Rain City Guide

1. Comment from Austin Realtor’s Wife
Time June 15, 2007 at 1:37 pm

Great explanation, Ardell. Hope your weekend goes better than your day!

2. Comment from Michael Wurzer
Time June 15, 2007 at 2:32 pm

I believe most states have passed legislation to ensure that real estate sales people are not even agents, let alone fiduciaries. I agree with you that the lessening of responsibility is a mistake for the profession.

3. Comment from ARDELL
Time June 15, 2007 at 3:38 pm

I’ve only heard of one, Michael. But haven’t kept up with it lately.

The only State I know of that outlawed agency was Oklahoma. I was working in Florida back in 97 or so when they outlawed Dual Agency and replaced it with non-agency transaction brokerage, but that is ONLY for Dual situations. Agency still exists in Florida as single agency unless the client agrees to non-agency/customer services vs. full fiduciary services.

I do think limited service brokers should be able to get non-agency explained well in the Agency Pamphlet they hand out here. Clearly the consumer should be shown both agency and NON agency options in a very clear and expanded way. I think with all of the new business models, it’s time to write a new agency pamphlet explaining the reduced levels available to consumers generally, at a reduced cost.

4. Comment from Michael
Time June 15, 2007 at 4:13 pm

you might take your role seriously, but the reality is, most agents make almost 20k if not more off of every transaction they transact…i am becoming less and less convinced by the day that anyone adheres to a fiduciary responsibility the way it’s written.

i used to work at one of those mcbroker outfits when i was younger (you know, the schwab/waterhouse things) and the made us take all the tests, get all the license and adhere to a fiduciary duty to our clients, but the reality is, we didn’t have a clue what that really meant, nobody could legally hold us to butkuss unless we made the most grave securities errors and from all the agents i’ve dealt with in the last 7 years and 3 states, 1 out of 8 agents knew what they were really doing and fiduciary duty has been nothing more than sales pitch rhetoric during the interview process.

i’m skeptical today and even more so tomorrow.

5. Comment from ARDELL
Time June 15, 2007 at 5:13 pm

Michael,

Haven’t read the whole comment. Passing by in between appointments. But the $20,000 is not correct for sure. Most charge up to 3% of sale price, which is not $20,000. Most of mine cap out at between $7,000 and $10,000 and take 60 days or more, so about $150 to 170 a day or less.

Rarely does one agent collect for both sides, the seller and the buyer. Your statement “most agents make almost 20k if not more off of every transaction they transact” is not correct in my experience, and is clearly not correct for most agents in the Country, if you are from outside of this area.

6. Comment from seattlite
Time June 15, 2007 at 6:34 pm

$7-$10k at 3% would imply sales prices of approximately $225k - $335k which doesn’t seem likely given the average sale price right now is greater than $400k. I don’t think looking at it in terms of days the transaction takes really makes sense either. How many of those days are you actually working on the deal/for your client and for how much of the day?

Granted much of the country is cheaper to buy a house in, thus lower commissions, but still.

7. Comment from ARDELL
Time June 15, 2007 at 7:04 pm

I often have a 2% or $10,000 cap, especially if someone is both buying and selling. But in any case, even at full rate 2 X4 is 12, not 20 and most sales have concessions, even if the concession is at inspection or at the end.

Full fiduciary requires full vigilance, so you can’t handle more than a few at once or they will miss an opportunity, or you may miss something else important. The big bucks came from the concept that you can’t handle too many at once. Fiduciary requires you to know a whole lot about the people…bond even. Hard to give advices of what you might do if you were them, if you don’t “know” them.

I agree much has changed and the main reason I “get” fiduciary is because I was a Trust and Investment Officer for much of my adult life before switching to real estate. That is why it would be a shame if I didn’t act as a fiduciary. I meet many like me along the way, but you are correct that we are becoming fewer. It is exceptionally difficult to remove self interest, as fiduciary requires. The higher the number, the harder it is. By placing a cap on commissions, it makes it easier. Salary doesn’t work as well as capped commissions.

As to how many days are you actually working for the client, pretty much all of them. Most of my clients need me to jump up and run as soon as “it” hits the market, or jump up and meet a buyer at a house, etc… It’s being “at the ready” as in “on retainer” as no one can predict the minute the right house is coming on market or THE buyer is ready to purchase.

