By Jim Fannon

Could a discounted selling broker, co-op or buyer agent’s commission (let’s refer to it as “co-op commission”) hurt the enthusiasm of the buyer’s agent and impact the seller’s bottom line in a negative fashion?

You bet it could.

The truth is, a discounted co-op commission can be detrimental to the seller’s bottom line and the reverse can also be true. Using a unique or above-market co-op commission could be the marketing tool that helps sell the listing and puts more money in both the seller’s and agent’s pocket, after all is said and done.



How many listing agents would recommend a discount co-op commission as a sales and marketing strategy to the seller of a new listing or a “freshen-up” or a re-list of a property that is not getting enough attention?

I’m guessing not all that many.

For many years now, decades actually, sellers have been falsely led to believe that a lower total commission equates to a higher seller’s net. This myth can be easily disproved.

Coaching sellers on how co-op commissions can affect sales prices should be the duty and a main focus of every salesperson during a listing presentation. A unique co-op commission can be mutually beneficial for the seller, listing agent and the co-op, despite it being a potentially difficult but necessary conversation to initiate.

It would be a good idea to remind the seller right off the bat of something they already know, but may have forgotten. Helping them to realize one simple fact could impact the saleability and bottom line or net of their home, business or vacant land. Look them straight in the eye and tell them something that most other agents will not. Are you ready for it?  Here it is: “Commissions are negotiable!”

How many times have you been asked, “How much is your commission?” even before you’ve met the prospect or inspected their property? If your answer to that question is anything other than, “Commissions are negotiable”, then you’re missing a very important consideration of your listing and marketing strategy.

Have you prepared your seller for the possibility of receiving an offer of full price? How many of your sellers actually expect to get the full contracted list price or even something close to it? If you asked your seller on the way out the door, with their signed listing in hand, if they would compensate another agent (which most likely will not be you) an above-market rate of commission to bring them something close to full price, I bet 85 per cent plus would say yes!

It is important to bring attention to how a unique commission structure helps to make the subject property stand out to the agents picking the properties to show, in contrast to other listings on the MLS, which almost certainly do not employ this listing marketing strategy. The seller should also understand how the listing agent, using a unique co-op commission, can create leverage advantageous to the seller, listing agent and even the co-op during price negotiations.

In summary:

  • Discount co-op commissions can hurt the saleability of the listing, the enthusiasm of the co-op broker and the seller’s net.
  • Most agents would not recommend a discounted co-op as a marketing strategy.
  • A unique co-op commission could gain the “loyalty” of the buyer’s agent.
  • Commissions are negotiable.
  • A unique co-op commission creates the possibility of a higher net for the seller.
  • Creative co-op commissions stand out to showing agents from all other listings.

SIMILAR ARTICLES

  • Jerry Bresser

    Hi Carolyn and Tomek,
    Thanks for your nice comments.
    If anyone would like to see how to present the very ethical method we use to show sellers the benefits of offering an incentive commission, please send me your email and I will send an invitation to my next webinar. Send to JerryBresser@gmail.com

  • Brian Martindale

    The word “unique” is truly a unique word. It is described in The Penquin Concise English Dictionary thus: single, sole; unrivalled. All registrants are seemingly unique as well (they certainly are singular/sole beings), but are they unrivalled? No.
    The application of a unique commission structure being applied to the non uniqueness of the population of registrants presents a big problem: only unrivalled unique registrants (registrants who stand alone in terms of long-standing experience, altruistic attitude and unique–read ethical–motivation can be said to deserve to employ the unique commission structure as detailed herein.
    There are two categories of registrant (personality wise): listing specialist and buying specialist, or at least there ought to be only these two types. I believe that Carolyne was primarily a unique listing specialist, and therefore she could control commission percentages based upon her previous very successful experience doing so. Someone such as Carolyne obviously cared very much about how well her sellers did, financially speaking. The same cannot be said for every listing registrant. However, a buying specialist may also be a unique specialist, but he/she might be a specialist who only cares about his/her bottom line (an income specialist) and that would mean trying to encourage naïve uninformed buyer clients to purchase higher-priced properties (relative to their real market value) with high commission rates attached thereto. Why run all over hell’s half-acre to sell five properties when four will pay off just as well vis a vis time invested? It is all about dollars earned per hour of labour input as far as registrants are concerned (unless one has loads of money and works as a Realtor just for something fun and personally rewarding to do). Therefore, unique (in this case, high) commission rates attached to listings will definitely appeal to buyer registrants who want to maximize their dollar(s) per hour ratio. Doing so disregards their buyers’ financial concerns. But that is not the concern of the unique listing registrant, and it ought not be the concern of the unique listing registrant. Thus, we have two registrant mindsets, each in perpetual opposition, one against the other, at play within this business.
    It is time for the powers that be to compel brokerages to define/register themselves as either selling brokerages or as buying brokerages, with each publicly setting a fee-for-services-performed payment structure (similar to how lawyers operate). There ought to be no more in-house confusion within brokerages regarding one hand trying to defeat (or top) the other, aka the practice of conflict of interest. Brokerages would set a predefined rate of payment schedules, and they would hire only the best to work for them, if they could afford to pay them what they wanted. Then watch the uniqueness quotient serve to sift the chafe from the riff-raff.

