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- Hamp Yonce, "Zilluminati"
- Contributions:3463
Continued referral business is the only rational motivation that drives any forward thinking Buyers Agent or Listing Agent.
- Larry Tollen, "Larry Tollen"
- Contributions:384
Do you believe everything your read? Your argument is taken directly from Freakonomics and has been answered countless times.
Let's pose the question differently, "What do you do for a living? Do you only focus on the money when considering business decisions or do you consider the long term view?" or try "Will anyone do anything in life if they don't gain from it?"
Here's the solution, Find a Buyer Broker who you can pay a fixed fee up front regardless of whether you buy a home or not, regardless of the cost. I promise you this will be easier than you think.
Your question expresses a deep seated distrust of humans in general and I think you need to reconsider you attitude.
As a fulltime Broker for 20 years I cannot begin to tell you how many times I've cut my commission, bought home warranties, paid for cleaners and repairs all to assistance my clients.
You need to realize if economists were half as smart as they would like the rest of us to believe we would never have housing or stock market bubbles, and we stop hearing every single day how this or that economist was surprised that this or that number wasn't greater or less than reported.
The argument Steven Levitt's book presented was certainly entertaining and no doubt true in some cases. While applying economic theories and social psychology is entertaining and makes for a good read, I take it with a grain of salt and so should you.
One last bit of advice, find a Buyer Broker who's been in business for a decade or more. Here's the statistics every Buyer and Seller should focus on. 80% of all Realtors don't last 2 years. Of those that remain 80% don't earn $50,000 a year. There are unfortunately lots of lousy and hungry agents at there and you can thank your state governments for this. They want the entry bar set as low as possible despite repeated calls by the National Association of Realtors for more training, more continuing education etc. Why because when the economy is bad they want people who've lost their jobs to be able to get into a new career for which they are poorly trained as easily as possible.
- Agents 4 Home Buyers
- Contributions:28
I was once negotiating a price reduction of a few hundred dollars on a property related to an inspection issue...and the listing agent was resisting and trying to find another way to transfer these $$ from Seller to Buyer. She finally admitted that she didn't want to lose the $32 of commission that the price drop would result in. So there are agents who will do odd things over trivial amounts of money. In general, however, most of the agent I deal with would much rather have a happy clients who makes future referrals than to make an extra $500. You mention the future referral business as if it is a trivial incentive. In fact, they are the difference between agents who have to quit in two years and those who can make a living in the business.
That said, it is really the commitment to the buyer's interests...not any other incentives...that you're relying on to ensure that the agent is representing your interests over your own. If there is one thing that many rational economists have learned over the past few decades, it is that rational economic theory is wrong. People...including real estate agents...don't act rationally in the market and they are not necessarily motivated by ecoomic self interest. Heck, we're an exclusive buyer agency company...which means we turn down the opportunity to list a dozen or so past client properties a year...just so that we can retain a clear commitment to representing the interests of our buyer clients. That may not be rational...and it may not maximize our income...but that's the business were committed to.
That said, it is really the commitment to the buyer's interests...not any other incentives...that you're relying on to ensure that the agent is representing your interests over your own. If there is one thing that many rational economists have learned over the past few decades, it is that rational economic theory is wrong. People...including real estate agents...don't act rationally in the market and they are not necessarily motivated by ecoomic self interest. Heck, we're an exclusive buyer agency company...which means we turn down the opportunity to list a dozen or so past client properties a year...just so that we can retain a clear commitment to representing the interests of our buyer clients. That may not be rational...and it may not maximize our income...but that's the business were committed to.
- klarek the realist
- Contributions:7044
"I am not trying to impugn on the character of the buyer's agents"
I will. The MLS is a monopoly and NAR is a cartel, a criminal organization. There are certain inherent constructs that create a conflict of interest that harms agents' clients - the public.
buyers agents can see the commission, and some will filter out listings with low commissions
Asymmetric information used to keep the client in the dark and make sure the agent's needs are served before that of the buyer or seller. They'll tell you that they would never do this, but that's usually a lie.