It’s like if you hire someone to sit behind a cash register. You can’t only pay them for the time when someone is actually buying something in the store. You have to pay them to be there and ready for when someone is buying something at the store. Right?

Having someone who knows the most, vs. a hired hand to be at inspections etc. is why the commissions have traditionally been high. Maybe all this is a thing of the past and will die away, but I don’t think so. I think there will always be 10% to 20% of agents who provide full fiduciary. Same as there are 10% to 20% of employees in any company who give an honest day’s work for a day’s pay.

I don’t think real estate is any different than other industries. Do you? Is everyone at your company earning their pay on an equal basis?

8. Comment from Rhonda Porter
Time June 16, 2007 at 6:56 am

There are also many times we (agents, loan officers) help clients and are NEVER paid. I just spent most of this week being a greif counselor, mortgage advisor–you name it, for a person in California who used one those internet companies advertised on tv where 4 lenders are going to call you…his lender in Florida did not close his on his home in the Seattle area on Thursday. Anyhow, as nice as the buyer is, it sucked up a tone of my time, energy and resources from my company. He’s gone back on forth on switching the loan from the other lender to me…just back to other lender (hopefully they’ll have docs on Monday). I’m going to try to figure out the hours I’ve spent on this…or maybe I won’t. We do a lot of CHARITY in this biz, too.

9. Comment from ARDELL
Time June 16, 2007 at 7:11 am

Rhonda,

I hear that a lot, but can’t say that I have that experience. Once in a while I give someone “a $.02 tour” who is thinking they may move here, to give them an idea of what their money will buy. Then they my choose not to move here. But I don’t have clients who choose to use a different agent, unless they are assigned an agent by their company relocation connection. I know that is going to happen before they do, so it’s more of a surprise to them than to me.

I don’t have to charge one person more, because someone else wasted my time. Never have.

10. Comment from Rhonda Porter
Time June 16, 2007 at 7:36 am

Ardell, I never charge one person more because I performed “charity” for someone else. That’s not fair to your paying clientele. My only point was more for the readers who view commissions as a large chunk of change without realizing we help a lot of people with advice, providing second opinions, etc. for free.

With the person I commented about, if the lender does in deed close the loan, he is better off staying there. He’ll close sooner and have a better rate since rates have been going up.

11. Comment from Marty Van Diest
Time June 16, 2007 at 7:51 am

Good Post Ardell and your comments and your comments make it even better.

When you get down to the final walk-through on the day before closing and notice something that no one saw before, not you, not the clients, not the inspector, or the appraiser, you have to ask yourself the question. What is the right thing to do? Of course, the right thing to do is to point it out, bring the inspector over to confirm the problem and advise your buyers not to close.

No one likes you at this point, except perhaps your clients.

That happened to me with a foundation issue that everyone missed. The crazy thing about it is that I have kept my eye on the house in the years since. It has sold 3 times without anyone fixing the broken foundation.

12. Comment from ARDELL
Time June 16, 2007 at 7:56 am

Marty,

I can’t even imagine not finding a broken foundation until a final walkthrough! Cripees!!!

We usually spot that in the first 20 minutes of the inspection, and the inspector reduces his fee drastically and leaves without bothering to inspect the rest of the house.

Pretty scary to think everyone could miss a foundation issue. I seriously can’t imagine that ever happening to me. But I will say I scratch my head at times wondering who the heck came behind us and bought the place…so someone must be missing it.

13. Comment from ARDELL
Time June 16, 2007 at 8:03 am

Marty,

I don’t know if you have escrow in AK, but in escrow states it is MORE important not to rely on a final walk through to “discover” things. Not that you EVER contractually have much leverage, if you miss something during the timeframe you are supposed to do your due diligence. But in escrow states you really need to stick to your due diligence period, moreso than in “settlement” areas.

14. Comment from Vicki
Time June 16, 2007 at 8:36 am

Hi Ardell -

I think you were BORN a fiduciary, and NAR membership doesn’t change anything with the way you operate. You probably can’t think any other way.

I’m sure you will take the high road with your current dilemma, then change the names and blog about it later when you know the whole outcome! I’ll be interested to hear about it.

