experience and expertise, you are worth $200 an hour or do you agree that you are overcharging and lower your fees?

You are welcome to answer, but I’m pretty sure that you will not be goaded into accepting the premise that you overcharge. You would be more likely to wonder why the other attorney was only charging $100 when you know how much it costs to run a law office, how much overhead you must pay, how much office rent, utilities, marketing, etc. costs…. You’d probably wonder if the other lawyer was new or inexperienced or working out of his home or a trailer down by the river. But I doubt you would lower your fee or consider yourself to be “overcharging” your client.

36. Comment from Craig Blackmon
Time January 31, 2007 at 4:36 pm

Marlow, c’mon — I can answer without accepting the premise. Is it relevant what other attorneys charge? Absolutely. The rates charged by other attorneys give some indication as to the market value of the services they provide. As you point out, though, the market value is greatly influenced by the skills of the person providing the service. If another attorney in my area of practice (who just so happens to hold very strong opinions) very publicly announces that she only charges $100 per hour, and that charging more is unfair to the client, you’re right, I’d certainly want to know more about that attorney. How experienced? How skilled? Where did she go to school? What is her reputation among other attorneys?

Now what if I find out that the attorney is very similar to me in regards to experience and skill and services provided? I’d respectfully disagree with the attorney’s views about fees, as I think my rate is fair for many reasons. However, if a potential client (or any non-attorney, for that matter) knew of this dispute, could that person (who just so happens knows of and respect this other attorney due to her prolific writings and very public opinions) reasonably conclude that I charge an unfair rate? Absolutely. This third person would have a reasonable basis for so concluding.

So, do I expect you to agree with Ardell that “fair value for the services rendered” requires a full service agent to refund a significant sum to her clients? Of course not. You (and I) charge what we deem is reasonable and, based on our experience, what the market will bear. Indeed, what the “market will bear” is also very relevant to determining a “fair” fee. Nonetheless, when a knowledgable, experienced, and thoughtful agent concludes that she routinely overcharges, I think all non-agents should take note.

One other distinction. Attorney’s fees are always the result of (or at least subject to) negotiation between attorney and client. Agent’s fees, on the other hand, often times result from the “system” and the buyer has no idea or even input on the issue. Under these circumstances, I think it is even more important to listen to comparable professionals who claim that they are being overpaid.

37. Comment from ARDELL
Time January 31, 2007 at 5:17 pm

Craig,

I fixed ONE of MY typos, and THREE of YOURS. You want to judge my integrity based on changing a “t” to an “r”, go ahead pal. I’m more concerned with the readers being able to follow the conversation.

The MLS does not have to go away in order for a buyer to be viewed as the client who is represented, and paying the fee within the transaction. That’s a bunch of baloney. We had it all figured out 15 years ago.

We had one form, which we all received many copies of the day that buyer agency came into existence (I was in PA at the time). It said”

“The MLS offered co-op is replaced with a Buyer Agent Fee of the same amount and is used to pay the Buyer Agent for the Buyer’s representation. The Buyer Agent fee will be paid by the seller as a convenience to the transaction.” Very simple. The MLS didn’t have to go poof for buyers to have representation and for the sub-agent fee to become a buyer agent fee. That was 1993 or so. The Realtor COE Article 17 even had revisions made for “the withdrawn co-op fee” for Procuring Cause purposes. Everyone had it down pat and it worked just fine and buyers become empowered.

An attorney even drafted the little four inch addendum and gave us a class on how to use it (Coldwell Banker at the time).The Realtor Code of Ethics was then modified (in 1997 I believe) to account for the withdrawn co-op in Article 17 regarding Procuring Cause situations. Withdrawn co-op replaced by a buyer agent fee between a buyer and their client, was well recognized by NAR and NAEBA and all the powers that be.

AS SOON AS BUYERS STARTED TRYING TO NEGOTIATE THE FEE, THEY TOOK ALL THE LITTLE FORMS OFF THE SHELF AND BURNED THEM. But EBAs still used the forms successfully for many years.

You are literally correct that the form does not exist here, and traditional agents want to call it a “Selling Agent Fee” and not a “Buyer Agent Fee”. But clearly getting an attorney to draft the three line form to empower buyer consumers, is a whole lot simpler than blowing up the whole mls…faster too.

