For the first time ever, I’m going to file a complaint against another realtor. In this case, the listing agent discounted her commission so her buyer would win, even though my all-cash buyer had a higher offer.
It is in the vaunted Realtor Code of Ethics that any different commission deal needs to be disclosed to the buyer-agents:
7.22 Dual or Variable Rate Commission Arrangements. The existence of a dual or variable commission arrangement shall be disclosed by the listing broker by a key, code or symbol as required by the MLS. A dual or variable rate commission arrangement is one in which the seller or owner agrees to pay a specified commission if the property is sold by the listing broker without assistance and a different commission if the sale results through the efforts of a cooperating broker, or one in which the seller or owner agrees to pay a specified commission if the property is sold by the listing broker either with or without the assistance of a cooperating broker and a different commission if the sale results through the efforts of a seller or owner. The listing broker shall, in response to inquiries from potential cooperating brokers, disclose the differential that would result in either a cooperative transaction or, alternatively, in a sale that results through the efforts of the seller or owner. If the cooperating broker is representing a buyer or tenant, the cooperating broker must then disclose such information to his or her client before the client makes an offer to purchase or lease.
Of course, when taking the listing most agents don’t think they are going to discount their commission to screw another agent out of a deal, but once they get into the heat of battle, they lose their mind and forget.
Or they never knew it was against the rules.
The maximum penalty is a letter in the agent’s file for six months, so there isn’t a big deterrent to being unethical. They say that the reason the MLS exists is to ensure cooperation and compliance between agents, which sounds good – right up until money is on the line.
I wonder how many agents have read the Code of Ethics?
The ethics of business………..AAAAAAAHHHHHHH!!!!
https://www.youtube.com/watch?v=xKGeHuln08A
In 2102 I made an all cash full price offer on a bank owned home that had fallen out of escrow.
As far as I can tell the selling agent never took my offer to the bank. I think it was because she also representing the buyer and did not want to split the commission with my agent.
The home sold shortly thereafter for about $20,000 below my offer. Whatever happened it did not seem right (ethical) to me.
Good luck, my experience with California real estate “referees” is that they were a stunning combination of lazy and stupid. Your experience may vary because I was a third party highlighting short sale corruption and realtor collusion on a house I wanted to buy. What killed me was that the short sale collusion was so obvious inspector gadget could have cracked the case. At the very least they should have requested that the bad guys submit documentation showing why the listing agent sold a house listed at 850k on zillow to his buddy realtor in the same brokerage for 650k. Which he flipped in 1 month for 980k
When we sold our home in Phoenix, our agent showed us all offers on the table (literally) and we chose which one to sell the house to.
Is it possible in this situation that the seller purposefully chose to sell the house for a reason other than more profit? Maybe they know the buyer or have some relationship to the buyer?
I had a buyer make a cash offer on a short sale and got tipped by an insider that the listing agent had to ‘twist the arm’ of the seller to take an in-office deal.
I had met the Fraud VP at BofA, and ran it by him while it was in process, and he said the current deal was ‘within the tolerable range’.
It closed for $100,000 less than our offer.
It might be possible but then why not explain it to me? There are other factors that make it extremely unlikely – I will do a follow-up story.
I am shocked. I have never met a dishonest realtor herein Encinitas. Probably did this to a senior too. “coming soon.”
If the agent reduced her commission to result in a higher net to the seller I don’t see anything done wrong here. Certainly agents are allowed to reduce commissions during negotiations. And I’m sure that was disclosed to her buyer. Nothing to see here. Move on.
Hey Tom,
In your zeal to bust my balls, you may have read through my post too quickly.
The residential resale business is built upon broker cooperation – that you don’t screw over another agent to make a deal. Commissions are set on Day 1, and they shouldn’t change unless proper notice is delivered by the listing agent to all buyers-agents.
The day is coming that ethics will be cast aside and we will finally acknowledge the truth. When it comes down to making $25,000, or tilt the table slightly to make $50,000 instead, most desperate realtors can’t resist.
In the case I mentioned, the agent made about $4,000 more to screw me over. That’s desperate.
I didn’t read through too quickly, I happen to disagree with you. Commissions aren’t “set” any more than price is “set”. Sellers are allowed legally to negotiate all terms of a sale, including what the seller is ultimately willing to pay listing and buyer’s agents. There’s nothing in the law that prohibits sellers from modifying a listing agreement after the fact.
The residential real estate market should be built on doing right by your clients, as it is in financial services (which is much better regulated). If the client, the seller, made out better; that should be paramount, not making sure all agents make as much as they can. As someone who has bought a ton of real estate over the years, it’s why I would never use an agent to buy, most forget that getting me the best deal is the goal, not to “cooperate” with other agents to collude so everyone makes more and the agents are “happy” with each other so they work together again in the future. That’s a fundamental flaw and is often times in contradiction to buyers’ and sellers’ best interests.
That’s why agents leave listings up (and signs) far longer than they should and continue showing houses with strong accepted offers, because they are hunting for more clients and trying to leverage my asset to build rapport with other agents. Real estate is really the only industry that gets to leverage my asset to the agents’ benefit. Every other agency relationship if prohibited from doing so.
I do like your blog and have followed for years.
And if you want to talk ethics, why do realtors as a whole insist on “credits” in escrow rather than reducing purchase price? Because credits don’t reduce agents’ commissions. Something that would be illegal if done in financial services, but perfectly legal in residential real estate.
P.S. what business doesn’t rely on “cooperation”?
I happen to disagree with you.
