Copyright(C)1998
by Ray Wilson. All rights reserved.Copyright(C)1998 by Ray Wilson. All rights reserved.
Copyright(C)1998
by Ray Wilson. All rights reserved.
Excerpts from the bookCopyright(C)1998 by Ray Wilson. All rights reserved.
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In the traditional system of real estate sales and purchase, homes enter the market through a "listing agent"g hired by the owner to "list"g the home, advertise it to attract buyers, make it available to buyers brought by other agents and, in general, do all that is necessary to sell the home at the best price and terms for the owner.Copyright(C)1998 by Ray Wilson. All rights reserved. ... the agent who brings the buyer to the listing agent represents the seller and not the buyer! Nevertheless, the buyer is very often under the illusion that he/she is this agent's "client". This selling agent derives a commission share directly from the listing agent, is contractually employed by the listing agent, and is a sub-agent of the owner-seller! By law, the buyer is merely the customer, and not the client of the agent. Under the law, agents owe all loyalty and confidentiality protection to their clients and not their customers. The law requires the agent to convey to the real client (the seller) any and all information about the buyer which might work to the seller's advantage -- including anything the buyer reveals in imagined confidence. This is fair if the buyer is forewarned, unfair if the buyer is unsuspecting, and scurrilous if the buyer is led or allowed to believe that he/she is the client.Copyright(C)1998 by Ray Wilson. All rights reserved. A 1983 FTC Report revealed 71 percent of buyers believing they were represented by an agent who was actually a subagent of the other side of the transaction -- confiding in someone required to keep the confidence of the seller and not the buyer! The classic example is the buyer who says to the agent "I'll go to $205,000 if I have to, but I want to offer $175,000 first and see if they accept that."Copyright(C)1998 by Ray Wilson. All rights reserved. The agent's legal responsibility to the seller requires the agent to inform the seller that the buyer will go to $205,000. This not only makes a mockery of the buyer's trust in the agent, but costs the buyer an extra $30,000 (of which the percentage-earning agent will get a slice).Copyright(C)1998 by Ray Wilson. All rights reserved. To put an end to this victimization, the law in many states now requires every real estate agent to immediately disclose to potential clients and customers whether he/she is a buyers' agent or sellers' agent, or acting as a "dual agent".Copyright(C)1998 by Ray Wilson. All rights reserved. One might think buyers entering the office of a sellers' agent, whether drawn by house ad or by the "working with buyers" pitch, would be fairly forewarned by the legally required disclosure. That would be so if the disclosure wasn't quickly neutralized with a follow-up something like "... but in practice, it really doesn't matter because there is actually no real difference between the two." Of course, such self-serving contention of "no real difference" contradicts the very premise of the law which was instituted precisely because the differences are very real (as is the massively unfair disadvantage to buyers unaware of the difference).Copyright(C)1998 by Ray Wilson. All rights reserved. A traditional sellers' agent working with you as a buyer has legal obligations and financial incentives to seek the highest possible price and terms favorable to sellers! That applies to any and all properties listed by his/her own agency plus any properties listed by any other agencies which are even made known to you. To the degree that such an agent may in fact serve any of your needs which compete with any interests of any of those sellers, the agent is either compromising the client's interests (in violation of the law) or accomplishing some net gain in the seller's advantage over the buyer. Seller wants the price up; buyer wants the price down. There are only two ways to go; one's gain is at the other's expense -- the classic example of adverse interest.Copyright(C)1998 by Ray Wilson. All rights reserved. RETURN TO TOP OF PAGECopyright(C)1998 by Ray Wilson. All rights reserved. Copyright(C)1998 by Ray Wilson. All rights reserved. |