    • Carolyne L

      Brian

      I was fifteen years in the business prior to buyer brokerage appearing in our market area. Initially we were taught that we had no choice; to work “for” a buyer we had to function under all the rules of engagement applied to buyer agency. No more sub-agency. Then along came forms that we needed to use stipulating “precisely” what kind of agency we (the corporation) intended to be under contract to with a buyer. They could elect to be a customer, not forced to be a client. And yes, the buyer could pay, various ways, in part or in full. His choice.

      Most don’t want to talk about it, or choose not to remember that original office buyer brokerage contracts were pre-written fill in the blanks, by front desk staff, indicating the office would be paid “whatever was offered to the co-op by the listing brokerage.” Recall the one-dollar comment I previously related in Ross’ article on commission structures.

      Sellers had their representation pretty much as usual, dictated by their listing contract, and not terribly difficult to understand, as it related to their representation, but typically sub-agency no longer attached itself to that contract as had been so, on the historical ever-ever plan. And who got paid how much, delineated separately on the new listing forms contract.
      But the BIG faux pas:

      No one had educated the public about buyer agency, so it became the purview of the listing agent to begin by educating their seller who had been forced into then having to decide how to pay the commission: both to their own agent and also what to offer the co-op.

      But many sellers were at the mercy of their listing agent, who sadly didn’t understand the new process himself. Suddenly agents who had always just followed their “board” rules, and they were board rules, now had to make real decisions themselves and guide their sellers into contracting decisions.

      And the agents often had no idea even where to start getting buyers organized, much less before showing houses. Some just ran around willy-nilly getting buyers signed up to ridiculous blank buyer contracts – or not at all. Just winging it. There were no rules that said an agent MUST get a buyer contract signed. Thus began the unravelling of the system that had been in place on the forever plan.

      Regardless of numbers of training courses agents took, mandatory ones or elective ones, there always seemed to be a mental roadblock regarding buyer agency. Obviously so because here we are still talking about the topic buyer agency: when it applies, when it should apply, how it’s meant to work, hard to believe, 20 years later in our marketplace.

      Drilled down deep in the psyche people really do believe, saying, continuing to actually promote: “only sellers pay commission.”

      Does a whole generation have to die off before even the press stops insisting that only sellers pay the commission. Period? Supported by those actually within the industry who continue to insist to obfuscate the concept. It’s really not rocket science. So where does the problem lie? within the industry and within the support system that includes lawyers who practise real estate law. And apparently in many cases don’t accept the concept of buyer agency: to wit, when delivered a copy of their client buyer agency contract some have been heard to say: “Why did you sign this??? Only the seller pays commission.

      After twenty years in the works why does this still happen?

      Carolyne L 🍁

  • PED

    I just have to ask all who approve of this scheme. Do you tell your buyer clients that you’ll be steering them toward the listings that are offering the highest percentage? Do you add that the reason that’s there is so that you can also encourage them to pay even more for the property than it’s actual real market value? because unless you believe a property is worth what a willing and informed buyer is willing to pay for it, then that’s what it amounts to.

    Or are you just offering this up because you know it will appeal to less ethical in the industry?

    As a seller’s rep, such a ploy should not be necessary when one is fully secure in their marketing ability and negotiating skills. The end result should be a higher net in the seller’s pocket without the need to pay a jacked up co-op fee.

    If the dishonest buyer’s rep is going to be lured by a higher rate and enticed to convince their client to pay a higher price, they’re going to convince their client to pay a higher price no matter the fee.

    • Alan M.

      Ped,

      A properly crafted BBA would allow for any excess selling commission to be rebated to the buyer. The main objective is to insure that there are no shortfalls that would cause a buyer to have to top-off commission to their REALTOR, directly out of their own pocket. It’s all pretty simple really, but if you need it to be complicated then please carry on.

      • PED

        I see you haven’t yet corrected your serious comprehension issues.

        Me: “Want a higher commission? then sign a BRA for a higher commission guarantee from the buyer.”

        I’m writing in English, honest I am.

        • Carolyne L

          You wrote: [Me: “Want a higher commission? then sign a BRA for a higher commission guarantee from the buyer.”]
          ====

          AGREED, PED, completely, “if” you are working “for” the buyer. But in my references, I was trying to “get the seller’s place sold” even when the market was sometimes dead, and other listings by other brokers’ were sitting dormant, and I was acting for the seller, with the hope of speeding up the process, and getting my seller top dollar at the same time; one of the seller’s options was to offer a bonus to a would be co-op, noting and pointing out that neighbours whose properties were not selling were offering anything from a dollar to 2 or 2.5 pts.