How can anyone be “a selling agent”? Get rid of that stupid leftover language. We DO NOT SELL HOUSES. We represent people who Sell houses, as agents who represent sellers. And we represent people who buy houses, as agents who represent buyers.

Everyone should start saying “I am the Seller’s Agent” OR “I am the Buyer’s Agent.” Maybe people would understand what’s REALLY going on, if the agent HAD to say, “Hi, I’m the SELLER’S Agent, how can I help you today?” How the heck are consumers supposed to know who is representing whom if we can’t simply say “he’s the Seller’s Agent and she’s the Buyer’s Agent?”

You know why, of course. Because “the listing agent” is trying to hide the fact that he is the seller’s agent by saying it that way…pure and simple. Follow the money. There oughta be a law about an agent not stating clearly who he does and does not represent by saying he is the Seller’s agent and not saying he is “the listing agent”.

Fight for that little change, Craig. Be a public policy guy and fight for that one. Every average Joe will know to clam up as soon as the agent says, Good Morning, I’m the SELLER’S AGENT. Simple change…why ain’t it so?

The COE was recently modified in Jan of 2007 making the method to pay the Buyer Agent fee slightly different, but it’s all semantics. The fact that Realtors keep modifying the forms to disempower the buyer is something you should be fighting to correct, not pointing at to reinforce.

There is no reason a buyer cannot be empowered within the current system by each and every agent willing to do so.

As more do so, the forms will change to accommodate it AGAIN as they were once before. The MLS doesn’t have to go anywhere for buyers to achieve full rights in this Country. We did it before and we can do it again.

If you are not behind that Craig, I’d like to know why not. If you do not believe the buyer is paying his agent in the sale price, and is fully represented and “paying his way” to have full and equal representation, I want to know why not. It truly is just a matter of thinking that way and saying it that way. You certainly don’t think buyers are getting something for nothing, do you?

In fact most Seattle buyers, internet savvy ones anyway, already know that they are the ones paying their buyer agent within the sale price. Are they somehow just that much smarter than everyone else?

When I bought my house and took the fee instead of taking it off the price, I was well aware that I was PAYING MYSELF. To think of it any other way is just insulting people’s intelligence.

38. Comment from ARDELL
Time January 31, 2007 at 5:42 pm

Marlow says: …are you charging what your market will bear?

Ah, but here’s the rub Marlow. First, we tell the seller he HAS TO offer a high Buyer Agent Fee or he’s shooting himself in the foot, which is true, so our prices include the HIGH buyer agent fee. We even tell the seller to increase “The Buyer Agent Fee” to get more buyers to come and “push his product” which the buyer agent under agency law is NOT supposed to do.

THEN we turn around and tell the Buyer that HE CAN’T CHANGE IT EITHER!. What a load of crap that is.

I’m all for “What the Market will bear” as long as the JUDGE of what the market will bear is the Buyer and not the Seller. There is no other way for this whole thing to make sense.

How can a seller offer a 5% Buyer Agent Fee with the Buyer Agent not even knowing about it? How can the Buyer Agent even THINK about not telling the buyer that the fee for this house is almost double the other house? Doesn’t that reflect on the value of the propety? Doesn’t it suggest that the seller is having trouble selling that product? Isn’t it the buyer’s right to know that weakness in the product and seller’s neogitiating position, before he buys it? Isn’t that info absolutely necessary for the purposes of price negotiation?

When you go to two attorneys and one charges $100 and the other charges $200…at least you KNOW it. What the market will bear will not come into play in the real estate industry, until the buyer is made fully aware of what HIS agent, the person who REPRESENTS him, is getting paid for that service.

It’s easy. It’s simply. Get it into the Purchase and Sale Contract. I’ve seen it there before. Why not? Why isn’t it in there so both the buyer and the seller can see the commissions in the transaction before they get “signed around”. Clearly some other areas DO do it that way. Why not here?

It’s not about a “discount”. It’s not about Ardell and other people…in fact it ain’t about US at all. It’s about not wanting to pay the same for a cup of coffee as you would for a full course dinner. Some buyers need and want the whole nine yards, and some just want you to write up THAT house and leave. Why should they pay the same for both services, just because the two houses cost the same amount of money? That doesn’t even make sense, and never did. And it certainly isn’t fair.

