Buying without an agent August 27, 2007
There’s a lot of discussion about the condition of the RE market (106 comments in 4 days? That’s gotta be a record…). Certainly one concern is whether it is a good time to buy right now. One way to “hedge your bet” (as well as save some money) is to forego the services of a buyer’s agent. When you do so, you can reduce your offer by up to 3% (or get 3% towards closing costs, or a 3% reduction in purchase price, or any other creative way of realizing the 3% savings) as the seller will not have to pay your agent out of the proceeds. Thus, you can buy the house “below market” up front, as the market takes into account the expected commissions to be paid out of the sale proceeds. This provides at least a little hedge against possible depreciation of the property (or, hopefully, significantly slowed appreciation at worst).
But how do you look at the properties on the MLS without an agent? Most properties have the handy-dandy key box which allows agents the opportunity to access the properties at their clients’ convenience. Absent an agent, how do you get inside to have a look around? While some people are aparently comfortable buying a house they’ve seen only on the internet (as I recall — can’t find a link to such a story right now), that certainly is not for everyone (and probably should not be for anyone).
It takes some effort on your part, but it is very doable. First, find the MLS search engine of your choice on the internet. Ideally, you want to find one that gives as much information as possible about the listing agent. Then search for the home of your dreams. You probably won’t find it, but you’ll certainly find several that may suffice. For each property that sparks your interest, contact the listing agent and let them know that you’d like to see the property. This step may require some additional research about the contact info for each listing agent, as not every search engine provides this detail. Rather, each engine is operated by a brokerage, and a brokerage is far more interested in having you contact them to show you a particular house — i.e., they’d like you to hire them as the buyer’s agent, which will entitle them to that hefty 3% commission. Once you begin contacting the listing agents, you’ll probably want to make a list of all the properties and the dates/times that they’ll be made available. It will make for an enjoyable day of shopping..
The listing agent may not be too happy about having to show you the property, as the agent may consider it not his/her job — that’s why there are buyer’s agents. On the other hand, the agent may be extremely pleasant and more than happy to show you the property. Either way, though, you’ll have the opportunity to personally inspect each property in order to decide whether you should make an offer.
As an alternative, you may be able to find an “a la carte” agent who will perhaps charge an hourly rate to take you to the various properties in which you are interested. This would obviously cut down on the effort needed from you, as you would not have to track down and coordinate with each listing agent. However, not every brokerage is willing to offer such a service. Rather, you either use them for the full 3% commission, or you get out of their office and make way for someone who will. I’ll leave it for another day whether or not that’s a good business model in the rapidly evolving RE business.
Once you find the “nearly-my-dream-home” property, you can proceed with an offer. You can always draft one yourself, but I think every RE professional (agents, attorneys, and probably everyone else) would discourage you from doing so. Alternatively, you can hire an attorney to assist you in the process. There are several in the Seattle area who are building practices in this field, and at least one of them (ahem) works on a flat fee basis. Another attorney offers the forms and provides guidance in completing them — sort of an “attorney lite”. Regardless, for hundreds of dollars, you can save 3% on the purchase price, while getting legal services from an attorney, not an agent.
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- Posted in : General Real Estate
- Author : craig
Comments»
Let’s say you’re a buyer and you want to purchase a home you found that’s listed for $300k. You decide you’re going to scrape off 3% from your offer to start because you’re willing to go at this alone, or hire Craig as your attorney.
So you offer an even $290k. But wait, you know it’s a buyer’s market right now, so you ask for an additional $10k off and another $10k from the seller to help with closing costs, so now you’re down to $270k.
Let’s slide over to the seller’s side for a moment, where they’ve already signed a contract with their agent to represent them and market their home for a certain percentage. Seller and agent have agreed, “This is what it will cost to represent the selling side, and this is what it will cost to represent the listing side”.
Now here you come, on Craig’s advice, and make your offer to seller and agent, not forgetting to mention that you’ve knocked $10k off the price because you don’t need representation. Sounds neat to me.
Except that if the agent is worth their fee - not saying every fee is a solid 3% - he or she will not just be letting you in to see the home. They’ll be on your lender like stink on you know what to make sure that funding happens on time if at all with today’s mortgage complications, working with title and escrow throughout the process, working with your home inspector, checking to see if you got home owner’s insurance and on and on. Because you aren’t going to do these things are you Mr. or Mrs. Buyer? That’s what the listing agent is for. They’re the expert, so let the expert handle the details.
So seller and agent sit down to contemplate this offer; seller sees $30k gone from their equity, and they haven’t even gotten through inspection negotiation yet. $20k gone just because, and another $10k gone when they’ve already contracted with their agent for selling the home. Agent sees $30k gone from the purchase price, which their fee is based on, and $10k because the buyer thinks that since they’re not being represented, that the money doesn’t need to be in the transaction, yet agent knows that since buyer isn’t represented, they’ll be doing all the leg work of the non-existent buyer’s agent if they want this transaction to have a prayer of closing on time, if at all.
Seller and agent look at each other, and agree not to counter, because neither of them wants to be insulted, nor do they want to go through the hassle of dealing with this buyer. Buyer laments because they lost their “nearly-my-dream-home”.
Hiring an attorney to draft your documents to purchase a home is a fine way to go. No argument from me - why would I argue with an attorney anyway? But thinking that you as a buyer can save money by not using a real estate agent AND subtracting whatever commission you think an agent might have collected to represent you, is a misunderstanding.
Jason — I don’t think its fair to base your response on a hypothetical where the buyer offers $21k less than the asking price (3% of 300k is of course 9, not 10, and another 20 is knocked off “just because”). In that situation, I think the seller would be just as “insulted” with a $279 offer.
As for the listing agent working with the lender, the buyer’s inspector, escrow, title, all on behalf of the buyer: on what authority? The listing agent is NOT an agent for the buyer, so what business does the listing agent have talking to others about matters that are personal and confidential to the buyer? Absolutely none, and in fact may be setting him/herself up for an adverse claim. That is the buyer’s business, not the seller’s (or the seller’s agent’s).
My post is based on a “misunderstanding” because agents don’t want to participate in a transaction that is ultimately a threat to their business model. Some listing agents may even talk their sellers out of an otherwise full-price offer ($291k in your hypo above). If I ever found out, I’d query whether or not that constitues an unfair or deceptive act or practice that is prohibited by the Consumer Protection Act.
Regardless, it’s not a misunderstanding. We help people in just this fashion buy houses all the time. In fact, in a “buyer’s market,” I think sellers will be even more willing to entertain such an offer regardless of the counterarguments presented by the listing agent (which, by the way, constitute a conflict of interest to the extent that the agent is trying to protect her/his market position).
Attorney lite????Im still laffin:)
Jason, in your scenario, it sounds like the buyer’s agent does all the work and the seller’s agent just sits around waiting for all that sweet cash to arrive
We have purchased houses using a buyers agent and in other cases going directly to the sellers agent. In my experience, there was no benefit to using a buyers agent. First, the buyers agent is not really on the buyer’s side. He only gets paid if *this particular buyer* buys, so his incentive to talk you into purchasing is enormous. So, now the person who is supposed to be representing you has an interest in making the deal happen, even if it’s not in your best interest (as a buyer). In contrast, the attorney gets paid by the hour, either way. In every case where I used a buyers agent (different one each time), the agent argued against my proposed offer, trying to raise it so that it went through. They also tried to prevent additional negotiation each time.
Second, the seller’s agent has an incentive to get this done quickly and move on (See Freakonomics discussion of this phenomenon), so as long as you are able to negotiate adequately for yourself, it can be easier to move a deal along with the sellers agent. I believe that many sellers’ agreements have clauses that if the seller agent takes both sides of the deal, then the commission drops to 4% or something similar. So, the agent may already be expecting a lower commission in this case; I don’t see why a seller would object to a buyer saying “you probably are paying less commission if your agent does the whole deal, so why don’t we split the savings?”
I think the only problem with Craig’s advice is that the buyer shouldn’t expect to take the whole 3%. Instead, propose to split it with the seller - isn’t that the logic behind most “hey, if you want to sell someday, let me know and we can work directly and save some money” statements between neighbors? Why would someone be offended by that?
Of course, you need protection on both sides, but having purchased four properties in two years, I have found that agents do little to protect you. They don’t read the fine print, the don’t notice errors, etc. You have to protect yourself. If you have purchased several homes and are intelligent and detail-oriented, you can get it done.
People buy and sell all the time without agents, most frequently when it is between 2 independent parties that have some kind of relationship - family, friend, or otherwise. In those cases a price is agreed to between the parties and an attorney may or may not be included in that sale as well. We know this happens day in and day out.
What you put out here, Craig, is nothing new but I give you credit for reminding people about your kind of business. People have worked without agents to buy houses on the market but I believe they are fewer in number partly because most 1st time buyers don’t have a clue as to how to go about the process. I have a current client (they’re now a client - she was starting out on her own as you suggest here) attempting to do this and she called me up one day with some questions, including “is it legal for me to write my own contract?” In the process of answering her questions it became really obvious that she was likely to step on a landmine of ignorance - she knew just enough to get her in some potentially big legal or financial trouble.
Without going through every single detail here (too long) let’s suffice it to say that she is now buying a house that is much higher in quality than she would likely have purchased on her own because of time savings and critical reviewing of properties that we supplied. She is also getting a pretty good deal because the house was (in my professional opinion) underpriced because square footage wasn’t represented completely on the property and it is in way better condition than most properties we’d seen in this price range. AND, she is getting the house because of my own personal sales history (100% closings for buyers past inspection) which we used to help us to win over the listing agent, who then helped her client’s choose my client over another even with 100% financing in a competitive offer situation.