You’re not disagreeing with me, I’m just the messenger who is pointing out the Code. You disagree that Section 7.22 of the Realtor Code of Ethics should be in place. But let’s face it, nobody knows it’s even there, let alone abides by it.
The Code of Ethics are the voluntary rules of the game that realtors swear to uphold. We’ve agreed not to screw each other.
I will agree with you that the Code is regularly abused every day by realtors who mark their listings ‘sold before processing’ with glee – and in doing so, they are willfully ignoring the rules.
The Code of Ethics is a nice idea until a realtor is faced with making a $25,000 commission ethically, or $50,000 if they ignore their fiduciary duty to their seller and violate the Code of Ethics by screwing another agent out of the deal too. Agents see other agents doing it every day, so it never occurs to them that there’s anything wrong with it.
It is in the seller’s best interest to cause multiple offers and get them to bid against each other to reach top dollar. What is murky and not understood by the players is that the bidding war also creates the device that gives every agent an equal right to earn a commission.
If we conducted live auctions to sell homes, it would solve everything. Every buyer has a clean shot to win the property by being the highest bidder. Because you can see the other bidders and can participate in the process to select the winner, it can’t be manipulated by agents. If the participants want agents to advise them along the way, then great, I’d love to stick around a while longer.
I noted previously how the company that is currently offering an auction option can’t help but add that you can buy it previously if the price is right. Sure, the seller has that right, but it makes the sales process murky and unclear – which favors the listing agent, not the seller.
I’m going to start a different comment to take your points one by one.
As someone who has bought a ton of real estate over the years, it’s why I would never use an agent to buy, most forget that getting me the best deal is the goal, not to “cooperate” with other agents to collude so everyone makes more and the agents are “happy” with each other so they work together again in the future.
If you never use an agent to buy, then you must be speculating that this is the case, or relying on hearsay. You must be limiting your purchases to just those properties where you can conspire with the listing agent to screw other buyers and agents out of the deal. No problem, you have the right to manipulate the system to your advantage – plus you get bragging rights around the barbeque all summer. I blame the listing agent, not you.
Since you’re a big player, certainly you have come across at least one case where the listing agent wouldn’t tilt the table for you. Please tell me it’s so!
I’d like to ask how you sell properties, and how you would feel if your listing agent conspired with a buyer instead of letting the open market decide the sale, but I’m pretty sure what your answer will be. Either you don’t sell anything (which is fine and probably smart) or when you do, you just get a guy to do the paperwork for a minuscule fee.
But given what you have learned here at the blog over the years, isn’t there a little part of you that believes that if you let me sell a property for you using my bidding-war techniques, I might be able to sell it for more than you could?
That’s a fundamental flaw and is often times in contradiction to buyers’ and sellers’ best interests.
I agree, and we’re just working our way through the old way to get to the new way of selling real estate. Agents are desperately working their way out of a job.
All we need is a district attorney from any county in America to prosecute a bunch of realtors – like 100 or 200 at a time – for breaching their fiduciary duty to their sellers. We need perp walks to scare other agents into compliance.
Everyone is free to buy and sell without a realtor’s help. Just go stick a sign in your yard and you’ll get callers.
Guys like me offer a convenience package that uses ethical behavior to achieve a top dollar sale with minimal inconvenience to you the seller. I offer a similar convenience package to buyers which helps them buy the right house at the right price, with minimal inconvenience.
When ethical, the cooperation between brokers is a fantastic system. But when it is unethical, it’s a mess – and filled with things that aren’t good for the consumers.
And if you want to talk ethics, why do realtors as a whole insist on “credits” in escrow rather than reducing purchase price?
Fannie/Freddie insist on credits instead of the seller handing cash back to the buyer. It only amounts to $5,000 or $10,000 total, and it’s a way for buyers to finance some repair costs. If you’d rather lower the price instead so I don’t make the extra $125 to $250, no problem. What agent is going to deny you a price reduction solely because they need the extra $250? If there are agents like that, they need to turn in their shingle.
P.S. what business doesn’t rely on “cooperation”?
“Broker cooperation” means I sell your products, and you sell mine. But I didn’t make the product and I don’t own it – so it really is an offer to share the commission if we work together to close a transaction.
I don’t think I could name another business like that.
“Broker cooperation” means I sell your products, and you sell mine. But I didn’t make the product and I don’t own it – so it really is an offer to share the commission if we work together to close a transaction.
I don’t think I could name another business like that.
This doesn’t address the question what other business don’t rely on cooperation.
Another example is any other agency relationship. How about selling movies to distributors, actors’ agents, m&a activity. Agents aren’t required to buy and sell product.
I’ll expand. Yes, every business relies on cooperation. “Broker Cooperation” is our code word for commission-sharing.
The movie-selling is a good example.
I do like your blog and have followed for years.
You own ‘a ton’ of real estate. Let’s say you have bought 11 properties in the eleven years I’ve been doing this blog.
Hasn’t there been one time that you could have thrown me a bone? One time where you realized that going directly to the listing agent wasn’t necessary? Or that going to the listing agent didn’t result in a discount, and you might as well have had me represent you, just to say hey?
I’d like to acknowledge reader Mark who, like you, does his own thing. But his dad was in need of a property, and Mark knew that some agent was going to make a commission. So he called me, just to say thanks for the years of blogging that he’s enjoyed.
If there’s never an opportunity like that, then fine. But why do guys like you read this blog for years but never comment? You have a ton of real estate and at least a few stories. Maybe your contribution could be to help me help others?