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When an agency "lists" a property, it adds it to its inventory (list) of properties to be sold and agrees to market it for a commission, payment of which is usually contingent on a successful sale within a specified time. Types of listing agreement vary, but the usual is the "exclusive right to sell"g listing which gives sole marketing rights and guarantees the commission to the agency no matter who actually produces the buyer. ... By contrast, "open listing"g agreements offer no such guarantees, promising only to pay a commission to whoever brings a buyer (i.e., the procuring cause). Spending effort and money on an open listing runs square against the risk of a competing agency collecting the whole commission.Copyright(C)1998 by Ray Wilson. All rights reserved. One might suppose from this that agency expenditures on an open listing are necessarily losses when another agency sells the property and collects the commission .... Such logic is often part of the pitch when a listing agent is trying to convince an owner to grant an exclusive-right-to-sell. ... but this particular logic is not totally valid, for it does not take into consideration all the reasons listing agencies list.Copyright(C)1998 by Ray Wilson. All rights reserved. On the face of it, it does appear that the whole reason for listing is solely to develop an inventory of stock to sell, and that exclusive rights are simply the protection needed to set about marketing the stock. However, something very fundamental is still missing.Copyright(C)1998 by Ray Wilson. All rights reserved. ... there are actually five ways a given listing, even when expired, can bring income, involving one or several sales. Most significantly, four of the five ... income routes have one element in common, one element that physically brings money into the agency, one element that is the basic reason, the sum and substance, of why listing agencies list -- a buyer attracted by the property's advertising.Copyright(C)1998 by Ray Wilson. All rights reserved. They do not, as postulated above, list "solely to develop an inventory of stock to sell," for there is plenty of stock to sell, including that listed by other agencies, and even FSBOs. Access to all the stock in the world means nothing without access to buyers; and a traditional real estate business cannot survive without listing because that is what it uses to attract buyers. That is how it has been ever since some early entrepreneur had the revelation that houses somehow attract people who are looking to buy houses.Copyright(C)1998 by Ray Wilson. All rights reserved. Consider the point made that it is not necessarily bad business to spend money on an open listing. Agencies will sometimes get an owner's permission to advertise a home without an exclusive-right-to-sell contract simply because they don't really care whether they sell that home or other homes to buyers attracted by the ad. If there are several Mediterranean-style homes for sale in the Multiple Listing Service, and many buyers in the area committed to that particular style, then an agency better advertise a Mediterranean-style home to attract those buyers.Copyright(C)1998 by Ray Wilson. All rights reserved. The same home advertised over a long period loses its attractive power, but the optimum is to have it around long enough to draw as many buyers as possible before being sold. For this reason, the tendency of owners to overprice their homes can have an upside for the agency, preventing the "premature" sale, letting the home attract buyers for other sales until the owner adjusts to its real value.Copyright(C)1998 by Ray Wilson. All rights reserved. There is another upside to overpricing (for the agency, not for sellers or buyers). ... An advertised eighty-thousand dollar house attracts eighty-thousand dollar buyers. An eighty-thousand dollar house advertised for a hundred-thousand dollars attracts hundred-thousand dollar buyers!Copyright(C)1998 by Ray Wilson. All rights reserved. Nothing better depicts the antithesis of client-service than exploitation of the traditional "open house" to turn a seller's property into general buyer-bait. An advertisement and signs invite all comers to "drop in" without appointment or pre-screening and tour a property. Ask yourself why the listing agent would put copies of the multiple listing book on the kitchen table so buyers can look at properties competing with the property of the person who is not only everyone's host, but the agent's client.Copyright(C)1998 by Ray Wilson. All rights reserved. RETURN TO TOP OF PAGECopyright(C)1998 by Ray Wilson. All rights reserved. |