I’ve had other clients consider “unrepresented buyers” buyers before but depending on the circumstances they may or may not be willing to take a hit on the sales price. Each sale is different and people sell for different reasons. Even listing agents may have different ways of handling these kinds of buyers with respect to their listing agreements with the seller. Just because someone comes unrepresented doesn’t mean the seller must provide a price concession. A listing agent may give a listing fee discount to the seller if a buyer comes with no representation so there is no incentive to the seller to drop the price because the extra money would go to them instead. It all depends. I think the biggest problem we have sometimes in the blogging format is that everyone wants to act as though blanket ideas are good for all situations - and they aren’t. Giving ideas in general can be enlightening and provide some potential for coming up with a good solution but viability of a particular tactic will always be dependent on the situation.
Craig,
My wife and I were looking for a home last October until just recently (we decided now is an excellent time to rent). When we started our search we thought we could go without an agent and save 3% as you explained in your original post. My wife and I were both comfortable negotiating on our own behalf and we were both familiar and comfortable with the contracts and paperwork going along with the deal.
Unfortunately, while this thinking seemed reasonable at the time, we found that seller’s agents were completely unwilling to show us their listings. We had to contact a buyer’s agent just to get inside. I understand it is technically the seller paying the real estate commission, but it stung a bit knowing we would essentially have to pay 3% more because we needed someone to be open doors for us. I know real estate agents will argue that I would likely pay more than I would have without a trained professional helping me out, but so far the extent of the advice I seem to receive from my professional is “I wouldn’t go more than a few thousand below asking, these houses are flying off the market!” In any case, I’m guessing a real estate professional’s advice would not have saved me 3%. And this is with a real estate agent I actually feel I have a pretty good relationship with (she is endlessly patient).
So my question to you is, do you have a lot of clients who go this route, and how successful are they with actually getting a listing agent to show them the listed property?
What about the agents that frequent this board? If a potential home buyer calls you directly regarding a listing you have, do you show it to them or do you tell them to go through their agent?
Craig, I think you timed this post very well. I think the time when sellers and sellers agents have the luxuary to pick and choose buyers on petty criteria’s like if they have a buyer’s agent or not is soon going to be history.
Reba — I agree with you wholeheartedly. You are right, each situation is different. Moreover, as you point out, there are many potential advantages to having an agent that extend far beyond the ability to look at properties at your convenience. Finally, you’re right that the 3% reduction requires the cooperation of the listing agent/bnroker, as they have a contractual right (assuming a “standard” listing agreement) to the full 6%. I neglected all of those points in my original post, but as you note “too long” is always a consideration.
John — (1) Typically we are contacted by a buyer AFTER they have identified the property for their offer. So, I don’t know about their experiences in getting the listing agent to show them the property. (2) I would think that a listing agent, at a minimum, has an ethical duty to show the property to a potential buyer, and possibly a legal duty as well (further thought required). The seller hired them to market the property and find a willing buyer. If they get a call from a potential buyer, they should show them the property, don’t you think RCG community? Isn’t that part of the listing commission they expect to receive?
When I am a listing agent and a person calls from a sign or other ad to see the house the first question we have is if they are working with an agent. If there is no agent I will show the house but I make sure to have a conversation with the interested buyer to let them know that I do not represent them and we will give them a WA State agency pamphlet which defines the duties of agents in their various capacities. We will decline to answer certain questions if they conflict with our representation of the seller.
My job is to sell the house so I won’t outright rule out a showing - although since I don’t represent the buyer I will make sure that the scheduling doesn’t conflict with a signed client’s time with me. I don’t do dual agency as a general rule. I’ve only had one situation where I worked with both a buyer and a seller and even then my team acted as a transaction coordinator and not as a personal representative. In that case it worked out just fine.
I don’t agree that a listing agent should refuse to show a house because no agent is representing the buyer - I believe that doing so would conflict with the seller’s interest in selling the house - which is what the agent is hired to do. However, I also don’t agree that just by not having a buyer’s agent should require a seller to lower their sale price. But, as I stated before, it’s always situational and the seller gets to choose what they want to do.
Craig,
I would agree that there is at least an ethical duty to show the property to an interested party. Obviously, the odds any home viewing will lead to an offer are low (and probably lower in regard to a non-represented buyer), but it seems there is still a duty to pursue a lead on behalf of the represented seller. It would be interesting to hear from agents as to what they think their ethical duty is in this type of situation.
I should clarify slightly. I called three different agents with listings before resorting to going with a buyers agent, so my sample isn’t terribly large. The conversation was almost identical each time. The sellers agent first would ask if I was represented by an agent, when I said no, they would ask if we were looking for an agent. My response to this question was, “no, but if we decide to go with an agent we know who we are going to go with, we would just like to see the home you have listed.” At this point, I was told by each of the three listing agents I should contact that agent to see the home.
In my opinion, it was probably obvious to each of the agents what my intention was (to try and save 3% by going alone). Did they turn me away because of the common thinking that when an unrepresented buyer comes through the door, the seller’s agent just does twice the work, or because it was presumed I wasn’t serious if I didn’t have an agent? Or was I just unlucky in the first three listing agents I called?
Reba,
Thanks for the reply. I was busy typing mine when yours posted but it looks like you answered several of my followups. I have one last question for you.
What is your general perception of self-represented buyers? Do they tend to be signficantly more work for the selling agent? Are they taken less seriously?
I agree going self-represented doesn’t entitle any buyer to an automatic 3% discount, however, it is a valid bargaining position for self-represented buyers in my opinion. Assuming a standard 6% commission agreement for the seller, and assuming a real estate agent is flexible (i.e. not trying to get a windfall of an additional 3% if there is no buyer’s agent), the only person affected by the 3% reduction is the seller’s agent, and that effect would seem nominal.
Here in Sunny California, dual agency is allowed. Meaning that the listing agent can represent the buyer as well as the seller. This means that Craig’s scheme really won’t work here, since the listing agent will get both sides of the commission (the full 6% assuming 3% to buyers agent and 3% to listing agent) unless they’ve negotiated otherwise with the seller when they took the listing, since they’re the one who showed the buyer the house (procuring cause). The buyer who’s trying to work out a deal to avoid the buyer’s side commission will just be taking money out of the listing agent’s pocket rather than avoiding paying commission to a second real estate agent (the buyer’s agent). And the listing agent will still have to walk the buyer through their side of the transaction, paperwork, lender babysitting, inspections and all. Seems they should get paid something for that extra work on the buyer’s side instead of just settling for the listing side of the commission.
Linda,
Just because dual agency is permitted doesn’t mean the buyer must agree to it, correct? Assuming a buyer is capable of completing all buyer obligations, would you take only the 3% seller’s commission or insist on the buyer’s commission as well? If a fully capable buyer presented your client with an acceptable offer (minus 3%), what would happen?
Another question, assuming the buyer does not want to take part in a dual agency arrangement, you have no legal or ethical obligation to assist, therefore, you wouldn’t necessarily have any additional work.
Based on your post, it sounds like when you take on a listing you have a contract with the seller stating you get a 6% commission, and if a buyer’s agent comes through, you will give them 3%. Do you inform potential clients that you will get the full 6% in the case of an unrepresented buyer up front?
Not that i’m a fan, but why not just go with redfin in that situation? Do most of the legwork yourself, get 2% refunded to you, pay only 1%. They even take you to houses (not as flexibily as an agent would, but they’ll get you in, I think) and do the contract stuff.
Seems a middle ground between “do it all yourself” and hire a full-service agent.
But I would guess that it’s a combination of experience and “principle” when a seller’s agent refuses to work with an unrepresented buyer. Yes, every unrepresented buyer on the internet claiming they have enough knowledge to fully represent themselves, but I’m guessing this is either: not a representative sample of actual DIYers; incorrect on its face. That is, many many DIYers (not just in RE) severely overestimate their own skills and how much reliance they actually place on the people on the other side of the table in any transaction.
Just watch all the shows on HGTV about people in over their head’s for proof.
Jcricket,
I agree most people claiming to be able to do it all on their own are likely overestimating their own abilities (and I may also be in that group). I guess I’m more interested in how real estate agents tend to deal with the situation, and what the appropriate way to deal with the situation is. As I stated in my last post, if a buyer goes it alone, the seller’s agent does not have any obligation to assist. If the buyer botches something it is on them.
The one argument I think would hold water on the seller agent’s side is they have a duty to make sure nothing comes back to haunt the seller, and this may require them to do additional work with a do it yourselfer to confirm they don’t have lingering legal issues after the sale. But is this enough to either turn away self-represented buyers or charge the seller an additional 3%?
Your suggestion of Redfin is a good one, and was not one we really considered (for lack of knowledge about how Redfin worked) at the time. However, 1% of a $400,000 home is still $4,000, which, in the grand scheme of a mortgage isn’t much, but could be used for some quick cosmetic improvements to that new nome.
Jiminy — Paying Redfin 1% on a $400k house means paying $4k. I work for a flat fee of just under $800, and (with my associate) I feel pretty comfortable stating that I provide a much better service. I have not used Redfin and thus am not fully informed, but I can tell you that, when it comes to the legal aspects of the transaction, an experienced attorney beats an experienced agent every time. That said, going with Redfin will get less pushback from the listing agent.
