Reduced Commissions Based On Sales Price Is Hogwash!
Wow! I guess I opened up a can of worms.
So, what else is new?
A few weeks ago, I responded to an article in the St. Petersburg Times by Robert J. Bruss. Mr. Bruss' column indicated that if a property is sold for far less than its asking price, the real estate agent should volunteer to cut his commission. I disagree with this position and I categorized it under the descriptive adjective "hogwash".
Since then, I have received a number of e-mails and even a phone call from people who think Mr. Bruss is correct. One of the e-mails came from a real estate agent who works for one of those "discount" brokers -- and we all know how I hold discounters and rate cutters in very low regard. The other communications came from sellers, and I received one of them this morning which is why I feel it necessary to write this little clarification article. It is probably no coincidence that all of the sellers were folks who had property on the market as "for sale by owner".
None of them, even the person with the real estate license, seemed to understand the legalities involved in selling real estate in Florida, nor the business nuances affecting this subject. So, here's why I think cutting the agent's commision based on the selling price is hogwash ...
1. Florida law requires that all offers be presented to the seller. ALL OFFERS, not just the good ones. Not just the ones that are close to the asking price. ALL OFFERS. The listing agent has no control over the amount of the offer. That is the sole responsibility of the buyer. The agent is BOUND BY LAW to present the offer to the seller.
2. The decision rests with the seller. The seller decides if the offer will be accepted, rejected or countered. If the seller decides to accept a low offer, that's his decision. It is not the agent's decision. The agent merely presented the offer, as is required by law. Ultimately, it is the seller who decides if he will accept the offer. If he accepts the low offer, why should the agent be held responsible and be expected to reduce his commission?
3. The agent suffers a loss with a lower than anticipated sales price. The agent's commission is a percentage of the selling price. When the selling price is lower than expected, the agent takes a proportionate loss in income. To take the proportionate share and then reduce the commission further as Mr. Bruss would have agents do is punitive and I know of no bona fide real estate agent who would volunteer to do it. Only weak-kneed amateurs who do not know how to defend their commission would agree to such reduced compensation.
4. The agent has absorbed all the marketing costs. No matter what the selling price, all parties to a transaction need to understand that the agent has invested his personal funds on behalf of the seller to attract potential buyers to the property. Generally, the broker does not reimburse the agent for these outlays on behalf of the seller. The agent needs to get every dollar in commission as a way to offset his expenses associated with the sale. To reduce his commission based on a low selling price is not finacially fair to the agent who worked in good faith to bring in a higher offer. Besides, it was the seller who accepted the low offer, not the agent.
You know, when the real estate market was hot, agents would often obtain multiple offers on properties. These multiple offers usually resulted in properties being sold for prices higher than their asking price. Funny thing, I don't recall any agents wanting to RAISE their commission based on a higher than expected selling price. That kind of bonus compensation wouldn't be fair to the seller, would it? But if a seller accepts a lower than expected selling price, why is it that some people expect the agent to reduce his commission? That doesn't really seem fair either, does it?
Like I said, it's hogwash.
For more real estate information, log on to my web site, www.thestpeterealestatesite.com.
So, what else is new?
A few weeks ago, I responded to an article in the St. Petersburg Times by Robert J. Bruss. Mr. Bruss' column indicated that if a property is sold for far less than its asking price, the real estate agent should volunteer to cut his commission. I disagree with this position and I categorized it under the descriptive adjective "hogwash".
Since then, I have received a number of e-mails and even a phone call from people who think Mr. Bruss is correct. One of the e-mails came from a real estate agent who works for one of those "discount" brokers -- and we all know how I hold discounters and rate cutters in very low regard. The other communications came from sellers, and I received one of them this morning which is why I feel it necessary to write this little clarification article. It is probably no coincidence that all of the sellers were folks who had property on the market as "for sale by owner".
None of them, even the person with the real estate license, seemed to understand the legalities involved in selling real estate in Florida, nor the business nuances affecting this subject. So, here's why I think cutting the agent's commision based on the selling price is hogwash ...
1. Florida law requires that all offers be presented to the seller. ALL OFFERS, not just the good ones. Not just the ones that are close to the asking price. ALL OFFERS. The listing agent has no control over the amount of the offer. That is the sole responsibility of the buyer. The agent is BOUND BY LAW to present the offer to the seller.
2. The decision rests with the seller. The seller decides if the offer will be accepted, rejected or countered. If the seller decides to accept a low offer, that's his decision. It is not the agent's decision. The agent merely presented the offer, as is required by law. Ultimately, it is the seller who decides if he will accept the offer. If he accepts the low offer, why should the agent be held responsible and be expected to reduce his commission?
3. The agent suffers a loss with a lower than anticipated sales price. The agent's commission is a percentage of the selling price. When the selling price is lower than expected, the agent takes a proportionate loss in income. To take the proportionate share and then reduce the commission further as Mr. Bruss would have agents do is punitive and I know of no bona fide real estate agent who would volunteer to do it. Only weak-kneed amateurs who do not know how to defend their commission would agree to such reduced compensation.
4. The agent has absorbed all the marketing costs. No matter what the selling price, all parties to a transaction need to understand that the agent has invested his personal funds on behalf of the seller to attract potential buyers to the property. Generally, the broker does not reimburse the agent for these outlays on behalf of the seller. The agent needs to get every dollar in commission as a way to offset his expenses associated with the sale. To reduce his commission based on a low selling price is not finacially fair to the agent who worked in good faith to bring in a higher offer. Besides, it was the seller who accepted the low offer, not the agent.
You know, when the real estate market was hot, agents would often obtain multiple offers on properties. These multiple offers usually resulted in properties being sold for prices higher than their asking price. Funny thing, I don't recall any agents wanting to RAISE their commission based on a higher than expected selling price. That kind of bonus compensation wouldn't be fair to the seller, would it? But if a seller accepts a lower than expected selling price, why is it that some people expect the agent to reduce his commission? That doesn't really seem fair either, does it?
Like I said, it's hogwash.
For more real estate information, log on to my web site, www.thestpeterealestatesite.com.
-30-
posted by Terry Ward at 4:04 AM
0 Comments:
Post a Comment
<< Home