          The option was received graciously, and explained well, and properly. Absolutely no pressure. Not ever. My track record spoke for itself. And I carried proof positive paperwork with me. I had cottoned on, as they say in the Deep South, to something that worked.

          So I elected to include the process in my portfolio. But of course the process would never appeal to agents who wrap up new listings by the boatload, spending often 15-20 minutes presenting. It takes a minimum of two hours. The deliberate, conscientious thorough slowpoke that I am.

          Likewise with a buyer, no pressure, but formatted differently, and that was my personal corp choice when I was introduced to the buyer agency concept … My services cost x-number percent. I wasn’t looking for boatloads of buyers. But when I had them I did an exceptional job for them if I do say so.

          More than 60% of my business was on the listing side, and unless those sellers were relocating out of my area, they too became my buyers. Under buyer contract. My buyer fee was xyz. Period. I didn’t officially go looking for buyers.

          But when an ad call, sign call, or web contact became my buyer (for some property some place) they paid a “top-up” fee, under my buyer broker contract, if that seller’s listing co-op fee did not meet my stipulated requirements.

          It was a rule I put in place when buyer brokerage first came to town and I was enlightened about the one-dollar situation.

          Only once did anyone want to “argue” about signing my buyer contract. He wasn’t sure about it. Because no other agent had even told him there was a buyer contract. I said fine, no problem, discuss it at home with your wife and advise me how or if to proceed. The chances of some other agent finding him what they wanted was nigh unto impossible. I knew it! for sure and for certain. But he didn’t. For a year he had worked with his prior agent who had sold him his current place. And just couldn’t figure why no new house had been found. WOW! Ya think?!?

          He took home the contract, signed it and hand-delivered it to me the next day. Another one… who will almost for sure never move again. The deal I put together for them was irreplaceable, and they acknowledged that with a beautiful letter.

          What they wanted practically didn’t exist but occasionally one did appear, and I knew exactly where, but there were none at the moment, and what he wanted at the price point he preferred was never going to happen, period. So I wasn’t about to engage in squirrel hunting behaviour searching for evasive nuts for him, and then not fulfilling his specified needs.

          I managed to find them a new listing the very next day, that in my opinion was very much underpriced in fact, (absolutely amazing in a prime location) – that is another way to generate a quick sale for your seller; convince them to list on the low side; long before that became a habit to elicit multiple offers, and that house filled absolutely every item on their noted wants and wishes list.

          That one was truly a miracle in the making: knowing your (map) market like the back of your hand comes in handy. I drove (my) streets in my sleep :) and very much got lucky. The agent was just installing his for sale sign.

          The agent did a good job presenting my buyer’s full price offer. We gave him everything possible to work with. And then I listed the backup buyer’s property.

          Carolyne L 🍁

          • PED

            Exactly Carolyne – get it in a BRA. I know what you’re saying, charged with getting your client the best deal possible there’s nothing wrong with a co-op commission that says to those seller reps operating on the higher end of the rates that your seller is ready, willing and able to accommodate. So no problem there. What concerns me with this is that someone actually, in spite of the numerous issues with the Competition Bureau we’ve had here in Canada, wrote an article suggesting that listing agents tell the sellers that by jacking up their commission they might, maybe, possibly, entice a buyer to pay more than the property’s market value because the object is to get unethical buyer reps to steer their buyer to that property.

            Then we have the usual suspect who goes off on a tangent offering that the article is somehow saying it’s about the buyer rep rebating back to the buyer the extra amount as if any buyer or rep with a modicum of sense would be lured to a property with a higher fee when it’s net neutral to both.

          • Brian Martindale

            PED’s concern that “…listing agents (“could”–my word input, not the original author’s) tell the sellers that by jacking up their commission they might, maybe, possibly entice a buyer to pay more than the property’s market value because the object is to get unethical buyer reps to steer their buyer to that property.”
            That is a profound statement of possibility that insiders know all too well reflects the truth of the matter too often (once is too often). This is an abuse of power. Remember: knowledge is ‘not’ power (contrary to accepted public opinion), but rather, the ‘use’ of knowledge (over the ignorant) ‘is’ power, and the ‘abuse’ of knowledge (over the ignorant) is an abuse of power.
            Unethical registrants, by their very nature, abuse their power, else they would not be unethical. The questions therefore are: What percentage of registrants on any given day are prone to engage in the abuse of power game, and, how does one (other than the subjects of discussion) beforehand, objectively determine who might be sniffing the unethical trail to riches?
            Answer: Depends upon how hungry registrants are and upon how much ad hoc monitoring of registrants is conducted by overseers respectively. It may be that under current entrance-to-the-money-tree-chase conditions the shark tank will never be completely empty of sharks.
            Why am I so suspicious? Because, I have worked against the sharks as they patrolled for prey here and there over the years. Being a commissioned salesperson who can set his/her own pay scale as well as set the stage for abuse of power is always a lure to the game for predatory types (who see selling real estate as a game to be won any which way possible) who are too often attracted to the hopefully lucrative (for them) real estate sales business. The fact that so very many registrants are ‘not’ of this ilk is a testament to the reality that there are still good honest people out there who have to, unfortunately, still work in the shark tank.
            Hopefully, RECO (Ontario) will somehow, in some way, go the extra mile(s) to rid this business of the fledgling shysters, ‘before’ they become eyes-with-dollar-signs-in-them students in the first place. It is always easier to clean up a mess before it happens vs after it happens. Proactivity instead of reactivity is the answer.
            Are there any anti-shark vigilantes for hire out there willing to deal with the current crop of already registered sharks? How about a bounty system? “You find ’em; we fine ’em. One strike and we financially kick their ass; two strikes and their ass is recycled as grass.”
            Let’s clean this business up. (Those of you who think that this business is clean enough: you are part of the problem) It often takes extreme thoughts to create reasonable, but effective, action. Trusting consumers (who pay the freight) deserve no less. Inaction is not an option.