I will. The MLS is a monopoly and NAR is a cartel, a criminal organization. There are certain inherent constructs that create a conflict of interest that harms agents' clients - the public.
buyers agents can see the commission, and some will filter out listings with low commissions
Asymmetric information used to keep the client in the dark and make sure the agent's needs are served before that of the buyer or seller. They'll tell you that they would never do this, but that's usually a lie.
- Rick Merrill, "Rick Merrill"
- Contributions:7
95% + of my business is from previous buyers and seller's referals. Simply put I give my heart and soul to see the buyer client is not just satisfied, but very happy. It means great price and service, also it means improving their lives with the purchase. Pick your buyer's agent based on interviews and previous buyer testomonials.
- Nathan Wolf, "natewolf"
- Contributions:1825
Example 1:
Home price $150,000.
Commission to buyer agent 3% = $4500.
Agent pays his company 50% of his commissions. Agent actually makes $2250.
Example 2:
Home price $150,000. Agent negotiates home price to $120,000 (a 20% reduction in purchase price).
Commission to buyer agent 3% = $3600.
Agent pays his company 50% of his commissions. Agent actually makes $1800.
Difference to Agent By Negotiating Price:
$2250- $1800 = $450.
Thinking that a reputable Buyer Agent would not want a Buyer Client to get the lower price, because the Buyer Agent might make an extra $450? I don't think so. If you're worried about it, do a flat fee to the Buyer Agent. I have done this for many clients -- ESPECIALLY if they are wanting to bid on foreclosures or short sales. Because my time is worth something too, but not at the expense of a buyer's satisfaction.
- Jeanne Zajac, "Jeanne Zajac"
- Contributions:32
A buyer's agent has a fiduciary duty to their client and also an incentive to provide the best service possible to enhance their referral base. Any ethical realtor would not consider an insignificant amount of commission as an incentive to have you go higher on your offer. An experienced buyers agent can be invaluable to a home buyer in both the transaction and the negotiations. The commission is typically paid by the seller. Most buyer's agents are free to the purchaser unless there is another agreement made between the broker and the purchaser.,
- Vivien Snyder, "viv25272019"
- Contributions:56
As an agent, my number one goal is to represent my client completely. I try to add value to the transaction by providing them the most knowledge that I have. Yes, I am paid on commission, however, don't underestimate the value of an agent wanting to wow their client with outstanding service. I never figure out my commission before a transaction is done. If you have concerns with your agent's integrity, you might want to interview other agents and be confident that you are working with the person that best represents you!
- Mike &Eve Alexander - Buyers Broker, "Orlando Buyer Broker"
- Contributions:173
It is a fact that buyers sue their agent more times than a seller sues and that is why in our state most offices act as "transaction brokers" instead of buyers agents...so there are no fiduciary duties and less liability.
If you are going to be truely represented by a buyers agent the agreement should be in writing that spells out the fiduciary duties of loyalty, confidentiality, full disclosure and skill care and dilligence. It can also spell out the compensation as a % or flat fee or how much is saved, etc.
Eve in Orlando
If you are going to be truely represented by a buyers agent the agreement should be in writing that spells out the fiduciary duties of loyalty, confidentiality, full disclosure and skill care and dilligence. It can also spell out the compensation as a % or flat fee or how much is saved, etc.
Eve in Orlando
- Suzanne DeTurris, "SuzanneDeTurris"
- Contributions:93
Buyers agents are supposed to try to get their client the best price. The reality of the situation is that is almost never works that way. Either they come in too low and upset the owner or..... if all things are equal..price down payment, contingencies etc. and it comes down to a buyers agency and say the listing agents own customer or perhaps another agent that the listing agent trusts to get the deal done....the buyers agent will never get the deal done. Market price is set by what a buyer is willing to pay and what a seller is willing to accept....they must be happy with the deal or it will not happen no matter who's client it is.