I think it’s perfectly fair to run a scenario to present a point here (I know that 3% is 9… I rounded down). It’s fun to talk about how people can save money and stick it to real estate agents by saying that a buyer can save 3% by not using one. I’m not saying that everyone needs an agent, just like I wouldn’t say that everyone needs an attorney.
To say that a buyer can save money without thinking what could hypothetically happen leads to misunderstanding, I believe. So, although hypothetical, it does at least paint a picture of what can happen when trying to put a transaction together.
Working with a lender, inspector, escrow and title on behalf of the buyer is not legal, this I know. My duty to my seller client though would cause me to “nurture” the transaction all the more, and not just leave it to whatever situation the buyer sees fit.
I would be asking the buyer’s lender for updates on pre-approval (legal), communicating with the lender to make sure that docs are to escrow on time (legal), ordering title insurance (legal), communicating with escrow to make sure they have what they need when they need it to close on time (legal), letting the home inspector into the home and closing it up when they are finished (legal).
If a buyer doesn’t want representation from a real estate agent, I’m not going to force them. But if I’m going to recommend that my seller sign a contract with such a Buyer, who’s left to make sure that everything that needs to happen to close on time, does? I guess that would be the seller’s agent.
I’m hardly threatened by the model, but I like food with my meals, and expect to be compensated for the work I do. I feel that my hypothetical story is a fair one in today’s market. And to be clear, $291k isn’t a full-price offer if the listing is $300k, and I don’t have to tell my seller the obvious.
I completely agree that in this market seller’s may be more willing to entertain such offers, and that there are plenty of buyers that go this route. Your post just left something to be desired though.
I think there a number of good points made here. I think it is important for consumers to be “transparent” if they expect the same from agents. I am happy to show unrepresented buyers my listings at any time. I am a little frustrated when their “agent” shows up later and tries to get a commission, but I am working for the seller, so as long as we sell their house it’s ok. What’s not ok is a buyer telling agents that they aren’t represented by another agent, but not telling them that don’t plan on being represented by an agent at all. Please don’t expect me to be a taxi service driving you around answering all your questions about the market, neighborhood info etc and then not get paid. Some brokerages will work “a la carte” and get paid for just showing homes, some won’t.
Geordie,
Your response leads me to believe I may have given the listing agents the wrong impression when I responded to their questions (see my post #9).
My intention was to go it alone, the only reason I mentioned that I knew which agent I would use if I had to was to avoid giving the impression that I was open to taking on the listing agent as my own agent. I would have preferred to have not used an agent at all, but I can see how my comment may have been construed as me asking for a taxi service.
Thanks for the input, next time around I’ll be more specific about my status as an unrepresented buyer.
It’s interesting all the posts on this.
First off, I am a real estate agent in Washington State. I work by referral and do no advertising. By working by referral, I receive clients that are like my previous clients, which is to say they are sometimes really skilled at purchasing, or sometimes a complete amateur.
Listing Agents in Washington have a fiduciary duty to sell a seller’s home. This sometimes calls for showing the property to a buyer(s). Most agents will do this, but there are some that will not. Personally, I will usually show a home. Exceptions would be if I were busy with other appointments or if the call happens while I am on vacation/my day off. More often than not I will refer them to another agent as I don’t ‘do’ dual agency. I don’t believe in it morally, though it is legal and ethically right. I will also let the potential buyer know of the next broker’s open/open house, for them to attend at their leisure.
Redfin is usually not the right answer. Negotiation is not meeting someone halfway in the middle… negotiation is figuring out what is important to each party, determining what will make both parties happy, backing up an offer or a counter-offer with statistical facts and/or emotional reasons. In other words… if someone offered $400k on my home that was listed at $450k because they wanted to end up at $425k… well, that’s not negotiation. I won’t go into any more detail… but let’s just say that one needs to get to know the mice running the wheel before they act on impulses. Redfin will help you push paperwork… but if you are going to do that, your better bet would be work with Craig. Craig will give you infinitely better advice and help work the paperwork to your favor.
Redfin offers no alternative to the limited service models that plague our industry. A full service agent won’t allow themselves to be undercut. It would be similar to your boss coming to you and saying “Um, Mr. Johnson… We are going to need you to take on more responsibilities, but we are going to give you 33% less money to do it. Yeah, that’s what we are going to do.”
Most buyers I have worked with lately have tried to find a house on their own and got tired of looking, got tired of the Redfin models… they turn to a full service, full time Realtor that previews properties and eliminates the time it takes to find a home… instead of spending a weekend looking at 10 homes… I will show them 5-7 after work, of which only 1-2 will be eliminated entirely. Of course, I have already spent countless hours looking and refining the homes they were going to see.
Then, when they decide on the offer, I don’t go in $50k less hoping for $25k… I go in with data on why the house should sell at this price, or that price… and I will sit down in front of the seller’s and plead my client’s case… and get people emotionally invested in their purchase or their sale.
It’s more than a fax being sent over… it’s more than a person sitting in a call center waiting for you to fill out some forms… it’s more than opening a door, it’s more than offering raw data… it’s deciphering it, it’s 100% consultation… in one of the largest purchases of their life.
As for #12: When you are the only agent working on a two part transaction where the buyer is represented by a poor agent, or no agent at all, it does consume at least twice as much time on your behalf. It does cause a lot more trouble, and it’s a lot less successful on the whole for both parties. If two offers come in and they are exactly the same… one with an agent and one without… my clients have always chosen the offer with an agent as they know there is a party on the the other side that understands the work it takes to close a transaction.
Finally, the % you save may not be saved at all… after all, the seller could have been thinking about a price reduction of 5%… and you come in 4% lower with 3% savings in ‘your pocket’ when in fact, you just netted the seller 1% more than they were going to be asking next week. Of course, you will never get that sort of information from a listing agent or the seller on your own… that takes someone that knows the right questions to ask… who has a reputation in the community of buyers/selllers/brokers. With that… my seller’s always net more when they work with a buyer(s) that isn’t represented… ALWAYS… though I am the one that usually suffers.
John F.,
Thanks for the input. Your post was very informative, however, the last paragraph seemed a little off to me. Obviously a seller may be planning on a price reduction in the future, but how is a buyer’s agent more likely to get that information than a buyer simply asking if they will take 5% less? Unless your implication is that listing agents are more likely to share information provided to them by the seller in confidence with another real estate agent. Or maybe I am severely underestimating the importance of “knowing the right questions to ask.”
John,
The listing agent has the fidiciary responsibility to represent the seller and their wishes. When a buyer calls a listing agent, the agent is only acting on the seller’s behalf. The information will be tight and hard to come by. Further, the listing agent wants to convert the person on the phone to a buyer and when they know they can’t, they tend to be less helpful.
When a buyer’s agent calls the listing agent, the agent has no grand vision of dual agency… much like a doctor talking to another doctor, there is professional courtesy (ok, that’s a stretch of professions). A good buyer’s agent will get a listing agent to speak more freely… ask the right questions, etc. Further, the buyer’s agent can look at the sales history and use the information found there to help aide the discussion. Such as… “I see the house has been listed three times over the last two years, each about 120 days. We are on the 100th day of the listing being on the market, why do you think it’s going to sell in the next 20 days?” or “I see the previous buyer walked away, what happened?”… “What is the overall problem that you have heard from buyers when walking through the home?”
These are questions that a listing agent won’t answer for a buyer, but will answer for another agent…
Further, I love it when a seller works with a flat listing fee company, such as Redfin ($3000 to post your listing, whereas other companies charge MUCH less)… most of the negotiating happens directly with the seller and questions are answered much more openly and less guarded than when talking to an agent… I save my clients money there too!
Does this make sense, John?
John- my response wasn’t directed at you, but merely some advice for any buyer (or attorney) considering going agentless.
John F. - I think you hit it on the head. I work in a vacation market that is not part of the Seattle area NWMLS. We get agents and non-agents who think that their Seattle market knowledge will help them here. Irrigation districts? Mosquito control boards? Which roads are plowed by the county? Local knowledge not easily found on the web. Most buyers would get lost here because Google Earth and Mapquest are notoriously bad with the local geography here. Some of the roads they show turn into jeep trails - not good for the mini-cooper!! As local agents in a small market we have knowledge about the motivations of some sellers because these people are our neighbors and friends. I preview homes so my buyers don’t have to look at all the “pigs with lipstick” - nice photos online but underneath the powerlines or backing on to the railroad tracks.
In our market the “average” home sells for 3% under list price. Using a skilled agent you should be able to do better than “saving the 3%” and doing it yourself.
John F.,
It does make sense. I don’t want to come off as if I’m questioning whether an experienced agent adds value to the seller or buyer, I think they can, and do.
In my opinion, when an unrepresented buyer calls a listing agent, the listing agent should have no grand vision regarding dual agency in the first place (at least, that grand vision should disipate once the unrepresented buyer states they have no interest in being represented). It sounds like once that vision is gone, listing agents will often disregard the unrepresented buyer entirely.
However, your answer also illustrates how the system is currently unfriendly to unrepresented buyers. A buyer is not required to hire any agent to assist them, however, it seems increasingly difficult for an unrepresented buyer to get relevant data, get access to homes, etc.
I also understand the dynamics of professional courtesy (the same could be said for attorneys working with other attorneys as opposed to pro se litigants). However, I think in the case of a real estate agent this is more complex as you have the duty to sell the house for your client and for some reason unrepresented buyers are often disregarded (even if an attorney takes a pro se litigant less seriously, they are still obligated to follow discovery rules, etc., and typically, the judge will grant additional leeway to the pro se litigant, serving to level the field slightly). In the case of the real estate agent not showing to an unrepresented buyer, there is potentially a lost sale.