          • PED

            “Inaction is not an option.”

            That and finding excuses.

          • Alan M.

            But apparently incomplete opinions are an option!

            How does someone who would like to hold themselves out as a competent and ethical REALTOR, manage to rail against using higher commissions to help facilitate a sale, but has no issue with using a $1.00 selling co-op commission, as part of a strategy designed to procure property listings?

            And the definition of self serving is: ………………

          • Alan M.

            PED,

            The Competition Bureau of Canada is mostly concerned with the fact that consumer’s know that commissions are negotiable — which they are. The Competition Bureau of Canada couldn’t care less whether or not someone failed to sell their home in a timely manner (which caused them to net less), or at all, because they only offered a $1.00 co-op commission, or some other pitiful amount — as the Bureau isn’t at all accountable. The Competition Bureau of Canada has proven beyond any doubt that they fundamentally don’t understand the cut and thrust of the best way to apply real estate commissions, and would have been well advised to not meddle in the way that they have! When it comes to organized real estate the Competition Bureau of Canada has about as much credibility as a problem child!

            PED, sales people have been offered bonuses in many sales environments forever and a day. The employer offers it to his salesperson employee to get better results. Higher selling commissions don’t necessarily attract unethical buyer’s reps — they can attract buyer’s REALTOR’s who see a seller who is very serious about selling, whether or not the excess commission is rebated to the buyer, or just reduced at the time of any offer to help bring the sides together. The essence of what made the MLS work was remuneration and cooperation, without any concern or doubt about getting paid! The difference between one commission level and another will likely never cost as much as one month of market time in many jurisdictions. For those who really understand the business the rational should trump the emotional, every time!

        • Alan M.

          PED,

          I’m seriously disheartened, when people of means are allowed to charge into the industry, and because of their deep pockets offer gimmicks to induce innocent consumers into doing business with someone (REALTOR) whom they otherwise would never have met! I do have a serious comprehension issue with the acceptability of the blatant use of bribes, for example: heavily branded moving trailers that are being offered for free. And with the aforesaid, I feel no need to remind anyone that I am speaking in English, neither!

    • Jerry Bresser

      PED, ABC TV ran a real estate program about three years ago featuring this story: A house came on the market at $235,000. After a bit of time sellers accepted an offer at $220,000. Appraiser said it was a dated house, needed lots of cosmetic help, gave appraisal at $197,000. Buyer walked away. Seller paid professional stager $300 for advice, spent another $2,700 taking her advice, (total staging cost $3,000), put house back on market at $220,000 and offered 7% commission (3.5 went to buyers’ agents). House sold in one week with multiple offers at $225,000. Same appraiser said OK.
      No one forced the new buyer to pay $225,000.
      Suggesting that a seller offer an incentive commission is a proper business strategy, not a nefarious scheme.

      • PED

        Well ow. One anecdote of a story that showcases cosmetic changes and staging and it’s about the commission rate. What a farce! Of course on some other forum somewhere the stager is talking about how $3,000 added $28,000 in value.

        • Jerry Bresser

          Your sellers wants to net the most they can in the sale of their properties. When you take the listings, you have a legal, moral, ethical and fiduciary obligation to everything you can to find the buyers who will pay top dollar for the properties. We mostly find the buyers through other agents. That’s why we have an MLS system. Nobody forces the buyers to pay top dollar. If $3,000 invested in staging makes the property worth an extra $28,000 in the buyers eyes and if offering an incentive commission causes more agents to show the property, why would you find that unethical?

          • PED

            No kidding about all those moral, ethical and fiduciary obligations. Yet nowhere, have I seen you or the author of his tale advise the seller that they have zero proof that in fact a buyer will be induced to pay more than the property’s market value even to the extent that it must cover the added commission. Nor can they say with any degree of certainty that the eventual buyer would not have paid exactly the same despite the fee hike and so the seller gambles on unfounded claims just to lose.