- Cynthia Behr Smart Move!, "cynthiahbehr"
- Contributions:20
A buyer's agent has a signed agreement with their client to do what is in the best interest of the client, as long as you keep things ethical. Yes, I agree that a big incentive is the referral business. Also, appraisers are being very strict and tending to appraise homes on the low side. The house will need to appraise at the sale price or higher as well.
- Meg Russell, "GreenBrokerMeg"
- Contributions:16
Let's look at the numbers on this one. It does me absolutely no good to have you walk away feeling that you bought an overpriced home when the 3% on the $10,000 only added $300 to my pocket! That is not how we do good business. I am interested in getting you the lowest price because a) your mortgage will be MORE affordable and so this deal is more likely to close b) your resale price will be more justifiable if you needed to sell quickly, and, of course, I want you to come back to me to get it sold and c) your appreciation will more likely mirror the market if you paid a fair price on the low side, thereby building your equity according to plan and eliminating the risk that you'll be underwater in your valuation. Make sense? It's all in the numbers and it's not about the agent's revenue in that isolated transaction, it's about the house relative to it's future health and positioning in the market, which is why we buyer agents are proud to be Accredited Buyer Agents! Good luck!
- Larry Tollen, "Larry Tollen"
- Contributions:384
Agents don't set the market price, this is arrived at ultimately by a ready willing and able Buyer and a Seller. In the 20 years I've been a full time Broker I have never had a Buyer I could make pay more than they wanted to. I have had countless Buyers loss out on the house they wanted because they refused to come up and I've had dozens of Buyers pay more than I suggested they should because they wanted the house and the Seller stuck to a number.
I don't look at the commission amount, I don't worry if the deal is for $100,0000 or 1,000,000 they all add up at the end of the year.
"Freakeconmics" which you've obviously read was an interesting book, but here's my question to you, "If Economist are half as smart as they believe themselves to be, then why do we continually have boom and bust cycles.? Why when monthly reports come out do we constantly hear economists expressing surprise that the numbers are higher or lower than they thought they would be?"
The truth is Economists are just people who believe all sorts of things that may or may not be correct. Just like Realtors.
The best and most successful agents know the value of long term relationships and are experts in their local market, Their analysis of the data can be extremely useful and their experience in negotiating can be invaluable. Long term studies have shown that Buyers who buy directly form the Sellers typically over pay between 3-10%
Funny story I heard on NPR Planet Money podcast dated 7/27 - Seller in market wanted to sell his house at $700k, but after a year sold at $600k but had to be convinced by Realtor to sell at that price. A month later his home resold at $725k. Seller was not happy and blamed his Realtor for not being able to sell the house. Fast forward 10 years later. Same house resold 6 times in 4 year period, each time higher. Come to find out the person that sold at $725k was involved in all future transactions and was committing mortgage fraud. It took 10 years, but finally the Seller came to realize that his Agent hadn't steered him wrong to sell at lower price. Although of little consolation, that probably cost the Agent - 10 years of referrals. - not sure if its relevant, but just thought it was funny how transactions can be perceived by those involved.
To answer the OP.
Although its been mentioned a lot. Referral business is the number 1 motivation for getting the best price possible. It might be the only reason that Agents will work to get you the lowest price possible.
Referrals are based on the perception that we are good agents. With that in mind one could argue that working hard for the lowest possible price, being a good communicator, being an effective negotiator as well as knowledgable about your area and product will lend towards more referrals. It is all perception, so you could fib your way to having a good perception while totally screwing your client, but in the long run that usually doesn't work.