It’s not too hard to figure out that someone who took ten minutes to buy a house that had zero issues from contract to close, shouldn’t pay the same as someone who took 18 months and bought something with 6 rounds of inspection negotiations. Just because the two houses happened to have the same purchase price. What’s “fair” about that? That’s paying the price of a five course dinner for a cup of coffee.

39. Comment from ARDELL
Time January 31, 2007 at 5:56 pm

“Unfortunately, it costs more than $1k to be on the MLS, as the seller also has to agree to pay the buyer’s agent’s commission”

Craig, NO seller gets to tell ANY buyer whether or not they can have someone represent them. The seller can choose to be unrepresented, but a seller cannot choose for a buyer to be unrepresented. Nor should any professional encourage any model that leaves buyers unrepresented without their fully understanding all that will entail.

Suing the seller after the fact is a whole lot harder than making sure you don’t likely ever have to sue him, by performing adequate due diligence before close of escrow. If a buyer can do that on their own, Great! But no seller can MAKE them do it on their own or refuse to sell them a house if they have an agent to represent them.

It is NOT the seller’s call how the buyer is to proceed. That’s like telling an arrested person that they can’t have a lawyer. You can say you don’t have to have one…but you can’t say you can’t have one.

Any and every FSBO should price their home with an allowance for the buyer to be represented. If the buyer chooses no representation, well then they can dicker over who gets to keep that money, the buyer or the seller. But just because the seller doesn’t want to be represented, doesn’t mean the buyer has to “trust him” and go it alone.

Not every For Sale By Owner is just trying to save money. Some are trying to sell it for way more than any agent will list it for. Go look at Craig’s list and see the price there vs. where it is eventually listed and sold for, if they don’t sell if For Sale By Owner. I recently saw one dropped by more than $200,000 from the Craig’s list price to the MLS listed price.

Some are trying to sell it because the agent won’t let them not disclose and deal with certain known defects. Lots of sellers are For Sale By Owners because they think we are still back in the days of “Buyer Beware” and Caveat Emptor.

I have no problem with a buyer purchasing ANY property without an agent, listed or not. As long as it is the buyer’s choice and not the seller’s, and the buyer is getting that 3% off the price if he truly needs no services at all.

40. Comment from Marlow
Time January 31, 2007 at 6:20 pm

Ardell,

You always assume that the Buyer’s fee is not disclosed but in my experience, it is always disclosed, as I require a Buyer’s Agency Agreement. Our brokerage doesn’t require it, but they do urge everyone to use the pre-printed agreements that spell out the fee the Buyer will pay. Any bonus over that amount goes to the buyer, including incentives such as plasma TV’s or trips to Hawaii.

I think you’ll find more and more Buyers Agents using either their own forms or the Buyer’s Agency Agreements supplied by the NWMLS.

41. Comment from Ben
Time January 31, 2007 at 6:37 pm

In fact most Seattle buyers, internet savvy ones anyway, already know that they are the ones paying their buyer agent within the sale price. Are they somehow just that much smarter than everyone else?

When I was buying my house my agent would often say how I didn’t really need her because I was always on top of things. I knew which real estate site had the best search mechanism and what time of day the listings updated. She would only send me the agent MLS listings if I specifically showed interest in a property, because in most cases all I needed was the public MLS info so I could decide if I wanted to add it to the drives I took every night or two. The house I ended up buying was one that I found myself and called my agent so I could get in the house for a tour. Yet I had absolutely no clue that there was any possibility of negotiating my agent’s commission.

I think more people are being made aware that fees are negotiable but I would still bet that the vast majority of buyers and sellers still don’t know fees are negotiable. Even if they know of Redfin and the MLS4ThreeDollars kind of services, they probably still think of it as a “redfin costs 1% for one type of service while the regular agents costs 3% for another type of service” comparison. The alternate services are flat rate (percent or dollar) and don’t encourage the thought of negotiation and Americans in general are no longer used to the idea of negotiating prices anywhere other than at an auto dealership. It surprised me while talking with a salesman at Guitar Center years back and honestly just saying “I think I saw this for $X online” offhandedly while thinking it over, that he offered to sell it to me for $X. Since then I occasionally use negotiation and it’s worked, but I only try it in situations where I’m pretty sure it’ll work - there’s a bit of a stigma to it. Real estate representation was such a foreign thing and the 3% figure seemed so ironclad - industry standard and I was at the dominant agency in town - that it never occurred to me to try to negotiate.