            To purposefully propose to the industry at large that playing with the fee should be promoted to sellers in order to attract the unethical within the industry is borderline if not a blatant violation of the Competitions Act in this country, and your own for that matter. It is also a blatant violation of the ethics in place with CREA, RECO and other provincial authorities.

            I hope at least one of them is reading.

            Your argument in support of this scheme fails, for your approach is to use bribery, not marketing or negotiating skills to sell a would be seller prospect on hiring anyone you would coach and in turn it is not skill, knowledge or negotiations they depend upon to pull the best deal from the buyer’s Realtor, but bribery – bribe the seller, bribe the buyer’s Realtor.

            And if you think consumers would want to pay a listing side of X over whatever amount they think is customary if they were told the truth, try asking them as opposed to coaching Realtors. And please do use your scenario above where they can see that not only did the seller actually net less after spending 3 grand and increasing the commission even before having to carry the house for many extra weeks, but the whole sale was about a totally useless appraiser in a country where, unlike in Canada, buyers can easily back out of a deal because the appraisal fell short of offer price.

            This particular thread makes my blood boil for the ugly side of what it’s promoting. I’m better off to not return to it.

          • Alan M.

            And offering a real estate customer the free use of a REALTOR branded moving trailer, isn’t a bribe?

            PED you seem to be implying that either: only one particular amount of selling commission is needed and that amount is straight forward — although you haven’t indicated what that amount is, or that you allow your seller’s to decide how much co-op commission that they should offer. In the first case you would be implying that commissions are basically fixed, and in the second you would be abdicating your Fiduciary responsibilities. Both scenarios conflict with the authoritative bodies, you seem to want to be cognizant of!

            At least Jerry Bresser is clear in his strategies.

          • Jerry Bresser

            Thanks, Alan.

          • Carolyne L

            Jerry. You have spent countless years doing business in Canada and would be first to know how differently business is conducted this side of the 49th.

            But for agents who don’t know or didn’t do any corporate relocation work coming in from stateside, mostly the relo company had us insert the clause in the buyer’s APS, saying the finalization of the contract was contingent upon (here we say: subject to or conditional upon), the property appraising at or above xyz contracted sale price (the contracted price in the APS).

            I can’t speak to how contracts are purposed stateside because my experience was that it very much depended upon from which state was the subject of discussion among colleagues or trainers in the moment.

            Here in Ontario, the appraiser always seemed to know the sales contract price, and he was hired by the relo company, yet as a conditional (or contingent upon whatever) sale that had not yet been reported to the board MLS system,

            I always found that curious. Because in effect, that “method” maybe required a “make the appraisal fit” philosophy. That “APS” sales price is never otherwise disclosed within the industry until closed.

            Because the appraiser knew what appraised value was needed to complete the relo buyer’s contract, and that appraisal could always be massaged to arrive at the needed number apparently. And of course there is nothing necessarily in writing that is believable as to condition of the comps. It’s a hard job.

            Now, here, and having had discussions with colleagues stateside, many appraisals are computer generated, following a few seasons of only drive-by visits as opposed to actually visiting the comps like in the 80’s. Some appraisers visited broker opens and public open houses, keeping records of their visits for storage (steerage info purposes, as PED would say, perhaps).

            Like I mentioned in another comment, it often looked like relo companies were just trying to “file the file” in the completed drawer and keep their client happy, moving forward. Next. Of course the goal was to be sure their client in fact did not pay too much for the subject property and maybe different inside-rules applied if the buyer’s boss-company was paying for the house. I never saw a relo APS contract rejected. My transactions were never questioned.

            But having said all that, the bonusing of, exceptional to a given market, typical commission (there is not any such thing as typical allowed to be spoken of here), was around already 38 years ago when I entered the field.

            The bonus topic is nothing new. Not here, not stateside. It seems to have been part of the industry here since Moses walked the earth. And I don’t ever recall seeing anything in real estate courses saying it was an unethical procedure, marketing plan to stay away from, and have never heard of anyone having been taken to task regarding such use of listing/marketing.

            It’s important to note that the definition of market value is what a willing buyer is prepared to pay to a willing seller, when neither the buyer nor the seller is under duress, AND the subject property has been properly (sufficiently) exposed to the market. [Read: put the listing on MLS.]

            We were taught to build CMA’s using five properties comparable to the subject, then delete the lowest price and the highest sale and work with the three in the middle.

            Divide the sale prices by three to get an average, then rework the CMA, adjusting for time/date in market (usually not more than a sale 60 days old), although a time adjustment could be accounted for, location, lot size, square footage, upgrades or not, and adjust all accordingly. I used to think the concept wasn’t a whole lot different than how an Acctg balance is developed, adjust to make it fit.