We never did go look at the three houses we called about, and there is no way of knowing if we would have made an offer, but it seems like an unneccessary risk. The house did sell, but it may have sold sooner.
Nice post, Craig. Very informative. I really hope that by the time I go to buy again, the agency rules will be written so that I can choose to pay for representation or not. And if not, I don’t have to haggle to get my 3% back.
Sadly, I would likely succumb to representation because I’m not willing to work so hard simply to get the door open. The system is currently set up to screw the informed buyer.
As an aside, I know RCG claims to love disagreement, but you and Jillayne seem both be in some contest to see who can piss-off the most agents this month!
I think it’s a great pro-consumer direction to go to get RCG more credibility as well as visibility beyond the RE community.
Craig,
Nice and informative post. Is there any way you can enforce getting buyers in the door? I think that might be key. Isn’t a listing agent who refuses to show a prospective buyer the property quite simply a bad agent for the seller? If a buyer were turned away, I think a letter to the seller on the lines of “I wanted to buy your house but your agent would not show me the house, so I looking at and ended up buying another” might be warranted. 3% and they would not even show the house to a prospective buyer? If thats not a flashing neon sign indicating that the consumer is no longer the main concern in this industry, I don’t know what is.
When we bought our home, we had found it all by ourselves b/c we were driving through our dream neighborhood. We got the flyer, went to the open house later that day, and knew we wanted it.
We contacted a realtor who I had worked with in the past just because we didn’t know there was an option, and she did not bring ANY value to the transaction.
If anything she was a real pain in the A esp. at inspection time.
She thought we were nutty for snaking the sewer line as well, to which I told her since they can cost upwards of $30k to replace it’s worth my time (and yours!!) to get this done.
We already had financing, had already bought other houses, she was just a total pain in the A and had I known that she wasn’t necessary, I would have saved myself the 3% in commissions the lazy seller’s agent got from us.
John - I can understand your frustration.
“In the case of the real estate agent not showing to an unrepresented buyer, there is potentially a lost sale.” - This all depends on the seller. As a buyer’s agent when showing a home I know my buyer is ready, willing and able. The same can’t be said for the Joe Smith walking in off the street calling any listing agent to see the interior of a home. If I call you and you are a seller, you should know that the client I am bringing by is an able buyer. When a buyer is unwilling to meet with me before seeing a house so that I ensure they are not Jeffrey Dahmer or someone completely unable to afford a home, how does that hurt the seller?
“It sounds like once that vision is gone, listing agents will often disregard the unrepresented buyer entirely.” Very true… I think the system could be tweaked here, but how? I think Title Insurance is a scam, but it’s better than the alternative, which is Aunt Jamaina still owing half the property after you paid $1M for it.
“A buyer is not required to hire any agent to assist them, however, it seems increasingly difficult for an unrepresented buyer to get relevant data, get access to homes, etc.” I think it’s much easier to access that data now than ever before. Company websites show a ton of information that was hoarded in the past, but now available for everyone to see. Furthermore, a buyer’s agent is not required… and as a real estate agent, I would never even dream of purchasing a property in a different city without the help of an agent. I don’t know the market conditions, I don’t know the areas and I certainly don’t know the tricks of the trade.
As for professional courtesy, I think it goes beyond such. I contend that an agent working in a field of expertise over an extended period of time is going to know a lot more than you can research on the web. My advice: Find an agent that specializes in certain areas as opposed to the agent that knows everything… sure, they are around, but they are few and far between.
As for Finance Girl: I am sorry you had to endure that situation. The agent you worked with probably wasn’t a Realtor… she probably was a real estate agent. I always recommend a city sewer inspection, especially in homes in West Seattle which seem to have a lot more problems than other neighborhoods. Most won’t pay the cost of it… but it’s a valid concern. Further, you should have been represented a lot better than you did. Unfortunately, I can’t teach everyone the ‘right’ way of doing business… I can only hope they get a good mentor who is respected in the community and act like a sponge. There is no excuse for your representation or customer service.
I don’t believe real estate agents have a blanket mandate to let anyone in the door of a house and prudent agents are advised to meet any sign-callers and/or unrepresented Buyers for pre-approval letters and ID before showings. We meet those buyers in our office, for our own safety and the safety of our sellers. Since I do not engage in dual agency (though it is allowed in our state), I refer any unrepresented Buyers to a Buyers Agent to view my listings, where they may be required to sign a Buyers Agency Agreement and produce a pre-approval letter before viewing the property. I explain to Sellers that we won’t just let anyone in the door, that we make the effort to pre-qualify Buyers to make sure they’re serious, and Sellers appreciate that extra effort to protect their homes and personal safety.
I’ve had limited experience with non-represented Buyers, but I did have one of my listings sell this year to a R*df*n-represented Buyer, and they made an offer $6000.00 over asking price, with no other competing offers. Neither the buyers nor their agent were able to negotiate any repairs or work-orders from the Seller, but I presume they did get some money back from R*df*n at closing, about equal to the amount they paid over the asking price.
If I get a phone call from an unrepresented Buyer, I first inquire as to whether or not they’re looking to hire an agent and if I can “interview” for the job. If they’re not interested in hiring me, then there’s not much else I can do to help them.
As a Lender, I prefer working with buyers who have a professional agent. When I see a FSBO, more often than not, the client doesn’t realize what they’ve entered into with a contract. I do work with people who are buying FSBO…it is a lot more work for the LO.
I’ve not experienced a transaction where the buyer is “represented” by an attorney in lieu of a real estate agent yet.
Craig,
I think there is a service that you can offer to alleviate Rhonda and Marlow’s concerns.
First, any buyer would have to go to a mortgage broker (Rhonda?) and get pre-approved for a loan amount. Second, they could get a letter from a real estate attorney (Craig?) stating that he would be handling the paperwork from their side. Marlow, would this information be adequate to convince you that the buyer is serious? You now have two references to verify that the buyer is serious.
Now we’ve established that the buyer is serious, has a source of funds, and is not (on the face of it) an incarnation of Jeffrey Dahmer. Marlow, would you show the listing to such a buyer? Also, do most houses have open houses on a regular basis rendering “showing the listing” moot?
If they agreed to meet me in my office first, with a letter of pre-approval and proper ID, I (or more likely an assistant) would show them the house.
As far as regularly scheduled open houses go, I would have to say that most have Broker’s Open House during the week and a smaller percentage would have public opens on the weekend. It’s a security risk, it’s dirty, what with people walking in and out and it’s probably unneccessary. As stated elsewhere, agents like to hold open house’s to meet buyers. It’s probably not the best way to market a property.
SS,
I think your suggestion is more than fair, and I have to admit, I would much rather pay an attorney $800 than a real estate agent 3% to complete the paperwork.
I had the preapproval letter ready the first go around, but I think next time I will also attempt to get an attorney ready as well. Unfortunately, I still think I may be left out in the cold by a significant number of listing agents.
Washington law is very clear on this issue:
“Unless otherwise agreed to in writing after the seller’s agent has complied with RCW 18.86.030(1)(f), to make a good faith and continuous effort to find a buyer for the property; except that a seller’s agent is not obligated to seek additional offers to purchase the property while the property is subject to an existing contract for sale.”
Absent a written agreement with the Seller, any listing agent who refuses to show their listing to a prospective buyer is, in my opinion, violating the state agency law. There is no caveat in the law that carves out unrepresented buyers from the potential pool of actual buyers.
Any buyer who gets the cold shoulder from such a listing agent should put a yellow sticky on the seller’s front door with their telephone number. When the seller calls you, inform them of your sincere desire to view the home and how the seller’s agent refused to show it to you. It may very well get the seller’s agent fired and you will then be able to split the entire commission with the seller, albeit paying a couple of attorneys to write up the deal.
Now, before agents get too mad at me, I am not advocating that seller’s fire their agents. Unrepresented buyers and Redfin buyers are a fact of life. They exist and they represent potential purchasers. As such, listing agents need to discuss with their seller how they will react to such buyers. If they are going to treat them differently than the “typical” represented buyer, the seller needs to know this and, in my opinion, it should documented in a written addendum to the listing agreement. Anything less is a shell game.
-Russ
John,
A couple of things to remember
“A buyers agent gets paid only if the transaction goes thru” - so think
about how interested they would be in “not” making you buy a house
“It is the market, stupid” (not directed at you).
In a tanking market, agents will show to a buyer whether they are
represented or not
I would suggest you call around and see what the reactions of the sellers agent’s are now compared to last october.
Russ,
Would you let your wife or daughter run out to a vacant house and meet some stranger who cold-called them out of the blue? I’m sure you’re not suggesting that agents disregard simple safety precautions designed to keep themselves safe, out of fear of violating RCW 18.86.030(1)(f). Every office I’ve worked in has had a suggested policy of meeting all buyers and sign callers in the office first, check their ID, and make a copy, giving it to the secretary along with a note of where they’re going and when they’re expected back.
Realtors in Danger: http://www.floridarealtors.org/FLRealtorMagazine/2007/April/Danger0407.cfm
To Meet or Not to Meet: http://www.realtor.org/rmomag.NSF/pages/featuresept03safety
Safety Tips for Real Estate Agents: http://homebuying.about.com/od/realestatecareers/a/safety_tips.htm
If I am the seller and I didn’t have to pay a buyer’s agent commission. Why wouldn’t keep I it for myself?
