The hidden cost of bad advice ......

Real Estate Agent with Century 21 New Millennium DC-SP98366576

So the usual suspects were enjoying a little glass of wine after work. Conversation went from the plight of losing a listing to the horrors of dealing with short sales. Eventually, the "forbidden fruit" of commission was discussed.

One agent lamented that co-op commission being offered is not always 3%. She could not believe that agents were only offering 2.5% and in some cases......2%.  She felt that in this "market" it was very poor judgement to offer anything less than 3%. She went on to share that, if you really want your listing to be should offer a bonus on top of the co-op!

"So", I asked, "you think that the co-op offered is an integral part of your home search for clients? And, you think that you should receive a bonus for doing your job?"

She replied "Absolutely!, if you take the information given and it is 2+ bedrooms and 2+ bathrooms for under $400,000 in Montgomery County, you will have page after page of listings. If you have seen one, you have seen them all. How else are you supposed to seperate them?"

Hmmmm.....Gee...I don't know.........maybe you could ask your client for more specifics. Montgomery County is a pretty big place and if you have that many choices, maybe..just maybe, they could find a home in a more specific area. It is a long way from Poolesville to Silver Spring or from Olney to Potomac.


Agents that claim to be looking out for their clients best interest and somehow bring what they will earn into the equation (after the fact) are nothing more than modern day Snake Oil Salesman. They seem to think that they have the right to preclude properties from buyers based on what they will ultimately earn on the transaction.

Fortunately, they are rather easy to spot.  If you are working with an agent, and the agent did not go over "agency" and have you sign a "buyers agent agreement" are working with a Snake Oil Salesman and not someone actually looking out for your best interest.


How do you avoid the shell game?

Look the agent right in the eye and ask them if they plan on showing you all the homes that meet your criteria or have they eliminated some because the co-op is not to their liking?  Have them put that in writing. It is very easy to do. Ask them to work under contract to you! Have them sign a buyer agency agreement with you that clearly states how much they will be paid to represent you. (Understand, all or most of the money they will be paid will come from the listing broker. That is what the co-op is all about.)


Sign here so we both know where we stand....

There may be laws regarding everyone agreeing on any set commission. There may be laws regarding how an agent must perform. There may be laws that actually require an agent to be under contract before showing you any homes listed with his broker. The only thing keeping you from stumbling and maybe missing the "real" home of your the catchy latin phrase "caveat emptor" (let the buyer beware).

If you just blindly go along.....

(2% coop)    (3% co-op)

Well...on the surface they may appear the same, but you will never see the one on the left. That is not what Realtors are trained to do. That is not what ethical people do.

But I just learned over wine..........that is exactly what some agents are doing. You may never know the hidden cost of bad advice.

If you want to have someone represent you that will consider your needs and do the job you expect, contact the MacArthur Group today. Our clients never see the first house without completely understanding the process and having full knowledge of the costs involved.


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Comments 26 New Comment

Mead Homes
Team Quintana Real Estate - Keller Williams Realty Spokane

Well, John, I like some points of what you said but others I disagree with. Just because you don't ask for a buyers agency agreement doesn't make you a snake oil salesman. We don't require it because many people feel pressured into signing a contract with someone they just met, I don't put my clients in that situation. I am still bound by law to provide the customer with reasonable care even without making them sign a contract.

Second everyone has the right to offer more or less money to the agents who bring their clients, and in a competitive market place and free trade environment agents can choose to sell homes where they make the money they expect to make for their services. That is the freedom we have. You can offer a job at $9 and hour but if a similar job is going for $13 an hour of course the better canidates will not take the $9 an hour job.

It goes both ways, I would say a seller should offer a competitive rate if they want their house to get shown. Most buyers agency agreements if you fill in say for example 3% and the coop is 2.5 would have the buyer then having to pay the .5% to make up the difference. So they may not want to buy that home anyway. You agree with your client in the agreement what youa re working for. So it doesn't matter if they offer lower than your rate. Many discount brokers offering less money get much less showings, they should disclose that to their sellers if they are really looking out for them.

May 02, 2008 11:11 AM
John MacArthur
Licensed Maryland/DC Realtor, Metro DC Homes
Century 21 New Millennium

Mead Homes - Can I kindly but strongly disagree with you. If you have a problem having someone sign an agreement, include the caveat that they can cancel at anytime. If they don't like you on the way to the first showing, they can fire you. If they don't like you after day one, they can fire you. They are fully protected and at no risk to keeping an agent that they don't want to keep.

In Maryland, you can not show homes that are listed by your broker with out an agreement. You just can't do it. If you happen to work for a broker that has 43% of the market, you are actually rather stupid not to have an agreement signed. You have to tell the buyers that you can not show them listings that are under your broker. If they agree, well they apparently only want to see 57%. I won't do it. I won't walk out the door if they are not signed. It is never an issue. I happen to think that those that claim "they won't sign" are only exhibiting behavior that indicates they don't know what the BBA is and how to explain it.

You may be bound by ethics to provide them care, but State Law must be followed as well. What part of care includes that you can use the co-op offered as a determing factor of homes you will show?

On your second point, it is a free market. You can not remove listings from possible showings because of the amount of co-op offered. It is a violation of ethics. Your free trade environment only covers the buyers and sellers. You have to answer to a higher authority. For some reason, you are equating everything to reimbursement. If that were the case, we would have no scientist, we would have no one in the Peace Corp and we would not have many elected officials. If you want the term Realtor to mean something, you have to exhibit ethics above the folks that are chasing the dollar regardless of their clients needs and desires.

It does go many ways. I just happen to believe in the standards we preach. I believe we should practice what we preach. If discount brokers are getting less showings because of the co-op they offer, I hope they file a class action suit against any broker that is supporting that behavior.

Perhaps in your rush to judgement, you should put your balance sheet aside and take another look at what our code of ethics contains and understand, your reimbursement on any transaction is the result of the transaction and not part of the transaction.

May 02, 2008 03:58 PM
Dr. Stacey-Ann Baugh
A doctor who makes house calls.
Century 21 New Millennium

Great post.  I agree wholeheartedly.  I feel the same way about realtors who only shop the listings within their own company - never showing buyers listings that meet their criteria because they are listed with another broker.

May 21, 2008 05:56 PM
Chris Ann Cleland
Associate Broker, Northern VA
Long & Foster REALTORS®, Gainesville, VA

John:  If a buyers agent wants to work for a specific commission,  it is most important to have that buyer agency agreement filled out with whatever you feel you earn doing your job.  That way, you can explain to to your buyers that if they want to see a listing that is 50% less than what you agreed to work for, they will be required to pay the other 50%.  The problem solves itself.  And yes, I do believe I worth every penny I ask for.  The buying sides are much more intense.  And with the cost of gas, what's to be ashamed about for asking what you are WORTH.  This is a job.  I am not a charity.  Get the Buyers Agency Agreement filled out, and send all the listings to your clients and let them decide if a house is worth coming out of pocket for.  You might be pleasantly surprised at how your hard work is perceived.

May 22, 2008 09:43 AM
Tony Marriott
Associate Broker, REALTOR
Haven Express @ Keller Williams Arizona Realty

No requirement that the total commission be a 50/50 split with the Buyer Agent.  If they are concerned about their compensation they should use a Buyer Broker Agreement.

August 21, 2010 02:14 PM

John MacArthur

Licensed Maryland/DC Realtor, Metro DC Homes
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