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Who gets the commission in this scenario?

Discussion in 'Real Estate' started by Jacque, 7th Dec, 2005.

  1. Jacque

    Jacque Team InvestEd

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    Interested to see where people would go with this and who they think rightly deserves commission.
    I have a friend who is currently looking to purchase a particular property. A brief outline so far:

    When she first inspected the property with Agent A she was keen but wanted to re-inspect with her partner. A second inspection with Agent B followed (A was unable to attend) and then an offer was submitted with Agent B to the vendors. Agent C (listing agent) then entered the negotiations, trying to talk the price up (as all agents worth their salt should be doing for their clients) and the offer was subsequently rejected. Reason was another buyer offered a higher amount and a contract of sale was signed.

    Fast forward 3 weeks and the property is still noticed for sale again, without an "Under Offer" or "Under contract" sign on it. New enquiries to Agent D reveal that the first buyers finance fell through and so the property is now back on the market. My friend is perplexed that she didn't hear this directly from Agent A, B or C herself. She then offers to buy again through Agent D, and lets him know that she only wants to deal with him, as her previous dealings with Agents A, B and C were less than memorable :)

    If she goes ahead with the purchase, I'm aware that the original listing agent will usually receive 50% (or thereabouts) of the commission, as this is standard practice in the RE industry. After all, the listing agent did all the groundwork in getting the client on board in the first place.
    However, who, in this particular case, do you feel deserves the rest of the commission?

    Hope I've made this as clear as possible so you all get my gist..... :)
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Are these agents individuals working for the same agency ? Or are these four different agencies in a multi-list situation ?
     
  3. Jacque

    Jacque Team InvestEd

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    Sorry I should have clarified this! They are all from the same agency and office.
     
  4. Tropo

    Tropo Well-Known Member

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    IMHO agent who'll sell this property deserves commission.
    Other agents deserves a few beers....
    :cool:
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I say the listing agent and the selling agent should split the commission 50/50 (or whatever ratio the agency uses to compensate listing versus selling agents) ... the others should be bought a beer as Tropo mentioned - they contributed to, but didn't actually achieve a sale - they don't deserve more. In my opinion.
     
  6. D&K

    D&K Well-Known Member

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    I agree that the agents listing and selling split the commission. A or B should have followed up people who had visited the property when they heard that the sale had fallen through, in order to reach your friend and earn part of the commission.

    A more serious issue is that an offer was submitted and then rejected in lieu of a higher bid. Nothing in real estate law sticks unless its in writing (I'm not a lawyer but have found this out the hard way). If you provide a written bid the agent might use this to pressure other buyers into signing a counter bid quickly before going to the vendor or back to you beating the price up. If you don't provide a written bid the agent might still notify other parties and spend more time trying to beat the price up before giving you a reply from the vendor. This is really annoying if you are watching a few properties at once, but can only afford one.

    What I (we) have done (and now usually do) and what may help your friend in future is to provide a written offer with a 24 hour deadline, requiring a written response. It doesn't give the agent's much time to conduct a silent auction (not that they would of course), doesn't leave you waiting for days, and also gives you a documented time of your bid should the agent present a higher bid after you have already been told that your's was accepted. Although the agents might be put off, surprisingly the vendors often seem happy with this approach, perhaps it's a case of having certainty in a time of uncertainty and stress?

    I have also had the case where the vendor received two signed contracts simultaneously in the mail for different amounts, on return from holidays. We lost, but it was done purely innocently :) . So this sort of thing does happen.

    Dave
     
  7. Rick

    Rick Well-Known Member

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    Other agents (A,B and C) deserve to buy agency principal a few beers for being slack!
     
  8. Tropo

    Tropo Well-Known Member

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    Good idea.... :D
    :cool:
     
  9. Jacque

    Jacque Team InvestEd

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    Thanks for confirming what my thoughts were on this, everybody :)
    Though I can't see how beer would pacify a non-drinker (as is one of them!)
    Maybe if it was as hot as yesterday....... :D
     
  10. Jacque

    Jacque Team InvestEd

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    Hi Dave
    I agree that written offers can be effective. After all, if you're prepared to put pen to paper, although nothing is legally binding until contracts are signed, it demonstrates the seriousness of your offer to the vendor.
    I also like to add my own conditions to my written offers, one of which includes the understanding that my offer will not be conveyed to any third party who may be interested in purchasing the property.
    Naturally, I would assume that some REA's simply ignore this condition, but at least I've included in on the original offer for my own safety net.
    Time expirations are also efficient for speeding up the whole negotiation process, though I wouldn't recommend using an ultimatum unless you are prepared to walk away from the sale.
     