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Commission rates are not set by law, and must not be set by agreements among agencies or their associations. Any agreement to set uniform commission rates is a violation of antitrust laws. Even seemingly innocuous conversation relating to commission levels can be taken as conspiracy to fix prices. Fees are supposed to be a function of a free and open competitive market.Copyright(C)1998 by Ray Wilson. All rights reserved. The result of the weakness of price dickering and comparison shopping is that the base level of commission rates is not far below the ceiling in a given area (which, as shown, is capped by the FSBO option). Thus, evolving out of pure market dynamics can be a fairly uniform pricing structure in a given area; i.e., a "going rate" but with some individual variations, since (or "if") it is not imposed by clandestine collaboration.Copyright(C)1998 by Ray Wilson. All rights reserved. Commissions directly impact buyers and sellers in two ways: (a) in taking money out of the purchase price that might otherwise have gone into the seller's pocket, and (b) exerting upward pressure on the price and resisting the promptness of sale.Copyright(C)1998 by Ray Wilson. All rights reserved. Commissions indirectly impact buyers and sellers by how they effect the behavior of selling agents and subagents. That agents are indeed motivated by commission size is a matter of common sense....Copyright(C)1998 by Ray Wilson. All rights reserved. .... However, the effectiveness of this incentive is not as straightforward as the simple percentage logic, for the agent's motivation involves other factors. Consider the case of a 6% commission of a $100,000 sale evenly split four ways among listing agent, listing agency, selling agent, and selling agency. Each will net 1.5% or $1,500. A thousand dollar difference in price will mean only fifteen dollars to an individual agent (1.5% of $1,000). A thousand dollars (or two) can kill a sale; and $15 (or $30) is no real financial incentive for an agent or an agency to risk losing the whole $1,500 commission share by pushing for an extra thousand or two for the seller.Copyright(C)1998 by Ray Wilson. All rights reserved. Agencies will generally maintain that how they divide their commissions should be of no real concern to their clients. On the contrary, the structure of commission splits has profound impact on the interests of both buyers and sellers. Owners in particular should make it their business to understand how splits work, and dictate in the listing agreement a sharing structure that will facilitate rather than hinder the selling and buying process.Copyright(C)1998 by Ray Wilson. All rights reserved. [THE seller] might want assurance that what will be delivered is exactly what [the listing agent] is promising -- i.e., a system geared to sell his property for the best price in the shortest time. He might well question the sincerity of such promises if listing shares are greater than selling shares. He might well be concerned about all of these things if he was aware of them -- but he probably won't be concerned about any of them because the self-interest of the traditional system is not served by making sellers aware of such matters.Copyright(C)1998 by Ray Wilson. All rights reserved. RETURN TO TOP OF PAGECopyright(C)1998 by Ray Wilson. All rights reserved. Copyright(C)1998 by Ray Wilson. All rights reserved. |
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Whenever someone asks you if it is going to rain, there is always one safe answer:Copyright(C)1998 by Ray Wilson. All rights reserved. Technically, the answer is inevitably true, though not in the real time context in which the question is asked. Usually, it is a shared joke in which both the questioner and the joker implicitly acknowledge a broader reality encompassing more than the "here and now".Copyright(C)1998 by Ray Wilson. All rights reserved. There is a parallel to an even greater reality -- eventually it will snow and there will be hurricanes, tornados, floods and droughts. Given a broad enough timespan, not only do these events happen, but so do massive systemic changes (i.e., oceans and continents move). Things we think of as "never happening here" actually do happen -- some actually recently, just beyond our memory. Our "never" really means "not in our limited personal experience" or, at the longest, not in recorded history.Copyright(C)1998 by Ray Wilson. All rights reserved. There is, of course, a difference between weather and real estate, between the physical and social/economic worlds. In the physical world, we step outside and discover that our expectations of sunshine were "all wet." But, in our social and economic worlds, even the systemic changes are often so fast and so subtle that people feel comfortable denying that they're coming long after they've arrived. Some village blacksmiths were still teaching their sons how to shape a horseshoe, even while others were scrapping their forges and installing gas pumps.Copyright(C)1998 by Ray Wilson. All rights reserved. This section opened with an observation about being asked if it is going to rain, and about the inevitably true answer being "Yes". Suppose, instead, that the question was, "Is it raining?" The same safe answer -- "Yes" -- could be given. It is always raining somewhere.Copyright(C)1998 by Ray Wilson. All rights reserved. In fact, most often, your local weather forecast for rain is based on the fact that it is raining somewhere, and that the stuff is moving your way (Yeah, yeah. Sometimes it forms right there where you are). Buyer agency is happening somewhere whether it is falling on your house or not. Both buyer and seller exclusive agency is happening somewhere. Yes, it is flat-feeing out. These weather systems are moving into the local region. In some low spots flood waters will rise causing extreme discomfort and worse for those who have their heads stuck in the sand.Copyright(C)1998 by Ray Wilson. All rights reserved. RETURN TO TOP OF PAGECopyright(C)1998 by Ray Wilson. All rights reserved. |