15. Comment from ARDELL
Time June 16, 2007 at 9:27 am

I think pushing self interest aside is a little easier for someone from a family of nine…especially for me, the middle of seven children. It really was rarely “my turn” and never all about me.

This is one of those…someone’s gonna buy it if we don’t proceed, but not necessarily at the price we offered. One of those, make offer before seeing investment properties, and renegotiate while in escrow…or not.

You know much about “truss uplift”?  So far I’m knowing more about it than the “experts” and builders…not a comfortable place to be. I know what years have it more, and I know how they fixed the problem later when building, but I need someone who knows if you can fix the problem on a roof put on in the late 70s.

I know you can float the walls if the trim were attached to the ceiling instead of the walls (as it was done), and I know you can use a slide screw L bracket to attach the truss now, but can you go up there and put slide screw L brackets after the fact?

If anyone has had any experience with fixing truss uplift, I would love to hear about it. I know what it is, and I know what causes it, and I know how to “camoflouge” it, but can you actually FIX the truss installation 30 years hence so the ceiling of the bedroom doesn’t move with the truss expansion and contraction?  I know you can’t secure it, because it has to expand and contract.  But the ceiling lifting off the walls in the bedroom is not a fun problem to have.

16. Comment from ARDELL
Time June 16, 2007 at 9:37 am

Oh, I also know you can drywall tape the gap so you can allow for expansion and contraction and replace the drywall tape from time to time when it cracks. But I want an answer that stops the bedroom ceiling from moving up off the walls.

17. Comment from Maria P.
Time June 16, 2007 at 9:58 am

“I think you were BORN a fiduciary, and NAR membership doesn’t change anything with the way you operate.”

I disagree, now you are out at least $500 every year. That has to cut into some operational costs. I’m kidding, I’m lacking sleep right now.

It is great to hear that you are trying to do what is best for your clients not just your bank account. As gross as it is to think about, I know so many agents who don’t act or advise their clients this way.

18. Comment from ARDELL
Time June 16, 2007 at 1:42 pm

I like your blog Maria. Would like it better if you had some photos to go with those “visuals”.

19. Comment from Rich
Time June 16, 2007 at 4:24 pm

Ardell,

I agree with you mostly (this refers your comment # 7), but with a little concern.

you said–
“It’s like if you hire someone to sit behind a cash register. You can’t only pay them for the time when someone is actually buying something in the store. You have to pay them to be there and ready for when someone is buying something at the store. Right?”

this is not a good example in this case because someone you hire to sit behind a cash register works only for you at a time. he or she wouldn’t be sitting behind the cash register in starbucks, wal-mart, k-mart at the same time and so it is not same as agents helping their clients.

my 2 cents.

20. Comment from ARDELL
Time June 16, 2007 at 7:46 pm

Rich,

My point is that you can’t book all of your time with activity. We really don’t “show” property as much as we jump up and run to catch the next one out the gate. So you have five or six buyer clients who want different things. You spend a lot of time finding those things. Sometimes writing to the people who own those things, that are not for sale. Sometimes running to see the new listing to rule it in or out.

The time is not always spent “with” the client. Much of it is not spent “with” the client.

Also, if I have a buyer for close to Microsoft for $575,000 to $625,000, I can’t take on another client for that same thing. So you have a group of clients who all want different things. It becomes like a waitress with all of her tables filled. If they sit at the tables all night, you can’t get new customers.

The block of time it takes from meeting to closing is the length of time that you work for that person. Until they find a property, I can’t take on another client who wants the same thing.

21. Comment from Maria P.
Time June 17, 2007 at 10:17 pm

thanks
I know… I have lots of photos I need to share.

22. Comment from ARDELL
Time June 17, 2007 at 10:20 pm

I like photos in a blog, especially when you are talking about something that really requires a picture. Lately I’ve been playing with them in the comments section as well.

I really wanted photos on that “ugly house” post of both yours and maybe someone else in the neighborhood for comparison.

23. Comment from craig
Time June 18, 2007 at 6:50 pm

Ardell — great post. Well written and informative. I’m sorry I’m just catching it now…

In Comment #7, you said:

“Fiduciary requires you to know a whole lot about the people…bond even. Hard to give advices of what you might do if you were them, if you don’t ‘know’ them.”