42. Comment from ARDELL
Time January 31, 2007 at 7:24 pm

I negotiate with my Dentist

43. Comment from ARDELL
Time January 31, 2007 at 7:34 pm

I thought of that Marlow, and know that you personally do that. But a buyer shouldn’t have to sign an agreement to negotiate a fee. It still doesn’t account for differences in work product. It’s not about the services we are willing to give. We all know it always just plays out differently regardless. Sometimes they buy the first house they see.

I’m just trying to equate cost to what actually happens and not some hypothetical expectation.

I did negotiate more this year than ever before because I was trying to prove that if agents didn’t pay for leads and have referral fees, the buyer would somehow benefit. I did say that way back when I first came to RCG as a commenter…in my first or second comment, I think. But no one listened.

Maybe if I spend $68,750 to “put my money where my mouth is”, people will listen…bottom feeder sites are growing in leaps and bounds and something has to be done about it. Why spend $1.3 million on an ad campaign? Why send each other 25% referral fees for doing a kindness. Why pay your company 35% of the agent fee without knowing it.

All of this money secretly changing hands needs to get funnedled to the consumer somehow. People selling people’s names for thousands of dollars without the person knowing it is just slimey. I know it has been going on forever, but one day someone has to stand up and say “That is just creepy!”

If you want the bottom feeders out of our business…disintermediate THEM, give the consumer the money you would pay them for leads. Don’t be disintermediated…disintermediate the bottom feeders. Make them unnecessary. Be better at what you do and give the referral fee to the consumer…not to each other.

44. Comment from ARDELL
Time January 31, 2007 at 7:48 pm

Answer me this Marlow, I truly am confused on this. Agents email me saying I”ll pay referral fees of 35%! and I LOVE referrals!

Why are those same people who are willing to give away thousands of dollars to other agents, not willing to negotiate with their own clients? Makes no sense to me. It’s obviously not about the money. It seems to matter WHO gets it. Who better than your client? What’s up with that?

45. Comment from Doug in Seattle
Time January 31, 2007 at 9:22 pm

My God people I’m exhausted just reading these posts. Rest your fingers.

On the list side:

3% - Hard to sell property (ragged, rental w/tenants, client with out of the box advertising expectations).

1.5%-2% - Repeat client or client intending to purchase.

46. Comment from ARDELL
Time January 31, 2007 at 10:08 pm

I just received this message from an agent clear across the Country:

>”I read it and boy did the wheels in my head start turning. I have no comment about all of that to make, but it did get me to rethink some of the ways I talk to buyers about how I get paid.”<

Isn’t that exciting!? Things stay the same because no one is talking anything but same old same old in the back rooms. If you want to change things, all you have to do is speak up and let people know they are not alone in their thinking.

Everyone knows in their heart that “it ain’t your buyer CLIENT, if you can’t talk with them about what it costs them to hire you.” It ain’t your buyer CLIENT, if you are pretending to yourself that THEY aren’t paying you. Everyone have a talk with your buyer CLIENT about their options…and please, don’t make it a one way conversation where there is only one set price available for all people.

Just have the very same conversation with buyers that you have with sellers, whatever that may be. Just treat them equally.

If you truly believe you are worth it, then have that conversation with your client. Understand that sometimes it IS too much and sometimes it ain’t enough. But it’s not always “just right”. That’s just not possible, and its insulting to suggest that it is so.

47. Comment from ARDELL
Time January 31, 2007 at 10:31 pm

Doug,

Wierd thing. I can talk with Craig or a consumer about fees, like the $1,000 option in the marketplace.

But you and I can’t put numbers out there and talk about them agent to agent. It’s an anti trust violation. I’m going to leave your comment sit there for now, but if other agents start comparing notes on line here. I’m going to have to pull it.

It seems pretty odd that the less we talk about it, the more consumers seem to have to pay. But that is the law. That’s why we need to talk about the concepts involved, and not actual fee schedules. I’m OK with talking to a lawyer, like Craig about it, cause I’m guessing he may be held to a higher standard than I

But agent to agent…no actual percentages may be used in discussions other than repeating the 6% perceived fee, as even Nar has written articles indicating that the National Average is less.

But I can’t comment on the numbers you have shown there, and hopefully neither will other agents. If they do, I’ll have to take out the comments.