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We're one-sided and listless, and proud of it! This boast in a newspaper ad I once wrote for an exclusive buyers' agency was not about closed minds and a lack of energy. The point was that the agency represented only buyers and never took listings.Copyright(C)1998 by Ray Wilson. All rights reserved. When the agents said they had no interest in either listing or selling, the owners were first disbelieving, then curious, most pausing to hear more about this unheard-of idea of a "buyers' agent". They had all been through the buying process at least once, and several responded to what they were now hearing with some version of the same revealing rhetorical questionCopyright(C)1998 by Ray Wilson. All rights reserved. ....Copyright(C)1998 by Ray Wilson. All rights reserved. Informed buyers will seek an exclusive buyers' agent -- one who represents only buyers in any and all transactions, and never sellers, and who is not part of a firm in which associates, supervisors and/ or owners are obligated to sellers (i.e., they work in organizations that do no listing).... In truth, exclusivity is indispensible to agency itself; and to the degree that an "agent" is tied to any interest adverse to his/her client, agency is not merely "limited" but nullified. ... one traditionalist approach to keep working both sides of the street is to claim to provide "limited agency" to each side. Limited agency is like limited pregnancy....Copyright(C)1998 by Ray Wilson. All rights reserved. The "exclusive" label is a desirable marketing device; and some listing agencies will paste it on in-house "agents" despite the fact that they cannot be exclusive of powerful workplace ties to seller interests.... Every member of a listing agency -- even one contracting only with buyers and not listing property -- works with and for those who do list and whose income is very much affected by where and in what amount the buyer's money is spent. They do not operate exclusive of personal, social, economic and other ties to seller interests; thus, they are non-exclusive buyer's "agents" despite claims to the contrary.Copyright(C)1998 by Ray Wilson. All rights reserved. Non-exclusive buyers' agents are real estate practitioners who want the right to claim to work "for" rather than merely "with" buyers, but are unwilling or unable to divest themselves of their sellerside security blankets.... [They] fit the old political definition of "mugwumps" who fence-sit with mugs on one side and wumps on the other, giving full commitment or service to neither buyer nor seller.Copyright(C)1998 by Ray Wilson. All rights reserved. In the traditional system, the seller hires the listing agent, and the listing agreement is the employment contract.... Using money earned from the sale at the closing, the seller pays the listing agency.... The listing agency then pays the co-broke share to the selling agency.... Both agencies then pay their own agents out of their respective co-broke shares. It is an employment hierarchy, with authority flowing along the lines of hiring and payroll, with the seller "officially" at the top. The underlying rationale is that of the traditional work organization in America:Copyright(C)1998 by Ray Wilson. All rights reserved. The premise accompanying this rationale in the traditional real estate mentality is, of course, that the seller's money is paying the wages. It is the same misguided premise that led American automakers and other manufacturers to near ruin by losing sight of who was really paying the bills. The quality revolution and its customer-focused definition of "quality"g came to the rescue when it reminded even those doing the hiring where the money was really coming from. There, as well as in the purchase and sale of real estate, the payer of all bills and all wages is the buyer!Copyright(C)1998 by Ray Wilson. All rights reserved. The buyer's purchase offer to the seller may specify, as a condition of the offer and purchase agreement, that the offered price includes full brokerage fees including the fee to be paid at the closing to the buyer's agent. Accepting such an offer will make no monetary difference to the seller. The only change effecting the seller's agent should be that, instead of a subagent share, there will now be a buyer's agent fee.Copyright(C)1998 by Ray Wilson. All rights