            That’s where I discovered anomalies in tax references on listings, comparing houses that happened to be on the same street, same square footage as per builder plans, no odd or addt’l changes in construction, built and sold in the same market time. Yet the given houses across the street from one another often had quite different tax assessment.

            So I called the city to find out why there were such sometimes large variables on cookie cutter houses, sold initially in the same builder market year, and how the city tax department arrived at the tax assessment number.

            Answer: it depends on who was the builder and what season of the year the house was built. WHAT? Really? Yes. I had difficulty believing it.
            And I had previously learned that a large deck, if attached to the structure permanently, raised property tax. If built on free-standing pylons, not.

            Carolyne L 🍁

    • Carolyne L

      Just a btw: this buyer previously unknown to me had initially called on one of my listings that we discovered in conversation was not in fact for him.

      Now regarding the circumstance of my having discovered the property he actually bought – he lived only minutes from that listing and without my having had his buyer contract in hand, he would have likely seen the for sale sign and have gone direct to the listing agent. He had made it abundantly clear that he had no intention of being loyal. There was simply no need. Agents would help him without a contract and without any pre-qual confirmations. Several had already done so.

      He had in fact been loyal (?) for more than a year to the agent who had sold him his current place several years earlier: but with no luck finding a new place.

      Countless buyers over the years had told me his type of story. They contacted an agent who proceeded to install their process to help a would-be buyer find a new property.

      The process amounted to putting the buyer on a list to receive daily or weekly lists of properties new to MLS. The contact could review the list of street addresses and choose which ones they wanted to check out. Give the buyer complete uncomplicated control.

      The key: the agent impressed the buyer by saying there was no need to sign this new thing called a buyer representation agency contract. The would-be buyer was under no obligation. (You cannot acquire the loyalty of the public using this process, time and time again it’s been proven.)

      And this buyer was proof positive. He communicated with his initial agent from whom he had bought his current place, and that is allegedly precisely what he was told. In effect: “I will put your name on my list to receive new information, you do all the work and when you find a listing that appeals to you, let me know and I will show it to you.”

      This situation plays out daily in the industry. And buyers love it. No commitment required and they can, and do, make an appointment with the “listing agent,” many buyers say because they know they can buy the listing for less money if they deal with the listing agent because he will take less commission (from his seller/listing client), while doing a “double-dip.”

      So I wasn’t going to play that game of putting him on a “delivery boy list.” And certainly I would show him a couple of listings he really wanted to see, (I knew they would not meet his requirements), but I wanted to hear his criticisms so I could learn his “dislikes” for myself. It would help me make some decisions of my own.

      I had explained everything he needed to know if we were going to do business together, but he was still reluctant to sign a buyer contract. No problem. I gave him the contract to take home. His wife was too busy to see those two houses. He was unintentionally sending out false clues.

      He had a tape measure in hand, and used it several times in each house. I had to discourage that behaviour saying we needed to wait until his wife would agree to view properties with him. He was in control. Not going to happen. He had absolutely no interest in either place. (A few years later I had a relo buyer try that on for size; again, I made short work of that and ended up finding them the most perfect place, too.)

      I could see this game plan going nowhere except to waste my time. And I had no intention of playing it further. Out of courtesy and not wanting to apply any pressure, I stood beside his car with him and briefly reviewed how I work and cut him loose with the unsigned buyer contract in his hand.

      After consummating his purchase (in those days, the buyers’ name was published with the listing sold info), during a follow-up conversation the buyer told me (his) agent had called him, quite upset that his year of sending listing email lists to his buyer had not only proved fruitless, it had cut down the fruit tree. More than a little upset and bewildered, (his) agent felt betrayed and hoodwinked, by “me.” Ya think???

      The agent (me) he had bought from was famous for getting buyers to commit to a buyer contract and then look what happened. She stole his client.

      Of course I had inquired: “are you, Mr. Buyer, already working with an agent, under contract.”
      “No. My agent never asked me to sign a contract.” (Confirmed the would-be buyer wasn’t loyal.)
      “I will not show you houses without one, but out of courtesy I will show you a couple that you choose, so you can evaluate how I work, and so I can evaluate whether or not I want to work “for” you, not just “with” you trying to achieve your goal, or not at all.”

      His face was showing frustration. That’s completely okay. Because I was about to say: next. I had no intention of working the game plan “his agent” was playing. Exit stage left and best of luck. (Or, how’s that working for you both?: No purchase in sight.)

      Oh, by the way: I had insisted he bring me a letter from his bank, confirming he had access to funds or to borrow (if we should find him the right place) and he balked at that saying no agent and specifically “his” agent had never requested such.
      “Well, sir, that’s how “I” work. It’s part of “my” requirements.”

      This determines how committed a buyer is, up front, and if he’s truly “ready.” Most agents don’t believe in my system, but all I can say is that it worked for me.

      I was very busy, always cordial, polite to a fault, but I had enough to keep me busy without wasting my valuable time chasing shadows. You either want me to represent you or not. To me quite a professional, simple process.