It’s hard to know where that legal line is. I push it for sure, but I’m pretty sure you just crossed it.

48. Comment from Wally Fry
Time January 31, 2007 at 10:33 pm

Ardell

Thanks for the brain stimulating post. I don’t have any comment to throw in, but will say you got me doing some thinking on the way the whole issue is presented to buyers. In our case, its built into the offer contract how I get paid when I’m a buyer’s agent. But that’s about the extent of the conversation. So, thanks for making me think…I think!

49. Comment from ARDELL
Time January 31, 2007 at 10:42 pm

Thanks Wally,

That’s all I ask. Think about having a conversation with your buyer. And realize that the fee you are getting is going to be in his mortgage payment for many, many, many years.

He’s not only paying you. He’s paying interest to the bank on that money you get, for a long time to come. I’m not saying what you do with that info, I’m just saying when you look into a buyers eyes, see a person who will be paying you now, and with interest.

Just because it is “written into a contract”, doesn’t mean it isn’t paid for, with the money that buyer brings to the table. At the end of the day you are not going to walk off with that number on that seller’s piece of paper. You are going to walk off with a piece of the money that buyer is bringing TO the table.

Thank you for the encouragement. Provoking people to think is good enough for me.

50. Comment from Jillayne Schlicke
Time January 31, 2007 at 10:50 pm

Craig,

Where would a consumer go to try and figure out how much an attorney might cost and if his or her fees are negotiable?

For example: Consumer needs a real estate attorney. Where could a consumer go on the web to figure out a RANGE of hourly rates and retainers often charged, and how the attorney’s fee correlates with his or her experience and success rate, and that the fees are negotiable?

I mean, it would seem like I could hire Alan Tonnon for the highest fee imaginable, or I could hire a recent bar member with not much experience. I would expect the hourly rate for the green attorney to be much lower. I would expect that attorneys will tell me what they can and can’t do for their fee. I WILL pay a higher fee for more knowledge, experience, professionalism, negotiating skills, and efficiency. In fact, I might even pay a HIGHER fee and get Alan just for one hour v. hiring a green attorney for many hours.

In the practice of real estate, WHEN AND HOW is the buyer’s portion of the commission disclosed to the buyer? In that disclosure, how is it communicated that the fee is negotiable?

Thanks to both of you for this public conversation. I am learning alot by reading through your Q&As.

51. Comment from Doug in Seattle
Time January 31, 2007 at 11:19 pm

Ardell

Maybe that’s why 90% of my post got chopped for some reason. Hiya! Chop! 15 years in the business and I didn’t know of what you speak regarding commission discussion. Seems to violate the first amendment but what do I know. I’ve never pretended to every know every nook and cranny of NWMLS rules or NAR’s position on such topics. I do know right from wrong and that has served me well enough. Thanks for setting me straight. Your thread 01/31/07 is going to be remembered. It’s got a life of it’s own now.

52. Comment from ARDELL
Time January 31, 2007 at 11:29 pm

For me it’s exactly the same way as it happens with a seller. I first evaluate the situation. For a seller it is the property itself, for a buyer it is their parameters and the level of difficulty it will take to achieve their objective.

Someone comes in and says they want to buy a home for $850,000 in or around Redmond. Pretty easy to accomplish. Nice people. I say that will cost you X, and the seller will likely be offering more than that, so you get to keep the difference. Simple. Takes a few minutes. They don’t even have to ask, and they are quite happy with what I offered.

Someone wants a newer townhome near Microsoft for less than $350,000. Houston we may have a problem. Not enough of those to go around. I need to know they will be quick on the trigger if and when we are lucky enough to grab one of those. Whatever the seller offers may be my charge for that. I will have to watch the market like a hawk, and the buyer will have to get over there and me too, as soon as it comes on market. I’ll have to drop everything and run and likely deal with multiple offers to boot.

With sellers we determine the fee after we look at the house, feel out the seller’s willingness to let me stage it so it will sell, and after we set the asking price. The price for my services has to do with the product, the price, and the seller’s willingness to get and and keep it in tip top showing condition and how much I need to do myself to get it ready for market.

For a buyer with broad and easy parameters, I can negotiate the fee shortly after meeting them. For pickier buyers looking for that needle in the haystack, I usually want to see a few houses with them first, even ones not in their price range, to get a feel for the difficulty level of the task at hand based on their expectations, likes and dislikes.