reserved. While no money offer at all should be made to buyers' agents by sellers' agents, to make such an offer with less than that offered to subagents, or for zero dollars, is blatant discrimination with antitrust overtones. Nevertheless, the MLS study revealed that offers to buyers' agents were often less than to subagents -- statewide in 24% of the cases, and in 36% of the cases in Benjamin County....Copyright(C)1998 by Ray Wilson. All rights reserved. Traditional agents have tried to justify the lower offering to buyers' agents by claiming that their sellers insisted on it; but in no case was the insisting seller deducting it from his or her overall commission payout.... To discourage buyers' agents from bringing buyers to a seller is certainly never in the seller's interest, so, by pure logical deduction, it must be perceived as being in the interests of the seller's agent. Such apparently deliberate deterrent is also not in the interests of a free and open market. Practiced publicly under the cooperative auspices of the MLS, it is not far removed (if at all) from the group boycott activity outlawed by antitrust legislation.Copyright(C)1998 by Ray Wilson. All rights reserved. The one thing both buyer and buyer's agent owe to the seller and seller's agent from first contact is the assurance that the buyer does have the capability to purchase the seller's property. However, the seller side is entitled to know nothing beyond that assurance about the buyer's financial condition.Copyright(C)1998 by Ray Wilson. All rights reserved. In the traditional system, the seller's agent gets a far better look into the buyer's financial condition than that, usually through the device of "assisting" the buyer with finding mortgage money. Even when a buyer needs no assistance, the seller's agent gets to justify the peek into the buyer's wallet with the seller's need for assurance of purchase capability.Copyright(C)1998 by Ray Wilson. All rights reserved. Whether the information beyond purchase capability is being used in the seller's or the agent's interest, it is not being used in the buyer's interest. The point is that it should not and need not happen; it is avoided with the employment of a buyers' agent who is not on a percentage of priceg commission. The buyers' agent also needs assurance of buying capability, but is strictly forbidden by the law of agency to relay anything more than that to anyone else (without the buyer's permission).Copyright(C)1998 by Ray Wilson. All rights reserved. The buyer probably most in need of a buyers' agent is the one relocating from outside the area, and unaware of local factors....Copyright(C)1998 by Ray Wilson. All rights reserved. Beware the advertised "relocation specialist", a self-bestowed credential which, if touted by a sellers' agent, is a spin on the "we work with buyers" pitch and means especially those buyers combining a pressing need to buy with a lack of local knowledge. Remember that the most ethical sellers' agents, by virtue of their client responsibility as sales agents, are indeed "relocation specialists," i.e, specialists at relocating money from the buyers' wallets to those of seller and agent. Relocation needs are absolutely genuine, but they are buyers' needs and sellers' advantage! Professionals can serve those needs, or exploit them. Each approach is a simple matter of who is working for whom; the relocating buyer should be mindful of the differences between buying and selling, between buyers' and sellers' agents, and of the ploys to downplay those differences.Copyright(C)1998 by Ray Wilson. All rights reserved. The root of continuing problems is an attitude that the offer is an instrument of real estate brokerage, i.e., one of the forms that makes the business work. What that attitude misses is that the offer is not an instrument, and it is not a form! The offer is an act of the buyer! It is an expression of the buyer's will which should be fully and accurately reflected in the paper and ink that comprise the document.... It is incumbent on the agents to remember whose offer it is!Copyright(C)1998 by Ray Wilson. All rights reserved. Not knowing their place in the minor matter of if and where their name appears in the offer, agents move on to major error, assuming rights that are plain intrusions upon the rights of the buyer. The insidiousness of the displaced focus is exemplified in it's surfacing in what is normally a bedrock of appropriateness, the Realtors'® Code of Ethics. Consider Standard of Practice 16-16:Copyright(C)1998 by Ray Wilson. All rights reserved. Realtors®, acting as subagents or buyer/tenant agents, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker's offer of compensation to subagents or buyer's agents nor make the submission of an executed offer to purchase/lease contingent on the listing broker's agreement to modify the offer of compensation. (Amended 1/93) In actuality, agents shall not use the terms of an offer for anything, since it is not their offer to use. One might defend Standard 16-16 by claiming it really is a restriction against improper influence by the agent upon the offer, but that is just not true. There is no explicit or implicit mention or indication of "influence." The clear presumption is that the offer is an instrument of the agent.Copyright(C)1998 by Ray Wilson. All rights reserved. RETURN TO TOP OF PAGECopyright(C)1998 by Ray Wilson. All rights reserved. |