I’d argue that a fiduciary is held to an even higher standard. You can’t “know” every single client — can you really bond to every single person with whom you work? So in at least some situations (perhaps 5%? or 20%? even 50%?) you’ll think you “know” them, but you won’t. Because you don’t know them, you give bad advice — which surely causes as much harm as any self-dealing.

So a true fiduciary must should refrain from giving professional advice based on what that he/she would “do” if standing in the shoes of the client. Rather, a fiduciary should endeavor to explain to the client the risks and benefits of various courses of action. The client must decide what is best for the client. If the client is relying instead on you telling him/her what is best, the client may end up disappointed. The client is the decision maker, and a fiduciary should not usurp that role.

24. Comment from ARDELL
Time June 18, 2007 at 7:20 pm

Craig,

In both of my careers I have not found that to be the case. As a trustee, most of my clients were dead, and I was acting on their behalf. So often I had to research their lives to “know” them, and act as they might have. Those who weren’t dead relied on me to take into consideration their “sleep factor” and personal considerations. They didn’t want to only have recommendations based on highest return. Some wanted more risk, some wanted none, and they wanted my advices to be guided accordingly. To them less total return, if it was less risk, was not “bad” advice. It was personalized advice.

I find my real estate clients to be pretty much the same. They don’t like one size fits all advices. They want me to advise what I would do “if I were them” or what I would advise my children or my mother. That is how my clients define “fiduciary”. They trust me to tell them what they DON’T want to hear sometimes. Then the choice of what to do is theirs, of course.

You are correct that I can’t always know them, as some buy a property without my advices. That is not fiduciary level to me, and so charge less for that.

Over ten years ago there were warnings that non-fiducary, transaction broker type services would drive commissions down. I think that should be the case, and that fiduciary level services should cost a bit more than transaction brokerage. I also think some need fiduciary level, and some don’t.

I think most attorneys would opt for a lower cost transaction brokerage type service. Many people who are first time buyers, especially those who have not lived in this Country very long, may prefer fiduciary level services. Just two examples.

I think there should be clearly defined options with costs to match. I think the Law of Agency that describes agency to consumers should be expanded to include low cost limited service options. It should include Companies that don’t show property and it should include Companies where the seller never meets “the agent”. I don’t think the consumer explanations are keeping up with the times, and the options available to consumers in the marketplace.

When an attorney writes a contract on NWMLS forms, are they required to give consumers the blue agency pamphlet?

25. Comment from craig
Time June 19, 2007 at 7:05 am

Ardell — Attorneys are not required to give consumers the agency pamphlet, as that requirement flows from the RE licensing statute, RCW 18.86, which does not apply to attorneys.

26. Comment from ARDELL
Time June 19, 2007 at 8:58 am

Thanks Craig,

I was just curious for “political” reasons. It always seems that the agency laws and requirements are skewed to agent options, and don’t cover FSBO and other non-agency type situtations adequately.

27. Comment from Broker Bryant
Time June 19, 2007 at 3:39 pm

ARDELL, In Florida we are rarely agents. We are presumed to be Transaction Brokers (no fiduciary) unless we decide, with our customers, to work in a single agent capacity, at which time they become our clients. Transaction Brokerage is not ONLY for working both sides of the transaction. It is actually how most Brokers choose to work. I can be a TB for either Seller or Buyer or both. If I am a TB for my Seller and the Buyer has his own Broker then I do not represent that Buyer in any way. Nor do I represent the transaction. I am representing my Seller just not with a fiduciary relationship. Transaction Brokerage is so misunderstood. We NEVER represent the transaction. I feel Florida got everything right except the name. It confuses the issue.

28. Comment from ARDELL
Time June 19, 2007 at 4:12 pm

HI BB,

I was there the day TB was introduced in FL. It was the same day Dual Agency was outlawed. I loved the old paper that said “I do not represent you until and unless you hire me to do so”.

Our Broker, for their own liability reasons, also told us to get people to accept TB vs. Full Fiduciary. But I couldn’t do that as I could not for the life of me understand why a consumer would elect TB over full fiduciary, if the cost for the service was the same? I totally get TB if it is cheaper. But not if it is lesser at the same cost.