Depending on which side of the fence that you fall in this conversation, you will be biased by the vagueness of the process. Like you said if you assume that you will buy the property at 10% higher, no matter what, then its inferred that you would probably refer your Agent either way, even though you paid too much. On the other side though, what happens when you talk to your neighbor and find out that they bought the same house at 20% less then you paid or the Seller was previously in escrow at 20% less then you paid? At that point I do not think anybody would be referring their Agent. Any perception of being a bad agent is not good for business. Same for any other occupation that relies on word of mouth and referrals to drive business.
Although its been mentioned a lot. Referral business is the number 1 motivation for getting the best price possible. It might be the only reason that Agents will work to get you the lowest price possible.
Referrals are based on the perception that we are good agents. With that in mind one could argue that working hard for the lowest possible price, being a good communicator, being an effective negotiator as well as knowledgable about your area and product will lend towards more referrals. It is all perception, so you could fib your way to having a good perception while totally screwing your client, but in the long run that usually doesn't work.
Depending on which side of the fence that you fall in this conversation, you will be biased by the vagueness of the process. Like you said if you assume that you will buy the property at 10% higher, no matter what, then its inferred that you would probably refer your Agent either way, even though you paid too much. On the other side though, what happens when you talk to your neighbor and find out that they bought the same house at 20% less then you paid or the Seller was previously in escrow at 20% less then you paid? At that point I do not think anybody would be referring their Agent. Any perception of being a bad agent is not good for business. Same for any other occupation that relies on word of mouth and referrals to drive business.
- Joy Rosik, "Joy Rosik"
- Contributions:51
I work primarily with Buyers and I can understand your concern. I honestly don't think about my commission when I'm negotiating. I don't know if that would be true across the board, but I really enjoy getting a good deal for my clients. The problem in the market where I work is there is a lot of competition for homes. There has to be a balance between wanting a good deal and wanting my clients to get the home they want. It only takes a few times of underbidding and losing out for my clients to realize that low bidding can cause them to miss out on a nice home. I always run a comparative analysis before an offer to make sure we are not offering above market value. I think the key is to have an agent that you trust to have your best interest at heart.
- Anna Deal, "Anna Deal"
- Contributions:98
1. Referrals are a huge part of an experienced broker's business. If you are happy with the house and price you paid for it then you are much more likely to refer me to your friends and family.
2. Personally, I feel if I get you the lowest price possible on a house then when you call me to sell in a few years I will be able to help.
2. Personally, I feel if I get you the lowest price possible on a house then when you call me to sell in a few years I will be able to help.
- sunnyview
- Contributions:25139
CMA's are good for some things. They are only as good as the person that prepares them. Although I think people should ask for them, they should understand that a CMA is like a snapshot of one moment in the market. It's main weakness leaving out human error is that next instant the picture can change.
Banks and owners found that out when the CMA's and appraisals that they got in the hot market were not worth the paper that they were written on when the bubble burst.
Banks and owners found that out when the CMA's and appraisals that they got in the hot market were not worth the paper that they were written on when the bubble burst.
- Pasadenan
- Contributions:21466
"Are stating that giving factual information to either a buyer or seller is setting the market price?" -
A "CMA" is not "factual information"; it is an opinion of present market value based on what someone considers "comparable" and appropriate adjustment factors. No two CMA's are ever the same unless there is collusion.
The market bubbled due to artificial demand created by NAR propaganda marketing. All the values that Realtors® suggested for "listing" and for "offers" from 2002 through 2007 were inflated, and as the bubble deflates, are STILL inflated.
NAR is directly responsible for the loan defaults of millions of homes. NAR is mostly responsible for the near economic collapse of multiple foreign governments.
To claim you had nothing to do with the listing price nor the selling price is just plain intentional deception.
A "CMA" is not "factual information"; it is an opinion of present market value based on what someone considers "comparable" and appropriate adjustment factors. No two CMA's are ever the same unless there is collusion.
The market bubbled due to artificial demand created by NAR propaganda marketing. All the values that Realtors® suggested for "listing" and for "offers" from 2002 through 2007 were inflated, and as the bubble deflates, are STILL inflated.