If I am the listing agent and I were paying the BAC, then I would want a a Buyer’s agent doing the work. The BAC is not the birth right of every buyer they has read somewhere… The commission I negotiated with the sellers is my business and if a buyer wants to earn a commission, then they need to get a license and I will be glad to pay them. I will do what is good for my seller and that is selling the house. My experience shows that this type of buyer is only price conscious and typically is high maintenance which is not in the best interest of the seller in spite of what they think of themselves. If they want a blue light special go to Wal-Mart and take your Blue Lite attorney with you.
“What about the agents that frequent this board? If a potential home buyer calls you directly regarding a listing you have, do you show it to them or do you tell them to go through their agent?”
I show it to them and then I tell them they can use the amount set aside as the buyer agent fee to hire a buyer agent, or I can write an offer on behalf of the seller. I also explain to the seller at the time I list a property that the amount included in the price to pay the Buyer Agent, may be deducted by the buyer in the event they choose not to use the services of a Buyer’s Agent.
I don’t know any seller who would understand why their agent who gets a call from a buyer to see their home, would refuse to go and show it to them.
What actually happens is between the buyer and the seller. I have had a buyer take the entire fee partially off the price and partially toward closing costs. I’ve had both parties ask me to be a Dual Agent and a portion of the fee was split between the buyer and the seller. I had one go to Redfin and purchase it that way and I had one go out and hire a full service agent.
It doesn’t matter how the buyer chooses to use the monies, as long as the buyer has the choice of all alternatives available, with the seller’s agreement to that buyer choice.
Uhh, do you all live in a fantasy world?
Oh yea, not a fantasy world rather what has been too long a monopolistic industry.
The fair market value of my property does not change just because someone does not use a buyers agent. Craig, and Redfin folks, why should I give up part of my equity to a buyer without an agent?
For that matter, why give up part of my equity to a buyer with an agent? If a buyer wants to use an agent then let said buyer pay for the agent as part of their cost of acquiring the property.
As a seller I may choose or not to hire an agent. Unfortunately for today’s agents I can see little justification beyond your slowly dissolving monopoly to pay you 3%…
Really, it is time to end the scam the RE industry has been running all these year!!
I have told my sellers that if someone calls me because they are interested in seeing my clients house and are not working with an agent, I will make an appointment to show the house or let the potential buyers know if there is an open house schedualed. I do think it is important for me to help expose my seller clients’ home to as many potential buyers as possible. However, Marlow does have a very good point about agent safety, and pre-qualifying buyers before meeting at a house. Since this particular scenario has not happened to me yet I will have to decide on a case by case basis how to handle it.
I also go over at the same time that I don’t do dual agency, that when they hire me they will have 100% of my attention and effort in representing their interests. If there is an unrepresented buyer interested in their home, I will ask the buyer if they know an agent or any of their family or friends can reccomend a good agent to help them, if not refer them to someone I know who could help them. If they want to represent themselves, then to hire a lawyer to help them. I have also let the one client who had a similar scenario know that I thought that the 3% buyers commission should be split between him and the buyers if the buyers chose to have a lawyer rather than an agent represent them. Those buyers (who were neighbors) decided not make an offer afterall.
Last year I gave some seller clients Craigs’ contact information in case the potential buyer the sellers thought they had lined up would like to buy the house before we listed it and then have no RE commission. The potential buyer did not follow through with an offer.
Yeah, well Steve
Go ahead and try to sell your house yourself in a declining market. #1 How did you arrive at your price? Odds are you will end up overpricing it just like most sellers. #2 How available are you for showing? Are you going to let your wife open the door to strangers? #3 Are you going to do everything right so you don’t get sued? #4 What about your marketing budget? What?!! You’ll have to pay $$ out of your pocket for marketing??? #5 I’ll bet your such a savvy negotiator you can beat a professional every day……we eat guys like you for lunch and you don’t even know it.
We don’t worry. Hot shot big mouth frogs like you try and fail every day. In fact, less than 10% are successful of sellers are successful doing it themselves. You’ll end up listing and paying a commission. Oh, and by the way…you’ll pay more than 3% to sell your house.
You should also know that commissions ARE not toy and grocery money. Before that we pay the brokers fee, taxes, postage, personal marketing, computers, software, marketing expenses on your house, transportation costs, and occasionally $$ thrown in to help you close the deal. We hire people to go on our payroll and pay competitive wages. We don’t have any benefits like you. We want health insurance? We buy it ourselves. Your bottom end would pucker if you had pay over $800 / month to keep your family protected. Most agents expense structure exceeds 80% of the holy commission you rail about.
Yes, some agents get paid very well, but most don’t. Commission sales people are the highest paid people in any economy. The Boeing plane salespeople make more than the engineers. That’s the way it is. But the commission person has infinite more risk than a guy with job. Steve, can you imagine being tight financially, making a sale and 40 days later find out it evaporated because of a mortgage issue? Hmmm the health insurance still needs to be paid.
And while I’m on the rant…Craig….your just as bad. You are no better than a bottom feeder of the real estate industry. Every time you write, you write with contempt for agents. Could it be that you passed your bar, and agents have the ability to out earn you? This post was such a blatant commercial for you that RCG guide should charge you for your post.
I’ve always wondered. Do CPAs get mad at people who do their own tax returns? Do attorneys who do tax returns badmouth CPAs? Why is this industry such a heated bloodbath, as if options for consumers equals some dreaded threat to their survivial?
Is there some secret society of CPAs plotting to destroy Turbotax? Why do expanded consumer options in real estate send everyone into a potty-mouth war?
Jane,
The individual points that you make regarding the expertise that an agent brings to a seller in getting their home properly marketed and sold, I agree with.
I agree with your points on our overhead, although a little childish to wave that in front of the community. I doubt you’ll get much pitty from consumers here.
But anonymously vomiting all over Steve isn’t necessary. And while Craig’s post did come off somewhat as a personal promotion piece, calling him a bottom feeder is out of line, and I’m sure, uncharacteristic of him.
Assuming you’re an agent by your post name, I have no doubt that business is tight right now and you’re probably frustrated by all this “not using agents” talk. But you’re not doing your business or the blogging world any favors by going on a rant and assassinating character. You’re not doing anything I guess, since you’re too craven to identify yourself.
Jane Agent.
If you think times are tough now,hang on a while.How long did everyone on your side think the ATM’s were going to work in those inflated houses?Forever? Just wonderin
Just Checking,
I agree the market may have had something to do with it. However, I find myself strangely uninterested in calling listing agents for the time being. Lets see how these mortgage issues shake out for the next 3 months, then maybe I’ll think about calling again.
Rob Aubrey,
I know when we lived in Texas attorneys were permitted to serve as their own agent and collect the buyer’s side commission. I haven’t checked what the State of Washington has to say on this matter but if there was something similar I was hoping to at least take advantage of that opportunity. Granted, it wouldn’t work for everyone, but I’m primarily concerned about saving myself some money.
Marlow,
I am not advocating that listing agent’s act unwisely or without regard to their safety. Each office and each agent will determine what is acceptable. I am only advocating that whatever the policy, that they communicate and obtain agreement of their seller client when they take the listing. As long as seller and agent are on the same page, act as you see fit.
Russ
Ardell and Deborah,
Thanks for your replies. It is becoming very apparent that every real estate agent has a different approach to non-represented buyers (ranging from openly hostile to extremely helpful).
I just wish the two of you had the listings I was interested in!
Russ — I agree 100%. Unfortunately, a legal right is only as good as your ability to enforce it. It would be difficult for a seller to prove some harm as a result of a seller’s breach of this statutory duty (that must also be consistent with reasonable safety concerns as Marlow points out).
Jane — thanks for the kind words. I think you’re a bit defensive, to say the least. As Ardell pointed out, what’s the problem with expanded consumer options? Perhaps it threatens your livelihood, but I think the answer is to expand, grow, and change with the times, not attack those who are at the leading edge of change. I encourage you to get out of the box — or at least poke your head out — to see where the industry is headed.
Steve — it seems like you’re just mad at everyone. I can appreciate your frustration, but what exactly are you railing against? The MLS system? If that’s the case, then we are on the same side. I agree, a good argument can be made that buyers should pay for their own representation, whether an agent or an attorney. You must read my post in context: Properties on the MLS, where a buyer’s agent commission is offered and paid out of the listing agent commission. In that context, it’s not your “equity” — you’ve already signed a contract requiring you to pay 6% (or whatever the listing commission may be). In that context, reducing the offer by 3% — AND securing the consent of the listing agent to reduce his/her fee — does not change your net sale price.
Jason — Sure its a promotional piece. That’s why I blog. Is there anyone here who makes a living out of RE that blogs simply for pleasure and WITHOUT promoting themselves? That said, its also a pretty interesting post that provides a different perspective (see comment #25.
John (#46) — I don’t believe an attorney can take a portion of the commission, although I have not looked into the issue in detail. Regardless, I like having my fee disconnected from closing. That way, I can go in whatever direction my client wants without any personal conflict of interest. If my client wants out of the deal and does not want to close, it’s not an issue in terms of my fee.
Russ,
I agree with your sentiment. I would have fully expected to have been “screened” by any listing agent I called. I offered to send over my preapproval letter prior to the viewing, and would have been happy to go to the agent’s office and show my ID.
Unfortunately, we never got even this far. We were more or less told to have an agent call on our behalf. The thing that struck me as odd was they had their phone number in huge font on the yard sign. If you don’t want unrepresented buyer’s calling, why put the phone number on the board? I’m sure any licensed agent can find contact information back at the office.