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One of the big lessons of the quality revolution in both industry and services was the discovery of how far off-base were traditionalist assumptions about the so-called "cost of quality." Put simply, the idea was that quality costs money, and that the more effort that went into the quality of a product or service, the higher it would necessarily be priced....Copyright(C)1998 by Ray Wilson. All rights reserved. Philip Crosby published his 1979 wake-up call with the then-radical title, Quality Is Free.... Crosby showed that effort given to achieve zero defects paid for itself many times over by avoiding the costs of non-quality! The very real non-quality costs accumulate in rework and repair, returns and replacements, back-up inventories and systems, legal expenses, repeated efforts, and colossal time expenses.Copyright(C)1998 by Ray Wilson. All rights reserved. The attention given to these internal non-quality costs ... sometimes takes focus away from the external costs of non-quality which quietly pass as a residual to the customer with the low quality product or service. We can appropriately call these the Customer's Residual After Purchase (CRAP), examples of which would include extra stops at the gas pump, breakdowns and repair bills, and both the pain and expense of poor medical care. One example of the post-revolution effect on such CRAP is a comparison of my own current fuel-efficient second car, now pushing 250,000 miles, with the short-lived gas-guzzlers of pre-revolutionary Detroit.Copyright(C)1998 by Ray Wilson. All rights reserved. There is plenty of non-quality in the real estate business, but traditional operations convert all non-quality costs to CRAP, i.e., literally dumping it all on the buying and selling customers.... By the time CRAP begins plaguing the new homeowner in property problems, high monthly payments, surprises about neighborhoods, communities, schools, or taxes, the agency has long since collected the commissionCopyright(C)1998 by Ray Wilson. All rights reserved. CRAP happens -- but only after the transaction is history and the agents have been paid. In the view of successful traditional agencies, the system "ain't broke, so it won't be fixed."Copyright(C)1998 by Ray Wilson. All rights reserved. People have to remember though, that for a very long time, the American auto industry was also fully insulated from competition and enjoyed a captive market.Copyright(C)1998 by Ray Wilson. All rights reserved. ... the experience of a thousand or more business areas will be repeated in real estate. The customers will no longer accept the CRAP, simply because they do not have to. They are no longer captive to one set of providers.Copyright(C)1998 by Ray Wilson. All rights reserved. RETURN TO TOP OF PAGECopyright(C)1998 by Ray Wilson. All rights reserved. |
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A. THE TRADITIONALISTS' DILEMMACopyright(C)1998 by Ray Wilson. All rights reserved. Copyright(C)1998 by Ray Wilson. All rights reserved. double agent n. A spy who pretends to work for one government while actually working for another -- Dictionary definitionsC Still, there is a clear parallel between a double-agent and a listing agent who leads a buyer to think he/she is the beneficiary of confidentiality and loyalty that is really owed to the seller. In the current age of consumer quality, three elements combine to expose such duplicity when it occurs: laws of agency based in three centuries of common law, provide clear rules of the game; disclosure (the most recent rule) makes sure everyone knows who the players are; consumer advocates (including buyers' agents) now insure that consumers know the rules and when someone isn't playing by them. •••••• •••• Let's apply a little "game theory". IF: i. the rules of the game (laws of agency) prohibit a gameplan that enables you to rig the game; ii. the players must wear uniforms (disclosure) so spectators and referees will know who's breaking the rules, and iii. the referees (advocates) keep the rules public and use public exposure to keep the players following the rules; THEN: The only way to keep rigging the game is to rewrite the rules! While you're rewriting to allow your gameplan, add a rule that allows you to put on the uniform of your choice.