      Oh, and btw, he topped up the co-op. But he got the best deal in town. No question about it. It was a win-win for all, including the MLS seller who was relocating out of the county, and his agent, too, who was gracious and complimentary as to how I do business. And told his seller so, that I don’t mess-around and always bring appropriate offers. There were two offers that night, the other from an out of the area agent wanting the house for himself. Very close offer apparently only dollars apart. But they accepted my buyer’s offer.

      Carolyne L 🍁

  • PED

    I’m always disheartened to read advice like this because it does nothing but perpetuate the public perception that we only care about our bottom line. The moral of the story is – bribe buyer reps because they’ll convince their buyers to possibly buy a property they don’t favour over another and even pay more than is necessary to boot. Who knew there are Realtors out there, in a buyer representation agreement who take care of their pocket book before their client’s? How about a similar piece from the buyer’s side extolling the virtues of paying more because their Realtor is self-serving?

    • Billy Bob

      No, the moral of the story is that we’re al human. I am sure the seller wakes up every morning, dresses up and goes to work. At the end of the day he says okay to less money, just because he’s not one of them “caring only of his bottom line” kinda person.
      But, when nothing else matters: do you want to spend $1.000- in order to make $10.000-? Let’s see how the seller feels about that, being that non-bottom line type.

      • PED

        I’m fairly certain that’s called steering which we’re not allowed to do. I’m also fairly certain that if a buyer agency agreement is in place that, “we’re all human” doesn’t count in fiduciary. Want a higher commission? then sign a BRA for a higher commission guarantee from the buyer. At least they know up what what they’re getting into. The other way they have no idea they’re being steered and played and manipulated.rate of

        Oh and there is nothing that suggest the extra rate of return is 1000% that’s ridiculous!

    • Alan M.

      PED,

      The moral of the story is: if you don’t offer enough commission (co-op) and there is a shortfall against what a buyer under contract has agreed to pay, it’s a problematic situation that can cost seller’s more money than they were hoping to save! That’s the message. What’s disheartening is that the industry can’t even have a consensus regarding basic math! It’s a fairly simple discussion — unless it’s avoided!

      • Realtor Guy

        Alan, what the buyer has agreed to pay their Realtor has nothing to do with the seller, its a contract between the buyer and their Realtor only. And lets face it, Realtors don’t properly explain these forms to buyers. Do Realtors actually tell buyers ‘if I get more than what we’ve agreed to I’m obligated to pay you the difference?”…no they don’t. Sellers don’t care what buyers are paying their realtors. If the buyers Realtor actually feels he/she is worth what they’re charging, they’d simply take the buyer to court and have them pay the shortfall…and good luck to any Realtor that ever does that.

  • Well said, Jim. For may years, I’ve been promoting the offering of a higher commission rate as an incentive for the listing agent to invest more effort, and to attract more buyer agent attention. Even though agents are supposed to show any and all possible listings of interest to their buyer client, we all know that that is not always practical or even possible. Thus, cherry-picking occurs. Which listings will s/he choose to show? Will the rate offered to the CB have any effect on those choices? Hmm.

    Almost as important as a realistic list price is the rate of commission, that is to say, incentive, offered to both the listing agent and the cooperating brokerage. The trick is to be able to convince a prospective seller of the merits of such a choice. When the heat leaves our current market, when sellers are clamouring for attention, I believe commission rates may rise again.

  • Robert Ede

    What a delightful bonus! A welcome kick-starter for a snowy (Apr7/17) morning!! (Written passionaltely too) Thanks Jim!!

  • Jerry Bresser

    Great article Jim, more than that, Great Truth! It’s about time that someone dispels the myth of saving sellers money by lowering the commission.

    I have been teaching this for years. A 1% increase in commission offered most often results in a 2, 3, 4 or 5 percent increase in selling price. Do the math: seller offers 1% above average commission, more agents show the property, multiple showings increase chances of multiple offers, and multiple offers increase chances of higher offers. Seller offers extra 1%, buyer pays extra 2%, seller pockets extra 1%, agents share 1%.

    One agent who uses my strategies took 82 listings in 12 months at 7% and half sold at full price and the other half at above asking. Bottom line, all sellers enjoyed an extra $2,500 to $25,000 in their settlement checks at closing. in addition, all his listing sold in 1/3 the average market time for his area. Clearly a win-win-win for both agents and the sellers.

    • Tomek W

      Nice comment Jerry, you actually describe the strategy better in the comments section than the article itself, that just mentions that discount co-op commissions hurt the final sale of the price. The article doesn’t really discuss how to do such a strategy just theorizes on the possibilities :)

      Even something like how to persuade FSBO’s to pay higher commissions and implementation of such strategy would trigger more interest in the article.

      • Carolyne L

        Let’s use this just as a procedure example. Seller wants 300k for his property, upgraded and overimproved as defined by a recent appraisal to permit him to have a secured credit line at his bank. Doesn’t support his upgrades and he is annoyed.

