Sunday, May 20, 2007

In Response to 60 Minutes Story

The following was in response to a story done by a reporter for 60 Minutes entitled "Chipping Away at Realtor's Six Percent.". Many comments posted in response to this story were from misinformed people who made unfair sweeping generalizations against all real estate professionals.

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In Washington State, commissions are negotiable. It is illegal to set commission rates. I am sure that this is the case in all 50 states, since this is a form of price-fixing--an antitrust violation. If sellers want to lower commission rates, then they need to speak up and negotiate it down. If listing agents "don't allow" less than 6%, then THOSE listing agents need to be reported. However, to say that all real estate agents and brokers are bad is, not only ridiculous, but it is also a sweeping generalization that is unfair to those who are honest, good, and who work very hard for the clients they serve.

As far as rebating buyers, some states don't allow this. However, in the states where it is allowed, a buyer can negotiate a rebate with ANY exclusive buyer's agent--or any real estate agent, for that matter. Exclusive buyer agents, however, only work for buyers. They are non-traditional, as discount brokers are, and their priority is to get their clients the lowest price possible on the properties they buy.
Exclusive buyer agents are truly pro-consumer. They don't take listings, and neither do the companies they work for, so there is never a chance of dual agency--which is a conflict of interest.

Dual agency is a conflict of interest, because a seller expects their agent (and their agent's company) to get the highest price possible for their property, while a buyer expects their agent (and their agent's company) to help them negotiate the lowest price possible.

When there are two agents working for the same real estate company, and they are working on opposite sides of each other in the same transaction--these commitments are conflicting. This is dual agency, or "dual representation," on the part of the company.
Dual agents are required to remain neutral to both parties, meaning, that neither buyer nor seller receive the level of service they originally expected, and signed-up for. However, with Dual Agency, the real estate company makes double commissions. It is a long-standing practice in the real estate industry called "double-dipping."

The company being interviewed in this news story has contradicted itself by claiming that they do not allow dual representation (as stated on their web site), yet they take listings--so if a buyer wants to make an offer through them, on a home listed with their company--this is dual representation (aka. dual agency) on the part of the company. A dual agent will make money from both sides of the same transaction, while remaining neutral to both sides. Who is really benefitting here?

Buyers can completely avoid dual agency by hiring an Exclusive Buyer's Agent or broker, because they do not take listings--and neither do the companies they work for. They will also work very hard to save their clients money, because a satisfied client means the possibility of a long-term business relationship.

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