29. Comment from Broker Bryant
Time June 19, 2007 at 4:24 pm

ARDELL, you understand agency and give your clients the full package. But do you think the majority of agents do? I don’t. That’s why I prefer TB. To me it’s a better picture of what we really do. I still represent my customers and I still look out for them and advise them. BUT they are not liable for my actions as they are in a fiduciary. If I were the consumer I would prefer that. How many agents truly and honestly put their clients needs first? Not just say they do but really do? I do and I’m not an agent. To me service is service no matter what we call it. Fiduciary/agency is a very complicated and precise form of representation. Just because the consumer thinks they have an agent does not mean they do. At least in TB they are not mislead. Not from you but from many others. Make sense?

30. Comment from ARDELL
Time June 19, 2007 at 6:29 pm

BB,
You should talk to Bob Delmar about the “Walk Like a Duck Trials” in Florida. When you say TB and act at a higher level than TB, they hold you to single agency fiduciary standard. At least that’s what I heard from Delmar who is very active in Agency issues in Florida.

I’m not sure how they resolved that. The problem was that there was no training on how to BE a Transaction Broker vs. an agent, so when the Broker tried to use the “we’re a Transaction Broker” defense, that didn’t stick because the licensee acted the same way as he did when acting as a single agent. So changing your Title doesn’t work. And changing how you work, is near impossible.

31. Comment from Broker Bryant
Time June 20, 2007 at 4:41 am

ARDELL, Lack of training for the broker and lack of education for the consumer pretty much says it all. I feel a post coming on

32. Comment from Marc Vitorillo
Time June 20, 2007 at 5:23 am

Ardell makes a very good point about BB that he may act at a higher level than TB. I just think that clients get the “deer caught in headlights” when you mention about fiduciary. If some agents, don’t fully understand the concept, imagine the customer hearing this the first time. I was in a 150-agent office before and this would make sense for a broker to have their agents have the default of TB to fully have the best interest for their client. As a Broker/Owner of two real estate boutique companies, I would much prefer the Single-Agency Fiduciary with the Right to Transition to TB (transition when you are showing homes that are your own listings). This way the default is always at the client’s best interest.

Now, it’s not merely the label of either Single-Agency or TB, but also the agent’s action. I have seen way to many times, when a seasoned agent gives me the whole story about how motivated their seller’s are as they have 4 other properties to sell (and that’s without me asking about it first).

Just like someone saying they are full-commission or full-service, it really depends on what they actually do for the client. Period.

33. Comment from Broker Bryant
Time June 20, 2007 at 5:40 am

Marc and ARDELL, You both make good points about it really being how the broker acts as to what his relationship truly is. With that in mind, I would certainly rather be standing in front of a Judge explaining how I crossed the line from TB to agency than the other way around. My point is. if you hold yourself out as an agent then you best be performing up to the fiduciary responsibilities required. And I think that is the rare agent that can do that.

34. Comment from craig
Time June 20, 2007 at 7:54 am

For the record, the terms “agent” and “fiduciary” are not synonymous. An agent is one who acts on behalf of and can legally bind another, the principal. An agent does not necessarily need to be a fiduciary, and an agent/principal relationship is not necessarily a fiduciary relationship. On the other hand, there are standards to which an agent will be held. Unfortunately, I don’t have the time right now to research the issue in order speak authoritatively on the issue. Perhaps my next post…

35. Comment from ARDELL
Time June 20, 2007 at 8:03 am

Look forward to it, Craig.

I once polled consumers about what they think an “agent” is, as the legal definitions are not as interesting to me as the public’s perceptions.

My favorite came from my brother. He said I want to say to my agent, “See that house over there. I want it. Then I want to come back in a month or so with my stuff, and move into it.”

36. Pingback from Up2Date » Blog Archive » Attention Realtors: From Which Side of the Mouth do you Speak?
Time June 20, 2007 at 7:42 pm

[...] I read many Real Estate Blogs, and a very good one is the Rain City Guide, it offers great content and is well written. Ardell DellaLoggia does a great jog of explaining what fiduciary duty represents. [...]

37. Comment from Cyndee Haydon
Time June 24, 2007 at 9:25 pm

Ardell - I enjoyed this post from both sides - yours and Broker Bryant’s, especially since I practice here in Florida myself. Was just exploring here in Rain City.