Obviously there is some room for the listing agent to use discretion when dealing with an unknown individual, but it seems like at least some minimal effort should be put in to establishing the unrepresented buyer’s credibility.
Thanks Craig.
Guess it was just another quirky Texas thing.
That leaves me falling back on the 3% (or 1.5% or whatever) discount as a pure negotiation tactic, which appears to have received a mixed reception from the agents in the room.
Craig- Thanks for starting this lively discussion. Care to share with the class your recent experiences in shopping for property without an agent? The theory is interesting and makes for great debate, how does work it in the real world?
Geordie,
I think one of the running themes of these comments is that it doesn’t work very well in the real world. The question I find more interesting is why not? Some agents have voice concerns regarding the safety of themselves and their clients. This is a reasonable concern, however, I think several people have proposed good methods for mitigating this.
It seems some agents are very hostile to unrepresented buyers. Obviously, this may be due to several factors, but at some base level, it appears that at least a significant percentage of listing agents don’t want to be bothered with an unrepresented buyer, or even worse, want to keep them out of the system entirely.
Sure, Geordie, I’d be happy to “share with the class” (does that make me the teacher? And if so, why am I working in August?) If anyone noticed, Geordie has a bit of a personal interest in this thread.
My wife and I were interested in looking at some vacation properties around Leavenworth this past weekend. I called a local brokerage (which had one of the listings we were tenatively interested in) and informed the woman who answered the phone that we were not using an agent, but that we were wondering whether an agent or an assistant would be available to show us some properties. The agent did not appreciate the nature of my request and reasonably thought we were looking for an agent. In retrospect, I should have made myself clearer. Shortly thereafter, the agent called back and asked for clarification of her role. I of course indicated that I was happy to pay for the agent’s (or assistant’s) time spent showing us the property. After further thought, the agent declined to assist us as the brokerage only offers “full service” and does not provide “a la carte” services.
It was an excellent lesson for me and obviously became the basis for this post. The moral: if you’re not working with an agent, then contact the listing agent for access. Alternatively, find an “a la carte” As shown by the comments, you may have only limited success in doing so. In our case, it worked out fine — we contacted three different listing agents for 6 different properties and had a productive day of shopping.
John-
I think agents are hostile to unrepresented buyers because as a listing agent you will be doing more than the “listing half” of the work involved in a transaction. There are a small number of competent consumers out there who can take care of themselves, but not many. There are plenty of incompetent agents working as buyers agents too and we don’t like doing their work for them either.
Craig, thanks for sharing your lesson about needing to contact the listing agent or broker. I think that is key here.
Consumers can help the efficiency of the transaction by telling agents what their expectations are and seeing if the agent can help fill them.
Going agentless is really about value right? (saving money). If a consumer calls me and tells me they want to buy a vacation home and get a great deal on it I can help them. I can probably save them more than 3% and I can save them months of headache and heartache. (By the way, in my market 3% is less magical than it is elsewhere, you may be only saving yourself 2% or less going agentless.)
Craig or Russ -
Is the 6% set-aside in the listing contract open to legal challenge?
Would someone who represented themselves yet in effect ended up paying 6% to the listing agent have a case?
I’m generally someone who avoids lawsuits, but maybe a good, well presented and researched lawsuit is the only way to get the system changed so it is fair to the consumer.
As I see it (and I’m not a lawyer) if you represent yourself you are being forced to pay 10s of thousands of dollars for a service you don’t receive.
If so, and there are any good RE lawyers who are willing to work pro bono, I might be interested in being a client, when I next go to buy.
biliruben — the 6% (which is “standard” but there is a significant degree of variation in the actual percentage charged) arises out of the listing agreement between the seller and the listing agent/broker. Here’s how it works from a legal perspective: The seller agrees to pay the listing broker 6% of the sale price. The listing broker then agrees to split (or otherwise pay some portion) to a buyer’s broker/agent who produces a buyer. This is enforced by the rules and agreements between brokers concerning the operation of the MLS. The buyer actually has no legal interest in this contractual arrangement. So no, the buyer has not legal right or ability to challenge the 6% commission.
Craig
What bothers me the most about your post is that it could be perceived to be “legal advice”. You are representing yourself as a real estate attorney on RCG. In comment #50 you say,”I don’t believe an attorney can take a portion of the commission, although I have not looked into the issue in detail.”
Irresponsible.
In fact the that issue is very clear in the MLS cooperating agreement with brokers and who is entitled to that side of the commission.
I am relieved that you clarified in comment #49 that the Buyer in fact needs the cooperation of the listing agent to have access to the Buyer Broker side of the commission.
Overall I think your original post is irresponsible and borders on giving improper legal advice on a public forum. Unfortunately most consumers won’t wade through 60 comments to unravel the truth.
I would encourage you to study the listing contract and the broker’s cooperative MLS agreement and make a “new topic” post with the facts.
Russ, I’m sure you with your experience with the MLS, you can at least share the facts with RCG on how the NWMLS contract works between a Seller and a Broker and the cooperating agreement between NWMLS brokers.
Greg,
Wow. Throwing out an accusation of improper legal advice is pretty serious. I’m sure you are an expert on the Washington State Rules of Professional Conduct, but I seriously doubt anyone here thinks any of Craig’s comments are intended to serve as specific legal advice.
Craig’s original post was intended to offer a different approach for potential home buyers. Yes, he provides a service that might be incorporated in that approach, but it does not have to be. I don’t see how offering an alternative to using a real estate agent constitutes “improper legal advice on a public forum” (quite the term by the way).
As many of Craig’s replies have been directed to me, I can assure you, I am not under the impression Craig is giving me specific legal advice. I doubt any others would think so either.
Sorry this thread has been so threatening to you Greg, but I have found it very informative.
Greg: Shades of Jane Agent here — does she work in your office? Friend of yours?
Given that I am not an NWMLS member, I am not privy to the MLS cooperating agreement, as you know. I was basing my response on the Rules of Professional Conduct that apply to attorneys. Regardless, I think you’re saying, “No, they may not,” while I said, “I don’t believe so.” We’re in agreement. I don’t see how that adds up to “irresponsible.”
Also, I clarified the fact that the listing agent needs to cooperate in reducing his/her contractual right to the full commission in comment #8, my second comment overall and first following a comment that raised this issue.
Finally, accusing me of dispensing legal advice in a public forum is pretty stiff criticism. If that were the case, I could very easily run afoul of the Rules of Professional Conduct. I respectfully disagree. Ironically, I considered but rejected the need to add my standard “this is not legal advice” langauge at the beginning of the post. Regardless, no need to take up space in this otherwise interesting thread with a discussion of this narrow issue that affects only me.
Shakespeare wrote a lot of memorable language, including “The lady doth protest too much.” Such timeless language, as nicely illustrated today by the responses of agents to posts like these as it was 400 years ago.
“Going agentless is really about value right? (saving money).”
I’m wary about hiring a representative that stands to make more money by making me overpay for a house. Cue the chorus of Realtors saying about how they would never do that and how they’re always so selfless and how it’s so important to find a good Realtor that only has your interests at heart.
But how am I to know if a certain Realtor is okay? Would you meet up with Realtor that you just cold-called out of the blue? How can you know that he isn’t Jeffrey Dahmer or someone completely unable to get me a good price?
Can anyone shead some ligh in how the payment of the buyer’s agent became the sellers responsibility. The whole setup seems very strange to me. That a seller should pay for a buyer agent’s that most likely (certainly if you read the comments from agents here) will be able no negotiate a lower price on your home and who knows what other consents? I.e you are paying for someone that will work on the other side of a negotiation? It’s very,very weird. To say that it’s payment to produce a buyer is just as weird since it implicates that the buyer agent is in some form working for the seller which most be a huge conflict of interrest. Shouldn’t it be the seller agent’s job to find a buyer by listing and showing the property?
I am currently looking to buy a house so my perspective is from outside the RE industry and as a buyer.
I think that Web 2.0 technologies / companies are giving buyers more and more power all of the time. I will be a first time home buyer and have been obsessing about the details for months. I frequent sites such as redfin.com, ziprealty.com, zillow.com and propertyshark.com. I also read a number of blogs such as this RCG. There is a wealth of information that I consume all of the time.
If there is a particular home that catches my eye I can use propertyshark and zillow to find out about other homes in the market as well as demographics. I can also find out about taxes, who owns the home, when they bought it and how much they paid.
It seems like the RE industry is following the same trend as the financial industry. My father wouldn’t have dreamed of buying a stock without his broker but now he uses ScottTrade.com and does his research on his own.
With all of this information people will feel more empowered in their search.
With that said and even if I am at the point that I am ready to pull the trigger on a particular home I will probably still look for a real estate agent with experience and whom I trust to guide me through the process. In the future I think RE agents can expect to deal with people who are very informed and the agents that will succeed are the ones who adapt to this new breed of web enabled client.
Craig
Won’t dignify your first sentence with a comment back.
As for your second paragraph, I think YOU will be surprised with the real answer.
And yes, it is stiff critism. You do not have your facts straight and are advising people to possibly meddle in a contract on an open forum in the position of a real estate attorney.
Again, I would encourage you to do some research and answer back.
K,
Have you had much luck contacting listing agents to actually view the homes in person or have you not gotten to that step yet? I agree, the Internet provides a wealth of information, but at the end of the day, you really have to see a house to know if you will be able to live there.
Unfortunately, it is the front door that is the bottleneck in the process for an unrepresented buyer.
Will the DOJ antitrust lawsuit, if successful, have any impact on these anticompetitive MLS broker’s agreements?