A seller’s agent shouldn’t set an asking price or commission before seeing a house. A buyer’s agent often can’t set a price until being inside at least one house with a buyer, to see how a buyer reacts to that which is likely to be readily available in the market place in their timeframe and price range. Especially if what they want is a limited commodity in the area in which they want to live.

A fair price is one that represents the work at hand. I admit it was hard at first to figure that out with buyers. But it gets easier with practice. Most agents who have been in the business as long as I, can do it in lickity split time with a seller. Now I can to it fairly accurately and quickly with a buyer. It just takes a little experience at it to get better at it, the same as it does for an agent discussing commissions with sellers.

Often in the lowest of price ranges, the expectation is even with what the seller is going to be offering. If everything goes easier than planned, then I just settle up by paying attention and throwing some money at a buyer concern or want, to level the fee to the easier than expected work. By putting that money in a place that makes the buyer even more happy, like a new washer and dryer or refrigerator, the change downward from the originally discussed fee has a double happy effect.

Same as we do with a seller by sometimes chipping in on repair costs, or decreasing the commission at the end if it sold faster and easier than anyone expected.

In the highest of price ranges, it is much easier to reduce the fee to an amount at which the buyer is more than happy and stick to it.

And with both buyers and sellers, how motivated they are for the event to actually happen…is key.

Setting a fee up front, and readjusting downward if needed at the end based on actual events, has actually worked out really well so far. It just takes a little practice and a good relationship with your client.

I have a really tough challenge, as I promised myself 16 years ago that a house would never get away from a buyer, if the difference in negotiations was less than my fee. I would never be “the thing” that stands between my client and a house they want. I got called pretty hard on that this year. It was tough. But that’s another story

53. Comment from ARDELL
Time January 31, 2007 at 11:43 pm

Doug,

I jsut sent you the orignal email I got when you posted the comment. Looks identical. No one here edited it. It posted that way from the get go. As far as I know no one monitors a comment before it hits the site, unless it gets caught automatically in the spam filter.

Check the email I forwarded. That’s exactly how it “came in” from you.

54. Comment from ARDELL
Time January 31, 2007 at 11:48 pm

Doug,

There used to be an orientation film when you joined NAR that had a guy refuse to have lunch with a friend from another office to talk about their commission schedules. I’ve seen it at least three times in the last 16 years. It’s one of those hokey films they make you watch to get your Realtor pin. I didn’t sit through it here in WA as I was a member of NAR already. But I saw the film in NJ and FL and CA. not in PA or WA because of reciprocity.

I am not a Realtor at the moment, but I remember the film well. Someone was wearing little white cotton gloves and the film was the same one for over ten years. Hope they made a new one. That one looked like Donna Reed should be in it.

Maybe you just thought he wasn’t hungry

55. Comment from Marlow Harris
Time February 1, 2007 at 12:09 am

Jillayne,

I’m going to answer your question, even though you asked Craig and not me, I’m going to throw in my two cents.

In our practice, the buyer’s portion of the commission is discussed in the very first meeting. We tell them what we charge and have them sign a Buyers Agency agreement agreeing to that amount. Though the commission is not set in the industry, our company’s commission is ’set’ and it is generally not “negotiable”, in the traditional sense. That meaning, we have an idea of what we need to do business and they can pay that or more, but usually not less.

Ardell,

In answer to your question about agents who are willing to pay a referral fee but won’t “give away” their commissions to buyers (”Why are those same people who are willing to give away thousands of dollars to other agents, not willing to negotiate with their own clients?”). It could be that those agents consider the 20-35% paid a “marketing fee” or part of their marketing costs. By rewarding the referrer, they insure themselves more leads in the future. By rebating the same amount to a buyer, it may be perceived as setting a bad precedent or perhaps “purchasing” their business in an unlawful, unethical or perhaps even illegal manner (think “kickbacks”).

When I worked for Windermere, there was a beautifully bound book that each agent received free every year. In that book was every single Windermere agents contact information. Every agent had a 2-line listing. However, each individual agent had the option to buyer a quarter-page, half-page or full-page ad in this book, trumpeting their experience and areas of expertise.

This book was used by each agent as a “Referral Guide”. The reasoning was, if, for instance, you had a seller who was moving to Bellingham and wanted to buy a duplex, you would go to the book and try to find the very best agent in Bellingham for that buyer.