I earlier noted some listing agencies claiming to provide exclusive buyer agency through one agent and exclusive seller agency via another. Under the common law, that is deceptive because one and only one broker in the firm, the "principal broker,"g is actually the agent of all the firm's clients. All other agents, whether licensed as "brokers" or "salespersons", work only in that principal broker's name and authority. Any listings obtained by anyone in that firm belong to the principal broker, and that one principal broker is the agent of the owners of those properties. "Common law" has more in common with "common sense" than a shared adjective. The common law which undergirds the system of contracts and agency in English-speaking nations evolved from the common experience of people repeated over many centuries. As a result, it operates in very close harmony with human reality; i.e., with what people hold to be good common sense. Common sense says it is pure nonsense to assert that the buyers' agent at one desk has no personal interest in property sales that could provide income to his/her boss and the sellers' agents at the surrounding desks. An organization does not exist without interdependent interests organized under some central coordinating authority. The common law of agency simply identifies that central authority and holds it accountable in the person of the principal broker to the clients! By common law and just plain common sense, a buyers' agent in a mixed-representation agency cannot divorce him/herself from interest in the well-being of either seller-agent colleagues or a boss whose income rises and falls with sellerside income. It actually isn't buyer agency that is causing the real problem for listing agencies, but the fact that, without buyers as bait, traditional listing agencies may in truth have little of real value to offer sellers. In this modern age of computers and the internet, there indeed may be more effective and economical ways of bringing a property to market than through traditional listing agency methods. Operationalists do value tradition, but for its stabilizing effect on operations and output, and not as an end or output in itself. There is a difference between traditionalism and true respect for tradition. Tradition does not form in history, but in the present; it begins with people facing up to their "today" and grows through the practice of subsequent generations living their present, not their past. Tradition is the light from history that gives us bearings as we move ahead even through darkness. Traditionalism is plain and simple fear of the dark, a hysterical delusion of safety gained by closing the eyes. Listing agencies and agents ... have come to the end of the old long lone stretch of "seller-only" road, reaching the fork and it's choice of either seller agency or buyer agency. The operationalists among them are those with a functioning steering wheel; they will simply steer toward the future, respecting the rules that still apply, but recognizing that the terrain is changing. The traditionalists, with their steering wheels bolted according to the past will try to force the road ahead back onto the old course. Traditionalists, on the other hand, put importance of process (i) second only to income (iii). While their speech professes noble values, most highly valued is security, which they equate with stability, i.e., avoiding change in the activities that have been profitable. Ironically, the one thing that stands most in the way of their clinging to their "tradition" of luring both buyers and sellers is the one thing that is truly a "tradition" in the full cultural sense of the word. It is the common law evolving from the common experiences, senses, and understandings of people over many centuries -- the very common law the traditionalists extolled when it suited their purposes. But extolling is, after all, only talk -- and business is business. Revealing that their public veneration of the common law was so much lip service, traditionalist lobbies in many states now promote legislation which relegates the "one master" rule to the scrap heap of no-longer-profitable principles. ... traditionalists first react with denial, using things like the "no-difference curve" to explicitly avoid taking it seriously. It is easy to maintain the illusion that buyer agency is not a threat to current practice in those locales where buyer-agency has not yet emerged. But, even in those places, it's coming. .... Through both the media and people relocating from other areas, local buyers will know they deserve better representatives than sellers' subagents. .... the national campaign to preserve traditionalist practice was obliged to put a positive spin on buyer agency as a "good thing", pitching it as something that would not end the traditional practice of playing both sides of the street. Suddenly, buyer agency is portrayed as just another service that can be provided by a listing agency. The task of national campaign management unavoidably falls on the National Association of Realtors® (NAR), the largest professional association of real estate agents in the country. NAR's duty is to represent all legitimate types of real estate agents, for nearly all exclusive buyer agents are also Realtors® (i.e., members of NAR); but their voice within NAR is dwarfed by the overwhelming mass of seller-agent members, most of whom were hardly aware until recently of even the existance of buyer agents. NAR is so dominated by the mindset of its traditionalist membership that it virtually disregarded the buyers' need for agency throughout its history and, in classic traditionalist denial, all but ignored the existence of buyer agency for most of the last decade. Not until November of 1996, and two years after some of its member Realtors® who were genuine exclusive buyer agents joined in setting up their own professional association (the National Association of Exclusive Buyer Agents -- NAEBA), did NAR put itself in the buyer agent association business. ... it simply purchased the privately-owned Real Estate Buyer Agent Council (REBAC), essentially a commercial training entity specializing in training and certification of buyer agents, exclusive and otherwise. REBAC's definition of an "exclusive buyer agent" does not include the common law, common sense, and NAEBA prohibitions against working in a listing agency. Moreover, REBAC adopted definitions of several other types of buyer representative, making the label of buyer "agency" accessible to virtually every traditionalist operator. NAR and REBAC are doing for buyer agency what American settlers did for Mexico's northern territory of Texas. Traditionalist agents committed to the old way of working both sides of the street are emigrating into the "buyer agent" business with about as much loyalty to buyers as Sam Houston had to Mexico. Mexico at least had other states after the loss of Texas; but once the concept of true buyer agency is brought under the dominion of traditionalist interests, buyers will be back where they were without genuine agents. The NAR/REBAC abandonment of the common law and common sense definition of agency enables NAR to masquerade traditionalist members as buyer agents, and itself as their advocate in the lobbies of state legislatures. There, it throws its power behind new legislation, the alleged purpose often expressed as a sudden need to "clarify the duties of real estate brokers" -- a need not recognized in all the years prior to disclosure laws when sellers' agents had absolute control. With active encouragement and guidelines from the national organization, state Realtor® associations have successfully lobbied for new statutes castrating the client safeguards under the common law, replacing clarity and order with disorder and redefinition, the combination providing cover for traditionalist agencies to continue working both sides of the street. Traditionalist self-interest state legislation may involve one of four ploys (or some blend of the first three): (1) legitimatizing dual agency, (2) disguising dual agency under new labels, (3) eliminating the principle-broker protection to clients, or (4) stripping the consumer of all rights to agency.