Re: listing agents showing their own listings.
We have always done it and will continue to do so. We could care less if someone wants to represent themselves. Our responsibility is to sell our clients listing. It can be irritating if the buyer is represented and doesn’t have their own agent show the home, but it happens.
Keep protesting Greg — your squawking only proves the larger point. Moreover, I still don’t understand the venom, unless it’s simply because I represent a threat to your (successful) method of doing business. Besides, as I pointed out, we’re in agreement — why would I be surprised by the “real” answer??
tj — the system evolved from one where BOTH agents worked for and had a duty to the seller. The WA Legislature changed this system when it enacted RCW 18.86. Per that law, a buyer’s agent has a duty to the buyer and a seller’s agent has a duty to the seller. Nonetheless, the law did not alter the system of compensation. So, that’s why we are here today.
biliruben — Russ knows more about the DOJ suit, but I think the answer is no. You make a good point, though. In a perfect world, the buyer would pay the buyer’s agent and the seller would pay the seller’s agent.
Bob — I commend you for this attitude. Sadly, as shown by the other comments here, they are not held universally.
If I get a phone call from an unrepresented Buyer, I first inquire as to whether or not they’re looking to hire an agent and if I can “interview” for the job. If they’re not interested in hiring me, then there’s not much else I can do to help them. - Marlow
You mean other than do your job and show your client’s house (yes, while taking the proper safety precautions) to a prospective buyer?
You must either be a heck of an agent or the market has been extremely good to you for you to feel like you can casually turn prospective buyers away from properties you are being paid tens of thousands of dollars to sell, Marlow.
And agents wonder where the the love is.
Right, all I can do is show them the house. I really can’t assist them further if they don’t want my assistance.
And yes, I’m a heck of an agent.
If that’s what you meant the first time, than I’m sorry Marlow.
It sounded very much like you had no interest in even showing an unrepresented buyer the house.
Marlow: Meet you at the office to verify information is reasonable.
Johns experience on being screened out by the listing agents is just terrible. I get the feeling that the agents have the attitude of making the buyer jump through hoops to show them a house if they are’nt represented. This will work in a “hot market”. If the buyers are scarce, I wonder if they will still be as reluctant when the market tanks and buyers are scarce. Is the sellers best interest served by this attitude?
Jane Agent: All you are proving that the current model is inefficient from a market perspective. One look at your post and its no wonder consumers are looking for alternatives like what Craig is proposing. It does the job for a lot cheaper and they get to choose what services they want, not what is forced down their throat by a monopoly of agents. In fact, I would consult a real-estate attorney anyway if I were to buy a house. All that paperwork, hundreds of thousands of dollars at stake, I’d be crazy not to. Jane Agent on the other hand…. based on her post, I’d be crazy for wanting to deal with her. Wonder how this will shake out after the DOJ lawsuit. At the rate at which the market is changing (such as the DOJ-MLS lawsuit), methinks Jane Agent will have to change her mind about “bottom feeding” in the near future. Eating people for lunch? Enjoy your lunch while you have it….
Craig: I’ll stop by your class - probably the next one. Thanks again for the thread.
Geordie,
I’m the other attorney in Craig’s office and I’d be happy to share a few recent experiences I’ve had.
In 2006 (before joining Craig), I bought a house in Rainier, WA (69 miles south of Seattle) in a brand new subdivision as an investment (which seemed like a good idea at the time!). After 6 months on the MLS along with 19 other virtually identical houses on the same street for sale I took it off the MLS, did two open houses on consecutive weekends, and sold it to a couple without an agent and paid no commission. A friend who bought the house across the street kept it on the MLS and sold it 4 months later at a $25,000 loss.
In January of this year my wife and I contracted on a house in Greenlake at 1818 N 51st St which was originally listed at $650,000 and had been recently reduced to $599,950. The listing agent couldn’t have been more pleasant. We offered $550,000 subject to inspection and told the seller and his agent they could keep the buyer’s agent’s commission. When the agent said the seller would never take such a low offer, I said “I understand it’s low but it’s the best I can do considering the condition of the house.” Sure enough the out of state seller accepted. We had it inspected and decided to terminate 3 days later when we learned the “newer” roof was the third layer of shingles all of which needed to be replaced. We also admitted that we’re not “handy” and this house needed a whole lot of “handy.” The house went on to sell “as is” in late March for $560,000 to a buyer with an agent.
This summer I closed on a FSBO house in Magnolia I found on Zillow.com. No agent on either side. The seller called me recently from San Francisco saying how much he enjoyed the transaction and that he couldn’t wait to buy without an agent now that he knows how easy it can be. Assuming you can get through the door.
Thanks for the insight craig! I can’t possibly see this compensation system surviving for long. It seems so very wrong in so many ways. The issue of being compensated of the opposite side of a negotiation should need no further clarification. The fact that this compensation actually increases if the buyers agent do NOT negotiate a lower price is mindblowing. Talk about negative incentive to get your client a good deal. This is on top of the fact that you get no compensation if the deal does not go through which is also a negative incentive to push for a good deal since it increases the risk that the offer will be rejected and your income with it. Isn’t this almost borderline bribery, when one sides representation in a deal is not only being compensated by the opposite side but also given an incentive to misrepresent thier client?
Craig,
I have no problem with a consumer buying on their own, selling on their own or using any kind of real estate model out there.
I do have a problem with your cavalier attitude toward the agreement signed between a Seller and a Broker. (note the contract is between seller and broker, not seller and listing agent)
Your quote: “One way to “hedge your bet” (as well as save some money) is to forego the services of a buyer’s agent. When you do so, you can reduce your offer by up to 3% (or get 3% towards closing costs, or a 3% reduction in purchase price, or any other creative way of realizing the 3% savings) as the seller will not have to pay your agent out of the proceeds.)
According to the terms of the listing agreement, the Seller owes the agreed to commission to the real estate broker on the amount of the purchase price. There is no language in a listing agreement that suggest the commission is negotiable with an unrepresented buyer.
What you say and do behind closed doors with clients is one thing. To publicly encourage contract meddling on a public forum in your position of a real estate attorney is another.
“Watcha in for, bud?”
“Encouraging contract meddling, and being generally annoying to monopolistic Realtors. You?”
You probably snip those mattress tags too, Craig. The lowest type of scum.
so bili,
a contract is not a contract? except when it serves your agenda?
There are good contracts and there are bad contracts.
A contract which essentially promises to give huge sums of money from a person who likely doesn’t even know the contract exists (buyer) to someone (broker) who hasn’t done a dang thing for the person paying , then I call that a bad contract.
Hopefully the DOJ will tackle this next.
My “agenda” is fair and open markets for services. What’s yours?
Greg: You’re absolutely right, the contract is between the seller and the listing broker, a fact I acknowledged in #58 above (ironically, the comment immediately preceding your first). Moreover, you’re absolutely right that the form listing agreement sets a certain percentage commission and does not provide any indication that the commission will be reduced if the buyer is not represented by an agent. Read my comments — I’ve never disputed these points.
As for “publicly encouraging meddling on a public forum” — what have I done wrong? Educate people as to how the system works? Letting them know that they have options other than paying the “market price” for a property PLUS 6% to cover the listing and buyer’s brokers/agents, even where the buyer does not USE an agent? Isn’t a blog all about educating the consumer? Or are you only in favor of “education” that does not undercut your business model?
You are incredibly defensive on this issue. You first suggested that I was giving “legal advice,” but that is clearly not the case. You’ve now mentioned “meddling” twice, but I am unaware of any such claim. Looking at my post and subsequent comments, I am very comfortable with what I have said. I have not infringed on anyone’s rights or caused any harm that would entitle someone to compensation.
Greg — of course, a contract creates legally enforceable rights and obligations. But parties to a contract are free to renegotiate the terms as the parties see fit. Here, I am merely letting buyers know that they can make an offer that is based, in part, on the seller renegotiating the terms of the listing agreement. Does the listing agent have to agree? Of course not. The listing agent can say, “Go…” [you get the idea]. That’s between the seller and the listing broker/agent.
You, however, suggest that the mere DISCUSSION of this fact somehow constitutes a wrong. I’m afraid you’re way off base. The only reason why this discussion is “wrong” is because it lets people know they are not trapped by the 6% commission system. They have options. They can try to save some money. I know you don’t like to hear it, but tough bananas. They times, they are a-changin’…
real life situation:
Multiple offer on a property.
Buyer #1 (first buyer in) offers full price on a property. (Let’s say $500,000 for the math.
Buyer number 2 visits the listing agent at an open house. Presents an offer for $490,000 written by an attorney. The purchase and sale specifies that the buyer waives the 3% selling office commission and rebates $5000.00 back to the Seller.
If you follow the math, the net proceeds for the seller is $5000 for sale number 2. The agent was somewhat blindsided, not facing this situation before.
Seller accepts sale number 2 seeing the extra $5000 net.
Buyer #1later sees that the sale closed for $490,000 is now very unhappy because she was beat by an offer that used commission money to beat her.
Should buyer #2 been held to the terms of the listing agreement (regardless of what was on the purchase and sale?)
Does buyer #1 have a grievance against the listing agent and the brokerage for allowing the commission to be used in the negotiation to beat him with a legitimate full price offer?
The commission was not renegotiated in advance with the broker prior to offer acceptance.
Greg,
You are grasping at straws here. You, of all people know that Buyer #1 has no grievance as Buyer #1 simply made an offer. Since you seem so knowledgable about the law, you should know that since Seller did not “accept” the offer, no contract was formed. A seller doesn’t have to take the highest offer, and I’m sure you have seen situations where a lower offer comes with less contingencies and therefore makes a more appealing package.