The agents were marketing themselves to each other and the payment of these referral fees were part of the marketing costs. The buyer did nothing to “earn” these fees, but the agents, by their actions (advertising and the placing of leads) did.

In my own case, I have worked very hard on my website and have spent innumerable hours on design, content and SEO. If a buyer contacts me with needs outside my area of expertise, I try to assist and part of that assistance is asking if they’d like to be referred to another agent who can perhaps help them more than I.

Anticipating the question from you, no I do not specifically tell them I may receive a fee for that referral. But for them to assume that I, or anyone else, works solely for their convenience and out of the kindness of my heart is naive.

I’ve already used RCG as an example of a site whose business model uses referrals to generate funds. But let’s look at Galen’s new site, http://www.ShackPrices.com. I’m sure we’d both agree that he’s taken a huge risk building and developing this site. If it attracts a serious buyer who wants to be referred to a pre-screened real estate agent, do you think it’s wrong for them to receive a referral fee? I’m sure you’d agree it is NOT wrong. Perhaps it’s just the amount that troubles you? What would be a good percentage, in your mind? Or do you want it to be a flat fee?

I think our capitalist society works best when everyone is free to live their lives and run their business in enlightened self-interest.

If a company or business or real estate agent charges too much, the market will acknowledge that and those people will eventually be driven out of business. However, if the public perceives a value, these agents will continue to find success and their business will flourish.

Perhaps, in your refunds, you are Mother Ardell bathed in altruism for the real estate buyer or St. Ardell of Kirkland, champion of the consumer….. I don’t know. But I do know that the beauty of capitalism is that it self-corrects for inefficiencies. For some to surmise that because you rebate funds, the hundreds of thousands of other real estate agents overcharge, is faulty logic. You have your own reasons for refunding or spending the money you have earned, just as I have my own reasons for spending the money I have earned in my own manner. Free choice in the market will ultimately decide….

Remember, the drug companies made money when they produced the vaccine that eradicated polio. It’s ok and possible to do good AND make money. It’s ok to produce a better mousetrap and reap the rewards for the invention. And it’s ok to charge whatever you want for your product or service, as long as you do so lawfully, legally and without collusion or restraint of fair trade. The beauty of our country is that we all have choices, and more and more choices present themselves every day.

56. Comment from Norm Fisher
Time February 1, 2007 at 5:01 am

Fascinating discussion Ardell.

I recall in a previous post that you mentioned you “fired” an agent so I assume that you are either a broker or a manager for your company.

If my assumption is correct, I’m curious to know if your personal compensation plan is structured in a way that gives you an advantage over the salespeople in your employ. In other words, could your agents realistically offer their clients similar rebates and still make a living after they share their earnings with the brokerage?

Secondly, if this “rebate” approach is the right and fair thing to do, and you are in some management or broker capacity, why is this approach not standard practice in your brokerage? Given your philosophy, I’m sure that sharing in the spoils produced by agents who are overcharging for their services would be very difficult for you.

57. Comment from Craig Blackmon
Time February 1, 2007 at 8:36 am

Ardell — consider it done. From here on out, it’s “seller’s agent” and “buyer’s agent” only. Even if I’m talking to an agent (who uses those other, archaic terms). As for everything else you say, we’re basically in agreement. Too bad, too…

Jillayne — I post my fees on my web site, but I’m a “transparent” kinda guy. Most attorneys do not. The most reliable method for identifying an attorney’s fee structure is to ask them. Do so in the initial call, before any legal advice is provided. As a consumer, you have every right in the world to that information, and you absolutely should feel comfortable in asking for it. Unfortunately, however, as far as I know there is no web page or any other resource that would allow you to compare attorneys, at least in regards to their rates. You can always find out more about an attorney from Martindale Hubbel, a longstanding legal directory. No indication of fees, though. Finally, as for negotiable fees, again the consumer needs to ask. I think they usually are not negotiable, but it never hurts to ask, and if it does hurt, then you probably should find a different attorney anyway.

58. Comment from ARDELL
Time February 1, 2007 at 9:57 am

Norm!! Excellent question.

First a question. When you negotiate a fee with a seller when you list a property, do you call the difference between what you “could have charged” him (had he agreed to it) and the final negotiated commission “a rebate or a refund”?