NAR is directly responsible for the loan defaults of millions of homes. NAR is mostly responsible for the near economic collapse of multiple foreign governments.
To claim you had nothing to do with the listing price nor the selling price is just plain intentional deception.
- sunnyview
- Contributions:25139
Any price that you agree to pay generally nets the agents in the deal 6%. They don't care if you knock $1000 off the price or pay $1000 more as long as you're happy as a client. If you tell your agent that the deal's a no go unless you get a seller concession of a certain amount, most agents will work their hiney off trying to get the seller to meet your price especially if there are no other offers on the horizon.
No accepted offer means nothing for the agents involved. Any accepted offer even if it is lower means a commission. Agents are in business to make a sale not walk away from a deal.
No accepted offer means nothing for the agents involved. Any accepted offer even if it is lower means a commission. Agents are in business to make a sale not walk away from a deal.
- Jennifer J. Erickson, "OaklawnRealty"
- Contributions:349
@ Pasa
A CMA is recent historical record of sales, pending sales and active listings similar to the subject property. Are stating that giving factual information to either a buyer or seller is setting the market price?
A CMA is recent historical record of sales, pending sales and active listings similar to the subject property. Are stating that giving factual information to either a buyer or seller is setting the market price?
- Reginold Jones, "RJtheREALTOR"
- Contributions:4
200,000 home that you "overpay" at 220,000 will yield you an extra $600 in commission assuming 3%. There is not one REPUTABLE PROFESSIONAL that will risk their reputation over that little bit of money. You speak of the lack of incentive of making the price lower, there is even less of an incentive to make it more. When a good buyer's agent works with a buyer, they make their client well aware of the current market and what is a reasonable offer. To suggest that a buyer that they should pay more for no reason, to me, suggests fraud. The large majority of professional real estate agents out there are honorable professionals who would not touch that type of behavior with a 100 ft pole!! Negotiating a low price and getting multiple referrals beat an extra $600 anyday!!!
- Kelly Crepeault, "TheRealProducer"
- Contributions:2
The buyers Agent will do his/her best to get you the very lowest and best price because of this reason, Most buyers are smart enough to keep their Budget and finances in order to have decent credit so this must mean they are at the very least,responsible and intelligent. if they were able to pay cash, this means for most buyers they are smart enough to work hard and save money to buy a house. Now, are they dumb enough to overspend for a house or to not know that the buyers agent is not working hard to get them the very best deal they possible can not to mention the referral that Agent will receive by the buyer because that buyer knows the Agent got him a great deal on a home. Two things to remember: Buyers are smart and they give referrals. Kelly
- Pasadenan
- Contributions:21466
"Agents facilitate transactions and do not or never will set market prices for properties. Owners of properties set a asking price and buyers set the market price." -
Oh, you are stating that no agent ever provides a CMA to their client under any conditions, regardless of buyer or seller????
Sounds like more NAR propaganda to me.
Oh, you are stating that no agent ever provides a CMA to their client under any conditions, regardless of buyer or seller????
Sounds like more NAR propaganda to me.
- Jennifer J. Erickson, "OaklawnRealty"
- Contributions:349
The buyers agent cannot force a seller to accept buyers offer. It all boils down to the two parties making a deal on parity with the market. Yes both the Realtors make a commission (income) on the sale. There is no collusion on price. You the buyer sets the price not the seller; the seller has to accept reality or take the property off the market eventually, only if the price is above what other buyers are willing to pay. Agents facilitate transactions and do not or never will set market prices for properties. Owners of properties set a asking price and buyers set the market price. There is nothing more happening. There maybe agents that expose a property to the market in an engaging way. Agents assist the parties to a successful conclusion of their goals. It is their career not a plot to fix a market. There are the anonymous posters here that have an agenda. This agenda might included that the real estate agent could some how create a real estate market good or bad. It is just bad logic. Good luck on your purchase.