I don’t see Craig telling you the ins and outs of your ethical and legal obligations to clients, I suggest you not tell him about his.
All Craig’s initial post discussed was how a buyer could try and save some money without costing the seller anything. This obviously affects your god-given right to get 6% of the sales price, but you might just have to deal with it.
Most of the agents responding to this thread have been completely civil, even if they disagree with the concept proposed. You, on the otherhand, appear to only want to end this discussion as quickly as possible.
Goodluck on the eastside, I’ll make sure to avoid you when our own home search starts again.
“As for “publicly encouraging meddling on a public forum” — what have I done wrong? Educate people as to how the system works?”
Yes, this is what you did wrong. Realtors are the Gate Keepers, they hoard information in order to protect their obsolete business model. They are afraid that consumers may just realize we don’t Realtors, or at least so many of them at overpriced commissions. Over the coming years consumers may look at the millions of foreclosures, millions more trapped in upside down mortgages and think, “I couldn’t have screwed up any worse on my own.”
You know your profession is looking bad when lawyers look like the good guys.
Thanks for the hypothetical. Here are a few problems with it:
(1) Buyer #2 cannot be “held to the terms of the listing agreement,” as Buyer #2 is not a party to that agreement. Buyer #2 has nothing to do with the listing agreement.
(2) IF there is an applicable MLS rule (again, I’m not privy to them) that prohibits a member from adjusting the commission, then perhaps Buyer #1 can file a “grievance” with the MLS. However, I think such a rule would be anticompetitive and unfair (anticompetitive as it protects the agents’ position in the deal, and unfair because Buyer #2 ends up paying more for an agent that he did not use).
(3) Bad move by the seller not renegotiating the commission prior to acceptance, and bad for the buyer too. PSA may not be binding. There would certainly be some thrashing about in deciding how to resolve the situation where buyer promised something over which buyer had no control (1% back to seller). If Buyer #2 had retained a competent attorney rather than doing it him/herself, the attorney would have drafted contractual language that would have had the same net result without buyer promising something over which buyer has no control.
Bottom line: Buyer #2 decided to forego the services of the agent, which reduced the transaction costs significantly. Accordingly, Buyer #2 tried to realize some of those savings. Buyer #1 may be upset, but he/she should take solace in knowing that at least she got the superior service of a full service agent.
Craig,
“You, however, suggest that the mere DISCUSSION of this fact somehow constitutes a wrong. I’m afraid you’re way off base.”
Craig, again I am not shy of the discussion. I’m calling you out on your original post which does appear to encourage contract meddling. Subsequant comments have made some clarification.
As for the example above, Buyer #2 (as I stated) had an attorney write the deal. The question I forgot to as was “Should the Seller have been on the hook for the entire agreed to commission?” We both agree that there were potentially plenty of unanswered questions and open holes.
Ok, Craig, I’ve said my piece. Please be more careful in completing the circle of information in your posts (and don’t forget your disclaimer!)
I have to give you credit, Greg. You appear to be exception to rule around here that folks blog to gain clients.
If I were buyer #1 I would be upset with my agent for not informing me of the possible competition as unrepresented buyers, redfin buyers etc. to make the offer as competetive as I intended. I would not be upset with the listing broker for discounting the buyer’s agent fee if a buyer’s agent wasn’t used. The latter just seems like the right thing to do.
tj
I was outta here, but you bring up a good point. Redfin uses the entire commission amount and rebates the rest. They are a member of the MLS and are entitled to the entire SOC (Selling office commission) and can do whatever they want with it.
Buyer #1’s offer would need to become $510,000 just to be even in this scenario. $10,000 more because the commission was used in negotiation. The main point I’ve been trying to make here is that somewhere, there is a contract between a seller and a brokerage that needs to be honored (or as Craig pointed out re-nenegotiatied ahead of time).
John, wow, sorry to see I was out of office (doing “actual” work) so I hadn’t had a chance to respond yet to your question in #11. It looks like quite a few others have jumped in though in the meantime. However, I’ll go ahead and give you my 2 cents, since you asked for it specifically.
Regarding unrepresented buyers, it isn’t so much that they require more work, although there is some, but rather that they potentially introduce a lot more potential liability into the transaction for the listing agent. If you read the duties that are specific to a listing agent and then the duties of a buyer’s agent you’ll see that there is a requirement on each side to work solely on behalf of one party (loyalty) and that there are requirements of confidentiality, and putting the client’s interests above the agent’s, etc.
When an unrepresented buyer enters the picture, particularly if they have no prior buying experience, there is an immediate element of potential conflict that can arise for the agent. The less experienced buyer may ask lots of questions and at some point begin to believe that the listing agent is representing their interests, even if the agent keeps saying “I don’t represent you so you should seek experienced help” whatever that help may be (inspector, CPA, attorney, agent) or perhaps the buyer gets ticked if the listing agent doesn’t share some specific, yet confidential, information and they sue later saying that they were harmed by not having this information prior to closing (because maybe they could have saved some money). These may sound like wild hypotheticals and I don’t have room to go through loads of details here but these issues do occur on a regular basis. I tend to like to read case law around the nation about real estate and what agents tend to get sued for and there are lots of cases like these - and usually the buyer doesn’t win because of the element of caveat emptor. If a buyer had the ability to investigate and they didn’t then it’s usually on them particularly if they chose not to have representation.
If it’s a buyer with a lot of experience and the buyer is asking specific questions directly to the listing agent there is the risk that a listing agent may inadvertently slip and provide information that should not have been shared, thus exposing themself to possible legal liability with his/her seller if it eventually harms them, primarily financially. Although I will say that this can happen when an agent is involved too so it’s not a certainty either way. I wrote about an experience like this a while back: http://www.raincityguide.com/2007/07/16/7-reasons-to-make-sure-your-agent-can-read-well/
In that particular scenario the listing agent had already told me over the phone that if my clients would do a pre-inspection he would be willing to put a lower offer (than what they’d countered earlier with) in front of his client and get them to take it. Then he slipped up and missed reading the full, new contract that we introduced which had yet another financial concession, and then he lied to his client - several times. This was not an agent who put his client first and she was threatening to sue him because she lost $15,000 in the sale price, a close to 3% closing cost credit, and the property actually appraised for $10k over the original asking price for a total potential loss of $33,000 for the seller. There was a LOT of info that guy shouldn’t have shared with me in that transaction. He did have that kind of “nudge, nudge, wink, wink” aspect to him and I usually find the agents with this attitude are the ones I end up hating to have to deal with in a transaction and things usually get nasty at some point and we learn a seller has been lied to, frequently.
I am happy to show prospective buyers my listings but I usually require that they’ve been pre-approved prior to doing so. This comes from the conversations I have with sellers in advance that I will show their home only to qualified buyers. Note: QUALIFIED buyers. There are enough freaks out there targeting female agents (we get notices regularly via NWMLS) that I don’t need to be in a vacant house with some guy without good reason. Plus, it’s a safety issue for my clients. If they are still living there, or even not, we don’t want to provide a casing opportunity for a thief or a chance for someone to go through a client’s medicine cabinet, etc.
If you can answer a few simple questions such as being pre-approved, and you can show the evidence of it, then most agents should be willing to show you a property. Some agents are beginning to make changes to how they advertise the SOC (selling office commission) on the MLS to state that if after the listing agent shows you a house you show up with your own agent they can lower the SOC to that agent. The amount varies, just as all listing commissions vary.
Ok, I went on longer than I thought but I hope that was helpful.
Reba,
Thanks for the reply.
Obviously this thread has gone on several tangents since yesterday, but the information is still appreciated.
It sounds like you, along with several other agents who have responded, will show an unrepresented buyer a listing if they can show you that they are qualified via a pre-approval letter and there are no safety concerns. This seems completely appropriate. Unfortunately, as I’m sure you can see, there are also plenty of agents with significant hostitility to the concept of an unrepresented buyer.
It looks like I will be seeing some homes and not others if I decide to go it alone in the future. At least I know what to expect this time around.
Yes, it’s an unfortunate reality that there will always be agents that are threatened by this scenario. I tend to believe that it is more a function of not being well trained or understanding an agent’s full duties. One suggestion - you might ask outright why an agent is unwilling to show the home to you. You might find out that your request to see the house at that particular moment is in conflict with the agent’s schedule. I’ve had plenty of people want me to drop what I’m doing to run out to a listing that I know will take a 20 minute drive to get to. If you are willing to schedule around the agent’s timeline then perhaps you’ll get more cooperation. Sometimes an agent can come right out, other times they can’t.
Reba,
Thanks for the suggestion. I don’t think that was our problem, however. We always asked if we could arrange a time to meet them to see the listing. It was never a situation where we were standing at the front door wanting in that moment. I’ll make sure we are very clear on that point in the future though.
Re:#75, TJ, it’s already over. An educated, motivated buyer or seller can find alternative models. There are plenty of agents who will negotiate commissions, offer disounted services and/or free advice/services. I’m not sure what the big gripe is all about. I can, and do, interview ny doctors, lawyers and accountants. The barn door is open and horses aren’t coming back in.
Reba, regarding #90. I can’t wait till one of these SOC with stipulations goes to arbitration. Seems to me the SOC is a mls sharing agreement and the SOC comments are simply a listing form function. Can I require the buyer’s agent to be attractive or I’m going to reduce the amount of compensation? Russ???
My husband and I