When you list a house for $200,000 and allow 3% for a buyer agent fee, and the buyer offers $194,000 because he has no buyer agent to pay, so he just takes out the 3% you and the seller allowed for his buyer agent, isn’t he making a full price offer? Isn’t the seller’s net the same as a full price offer…in fact a smidge higher?

Now to how does one structure a company so that all agents are free to treat consumer’s fairly. You are correct, the broker compensation model has to not suck out too much of the commission, and every agent must be autonomous in negotiations with their clients. There’s no way anyone can determine a fair price for the service for THAT client, except the person working FOR that client, and providing that service. So every agent must be totally free to negotiate with their clients. That’s a huge key.

I don’t “require” them to do things “my” way, I simply require that they be consumer-centric and not agent-centric. I require that they only talk to me about the client’s needs and objectives when structuring an offer. I require that they only talk to me about the client’s goals when talking about which houses are best suited to the client. The agent you mention didn’t want to show a property that was $200,000 less because she would make less money…FIRED! (long story short of course).

I don’t think it is too much to ask for agents to focus on the business at hand, that being the client’s purpose. Not everyone agrees

If you hire agents who care about and work for their clients, you tend to also have agents who do not want to gouge them either. It’s pretty simple stuff really. Fair Market Value of a property is a price at which neither party is extremely happy and dancing in the street. Fair market price for agent service is a price where neither party’s jaw drops open or books a flight to Hawaii to spend their “windfall profit”. It really isn’t hard stuff if you stay consumer-centric.

Most brokers already have a structure that COULD provide adequate room for negotiations. Many, many agents pay desk fees and have an annual cap after which they keep 100% of the commission. Only question is, if they are getting 100% or 95%, why are they pretending that they are getting half by trying to convince their clients that they don’t really get that much of the pie?

WHY when a broker charges a desk fee or a cap, does the Broker/Company ALSO say that the agent MUST charge at least X. If the broker is not getting any of that X fee?? Once the agent has reached his annual cap, of what concern is it to the broker what the agent charges the client, once the agent is on 100% commission status? We have companies that do that. If there is no monetary benefit to the company to set that fee at X to the consumer, isn’t that quite simply price fixing?

The structure of agent paying less to broker is and has been there for years. It was the original RE/MAX concept (though now changed), Realty Executives concept, and on the West Coast at least, many if not ALL brokers have an annual cap after which the agent receives 100% or close to 100% of their commissions.

Clearly the agents have worked out a way to not pay their brokers too much. They just haven’t taken that savings out to the street.

It’s not about how one man does it. Any agent on 100% commission or desk fee can do it. And NO Company should be telling their agents that they MUST charge a buyer 3% IF that company is not GETTING ANY of that 3%. That is price fixing.

In fact NO broker has EVER told me in 16 years with major companies like Coldwell Banker and RE/MAX and anything in between WHAT I can charge a client for my services. The broker only tells me what I have to pay HIM, not what I have to charge the consumer.

Agents are not paying half their commission to their broker. They just say things like that generically as in “well you know, many agents pay 50% to their broker” when in fact, they themselves do not do that. It’s smoke and mirrors and flat out lying. Sometimes the Brokers even say “I demand that you not charge less than X. There, I have now given you ‘an excuse’ to charge top dollar. All you have to say is “my broker won’t let me”.

No Broker has ever interfered with my negotiations with my clients ever. Not even when I was in the business the first week with Coldwell Banker in 1990 and never anytime since. That’s a misnomer. All commissions are negotiable. The broker can say you have to pay me $2,000 a month whether you sell a house or not…but he can’t tell you what to charge the consumer.

59. Comment from Russ Cofano
Time February 1, 2007 at 10:14 am

Ardell

“No Broker has ever interfered with my negotiations with my clients ever. Not even when I was in the business the first week with Coldwell Banker in 1990 and never anytime since. That’s a misnomer. All commissions are negotiable. The broker can say you have to pay me $2,000 a month whether you sell a house or not…but he can’t tell you what to charge the consumer.”

First, please stop using the old line that ALL commissions are negotiable. They are not. If you go to the grocery store and bring a loaf of bread to the register that is marked $2, you may very well ask them to sell it to you for $1. They will likely say no, the price is the price. There has been no negotiation as most consumers would define the term. I have been asked by prospecive clients from time to time to lower my hourly rate. Most of the tim