        Sales in the area for lesser-than quality but same general definition comps produced recent sales at 280k. There’s a good possibility you have not been in these comps when they were for sale, (and you certainly cannot always take the word of the listing reps who express how beautiful and wonderful their listing MLS property is, because it “is” in their eyes (but were you to see it personally you absolutely might not find it so), so you are going to have to rely upon the information provided by the listing reps. But it’s helpful to know that the bank appraisal is a guideline for your seller, even if he has unrealistic expectations regarding his wish list for a resale price. More than once I was disappointed, having checked the listing, visited the property, and struck it off my (beautiful:not) list.

        How to help the would-be seller get the extra 20k he wants:

        Using 280k as the base at 6 pts. ($16,800 commission), his net would be $263,200.

        Using 300k as the sale price, at 6 pts (18k commission), his net would be 282k. And his commission increases by $1200. But how to get him that 300k? When for all intents and purposes, the co-op agent is likely to use the same comps the bank did, and try to convince the seller that 300k is not realistic, having brought an offer at the supportable 280k figure.

        By using a sale price at 300k as the base at 7 pts. (21k commission), the seller’s net would be 279k. Or three thousand less. Yes. But he generated a sale that might not otherwise have happened at all, or he would have ended up reducing his price and netting out the figure based on the 280k at 6 pts, leaving him with 263,200. Not 3k less.

        The difference between SP280k:NET263,200 (at 6 pts) or 300k: NET279k (at 7 pts) is: an extra 15,800 dollars in the seller’s pocket, that cost him only an extra 3k to get. Divide that 3k by 2 agents who each get $1500. if divided in half (and shared, divided further with his office on whatever split he has). Using a 50/50 split just as an example: it means each agent gets an extra $750. out of the 3k extra commission but the seller has netted an extra $15,800 in his pocket.

        That is “just an example” of one algorithm. Each property generates a different one. TIP: Cross-check your comps by comparing annual taxes. I found some really odd information when doing this. That just confirms the status of your comps vis a vis the subject property. You might be surprised by what you find, digging a little deeper (and this applies to for use with buyers as well as sellers).

        Carolyne L

    • Carolyne L

      Yes, Jerry.
      That was one of my own personal chief differentiations. My USP. Not allowed to do it when at corp office for ten years; they had strict rules about such things. But for past 28 years as CRC – on my own it was my major secret. Sometimes people would say, since you are on your own, and you do so much business you can afford to work for less because your own costs are less. Speaking of which, TREB required the same 5k at the time for duplicate board membership AND 5k for my boutique one man band corp same as big corps paid. No scaling. We all had to pay the same start-up fees, even so I had been a TREB 5k member for full ten years prior to going on my own

      I mentioned 7 Pts USP briefly in several REM comments over the years, but no one seemed to catch on, oddly enough.

      Or some thought it was wrong, especially when the mode of the moment in recent years was deep discounting. I had only once been asked to discount in all the years, and a stand-in corp VP told my seller who spoke directly to him, “Carolyne will be fired if she discounts to you; we charge everyone the same commission.” That was a 500k sale, and I had sold the seller a million dollar home.

      Best results; proof of the pudding is in the eating. (See my recent post about the senior widow seller and her adult son; surely my effort put extra net in her pocket, and my competition from two other top agents was offering huge discounted commission.)

      So many transactions at 7 pts. when others offered 1 pt – 5 pts. Or even one dollar to co-op’s on MLS. No question that the seller benefits most.

      But be prepared by doing charts and graphs and select copies of addresses as proof positive. Show algorithms that explain easily in real dollars how it works. It’s the only answer when a seller says: “how’d you get that seller so much for their house? It’s not nearly as nice as mine is. I should get more, even.” My response; Okay. Here’s some options to consider.

      And NEVER discuss commissions on the telephone. N-E-V-E-R! You must be face to face, in their house with all parties to the listing present. I never used power point presentations. People love to “feel” real paper in their own hands. Stop talking. Let them convince each other, as to which process most useful to them, while you “listen,” and use your energy to discover who the real boss in the family is.

      Sometimes 4 Pts was allocated to the co-op, never less than 3 of it, and other times the extra was allocated to expensive marketing, (seller’s choice) that often, although produced quickly, didn’t get delivered fast enough before a sold sign went up (even in a dead or quiet market); I had already designated a “sold card” repeat, and since the artwork was already at the printer, things then moved quickly, because even when agents many times said my listings were overpriced, my listings 99:100 times sold fast, even in dead markets, and way back when, even, generated multiple offers.

      Fast sold signs at top dollar certainly made the phones ring. Everyone wanted to know my secret weapon. USP. But I always refused to discuss details without a confirmed appointment to view the property.

      Watch for my forthcoming comment about what else I did that apparently others weren’t doing. Just paying it forward for the newbies, perhaps.

      Carolyne L 🍁