- Pasadenan
- Contributions:21466
By the way Triad, (Mr toad?) are those really your teeth? What happened to the eye-teeth?
- Pasadenan
- Contributions:21466
"to be honorable and honest in all dealings" -
What is honest about NAR talking points:
1) "Prices always go up"
2) "Values always go up"
3) "No one every loses money on Real Estate"
4) "They aren't making any more land"
5) "Buy now or be priced out forever"
6) "Prices are at the lowest cost in History"
7) "Interest rates are at their lowest rate in History"
8) "Houses are more affordable now than ever"
9) "Better offer your highest and best or someone else will beat you to it"
10) "Now is the best time to buy"
11) "It is never a bad time to buy"
12) "It is always a good time to buy"
13) "Prices will double in the next 10 years"
14) "If you rent you are paying your landlord's mortgage"
15) "Location, Location, Location"
16) "NAR lobbies for legislation to help the homeowner"
17) "No one has a crystal ball"
18) "No one can time the market"
19) "Prices will recover to those of a few years ago"
20) "It is a buyer's market"
21) "The worst market is the best time to get the best deals"
22) "Real Estate is a better investment than a 401k"
23) "Prices are 20% off, thus you are getting a bargain"
and on and on and on...
If any Realtor® claims to believe such propaganda, they are either a complete liar, or they are so ignorant that they are not qualified to represent anyone.
It the organization that requires the "pledge" puts out blatantly false propaganda, how could those that take that pledge possibly be any more honorable?
If NAR can't clean up their act, they should be boycotted and replaced.
What is honest about NAR talking points:
1) "Prices always go up"
2) "Values always go up"
3) "No one every loses money on Real Estate"
4) "They aren't making any more land"
5) "Buy now or be priced out forever"
6) "Prices are at the lowest cost in History"
7) "Interest rates are at their lowest rate in History"
8) "Houses are more affordable now than ever"
9) "Better offer your highest and best or someone else will beat you to it"
10) "Now is the best time to buy"
11) "It is never a bad time to buy"
12) "It is always a good time to buy"
13) "Prices will double in the next 10 years"
14) "If you rent you are paying your landlord's mortgage"
15) "Location, Location, Location"
16) "NAR lobbies for legislation to help the homeowner"
17) "No one has a crystal ball"
18) "No one can time the market"
19) "Prices will recover to those of a few years ago"
20) "It is a buyer's market"
21) "The worst market is the best time to get the best deals"
22) "Real Estate is a better investment than a 401k"
23) "Prices are 20% off, thus you are getting a bargain"
and on and on and on...
If any Realtor® claims to believe such propaganda, they are either a complete liar, or they are so ignorant that they are not qualified to represent anyone.
It the organization that requires the "pledge" puts out blatantly false propaganda, how could those that take that pledge possibly be any more honorable?
If NAR can't clean up their act, they should be boycotted and replaced.
- Francisco J. Navas, "Weston Resident"
- Contributions:8
Very simple: Just let remain you our pledge:
I pledge my self to protect the individual right of real estate ownership and to widen the opportunity to enjoy it;
to be honorable and honest in all dealings;to seek better to represent my clients by building my knowledge and competence;
to act fairly towards all in the spirit of the golden Rule;
To serve well my community,and through my country;
To observe the Realtor code of Ethics
and confort my conduct to its lofty ideals.
See: allways will be a win win situation.
Francisco J. Navas
Lic. Real Estate Broker
- Linda Strasberg, "L Strasberg"
- Contributions:2315
When you have a good agent, buyer or seller, it will lead to more referrals...we do not survive just on one sale!
- droopyd
- Contributions:403
Considering that with a 3% split every $1000 added to or subtracted from the sales price translates to just a $30 difference in commission, it is to both agents' benefit to strike a deal as quickly and efficiently as possible to ensure they both get a commission of several thousand dollars.
Why should a buyer's agent try to get me the best price?
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