  11. D&K

    D&K Well-Known Member

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    Hi Jacque,
    I like your additional clause, I must include it next time. I never state that a written offer is final, which leaves the door open to revise once if we have to. However, my wife and I usually make a realistic offer in the first place, after a lot of comparisons, and in doing so we often find suitable alternatives if our offer is not accepted.
    Part of learning to be unemotional about IPs is being prepared to walk away. :)
    Dave
     
  12. Jacque

    Jacque Team InvestEd

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    Right on :)
    Easily done for us when investing, but not so easy when the home of our dreams is up there on the stage. When it comes to this, we seem to lose all our normal logic and commonsense, don't we?!
     
  13. TryHard

    TryHard Well-Known Member

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    The Commission

    Hi all

    Just a slightly different take on this. A good friend of mine is principal of a large chain RE Agency. Without going into great detail about some of the astounding things he has told me :) ... basically as I understand it the philosophy of the major agencies is similar ...

    SELLERS are everything. The more product you have on the books, and the higher the prices you achieve for them, the better your business model (current and future) is. BUYERS are a dime-a-dozen tyrekickers that receive limited attention. Eventually SOMEONE will buy the property - the trick is having the property on the books, fhaving it fund a big marketing campaign, and bumping the achieved price up as high as possible (as Jacque pointed out). No great surprise that 3 out of 4 salespeople churned and burned a potential buyer - it would have prevented them prospecting some more sellers ;-)

    As far as I know, in this particular organisation my friend is in, the LISTING salesperson gets the majority of any commissions (and they generally work their listings to death anyway so limited chance of someone else selling it) because they are the ones who reeled in the "spun with gold" seller.

    Once I was given the inside explanation of the lack of focus on buyers in general, things made a lot more sense based on my past experience ! :)
    Buyer's agents no doubt turn the tables on this approach a bit :)

    Cheers
    Carl
     
  14. D&K

    D&K Well-Known Member

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    Jacque, Yes and no. I think investing changes your attitude in terms of looking for value for money in a PPOR also. A PPOR is emotional, but you also realise that it's also a great asset to leverage off and secure future investment and life goals with. You start to balance house dreams with life dreams - if that makes sense. :confused:

    For example, we looked a bit harder at our options when we bought our current PPOR. We didn't downgrade our house so much as worked out that it was better to knock down an old house and build new rather than build in a new estate three times the distance from the city (if Canberra qualifies as a "city") - for about the same price when including the knock down vs cut and fill costs!

    It is amazing how the cost per m2 is often cheaper in existing suburbs closer to town. If we hadn't been investing I don't know if we would have looked for the opportunity and made the decision we did. Perhaps I'm just too obsessed with investing and RE! :eek:

    It would be interesting to hear if others have found that their investing influenced their choice or location of PPOR, but I think I'm getting off the topic of this thread!

    Dave
     
  15. Jacque

    Jacque Team InvestEd

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    I realise only too well that this is the way that most agencies operate. If they were more attentive to buyers and diligent with their buyer databases, though, then I'm sure their reputation would be better amongst the general public. This includes vendors, as their properties would probably sell a lot faster if genuine buyers were kept and updated on agency records.
    However, they are caught in the classic conflict of interest- trying to represent both players in a transaction, when it simply can't be done. They represent the vendor only and are paid by them only. They are agents for the seller. It pays for buyers to remember this at all times, and do their own homework when searching for a property.
    I now notice a significant difference in callback attention compared to two-three yrs ago, when enquiring on a property. At the height of a boom, agents don't need to maintain buyer databases as it's almost a situation of "List and Wait for the Buyer" whereas times have now changed (at least here in NSW). Names and details are diligently taken and about 50% of agents actually return calls and continue to follow up, a definite contrast to the heady days of 02-03 :)
    If you are truly serious about saturating the market out there in your property search, then you need to be consistent and regular, with your follow up calls and enquiries. I call the same agents on a weekly basis to ensure they haven't forgotten me (the lazy ones wait for the call, the pro active ones have already followed up), persist with agents who ignore calls, promise they'll get back to me (and don't) and insist on someone showing me a property, even when there's little interest from anyone in the office in doing so!
    Having said all of this, I've come across some brilliant REA's who are honest, upfront and truly working hard for their clients to get the best price they can. They won't readily reveal any motivation or bottom line, are efficient and strong when it comes to negotiating the best price for the vendor. Yet they remain courteous, attentive and follow up with all enquiries. One of the better agents I bought a Qld property through even followed up on pre settlement renovation quotes for me, sent photos when I asked for them, and was generally helpful right through to settlement. Not rocket science- just good old fashioned service.
    My apologies- This thread has really deviated from the original discussion, but, hey, isn't that what healthy discussion is all about on these forums?
    Thanks for the response Carl :)
     
  16. Jacque

    Jacque Team InvestEd

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    Well, let's start a new one Dave :)
    Can you cut and paste this over to a new thread or do you want me to do it for you? Could generate some interesting views..... :D
     
  17. D&K

    D&K Well-Known Member

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    ... umm. Forum novice here. Don't know how to transfer this to a new thread. Happy for you to start it as I have to rush off for a day or two. Thanks Jacque,

    Dave