opyright(C)1998 by Ray Wilson. All rights reserved. RETURN TO TOP OF PAGECopyright(C)1998 by Ray Wilson. All rights reserved. |
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However nervous buyer agency makes traditional agents, it won't put many of them out of the real estate business. It certainly dooms sub-agency; but that just means many current traditional agents will have to decide whether they want to be buyers' agents or sellers' agents.Copyright(C)1998 by Ray Wilson. All rights reserved. ....Recall that "quality"g is all about conforming to customer specifications, and also that it applies as much to the customers of agency services (i.e., the clients) as it does to the customer of the real estate sale. Customer specifications of service need should vary as widely as the personal circumstances, abilities and personalities of individual clients (buyers or sellers); but sellers were never given that option by traditional agencies lumping everything in a blanket commission.Copyright(C)1998 by Ray Wilson. All rights reserved. ....By contrast, "a schedule of charges which vary with the nature and amount of service required" -- i.e., flat fees -- will be devastating to traditionalist listing agencies. Again, I specify traditionalist listing agencies, not progressive sales agencies. However, even if all traditionalist agencies and agents were to convert overnight to progressive quality-driven seller service, there would not be enough room for them all. The down side of the quality revolution has been downsizing.Copyright(C)1998 by Ray Wilson. All rights reserved. ....Ironically, the most obvious non-quality activity, and the certain casualty of flat-fee reform on the sellerside, will be the very one given homage for its everlasting nature in the hallowed maxim of traditionalist wisdom:Copyright(C)1998 by Ray Wilson. All rights reserved. No more! Listing is at long last, lost as the essential element of success.Copyright(C)1998 by Ray Wilson. All rights reserved. ....Within seller-service firms, listing is non-quality activity because it does not directly serve those who are already customers (i.e., property owners). In fact, it even works against them, taking up the time of people who should be selling, i.e., procuring buyers, rather than more competing sellers.Copyright(C)1998 by Ray Wilson. All rights reserved. ....The major reason that the gathering of listings takes precedence over selling is the sheer number of agents in the business and that, in the past, they have all been listing agents. To take the eyes off listing would be to allow the competition literally swarming around to take all the inventory. That would be suicidal in the traditional system, the reason for the word "lasts" rather than "succeeds" in the maxim.Copyright(C)1998 by Ray Wilson. All rights reserved. ....Quality performance means selling homes quickly and close to the asking price. Legitimate appraisals by qualified objective appraisers mean realistic and credible asking prices, faster deals and streamlined lender approval. Traditional listing activity and CMA's each work in the opposite direction, taking time and costing money; agents must be compensated, so these things both push commission rates upward and slow the process down. Eliminating them provides both fee-reducing cost cuts and agent time to focus on the job of selling the property fast (made simpler by the assurance that the price is the right price).Copyright(C)1998 by Ray Wilson. All rights reserved. ....This may sound a bit too idealistic; and if the response is that most agents simply won't operate this way, that response is correct. Most listing agents will not work this way -- but some will, and they will be the ones who take away business from the others.Copyright(C)1998 by Ray Wilson. All rights reserved. ....Short-sighted reaction of traditionalists to inevitable dynamics may be self-defeating, neutralizing two current resources which could give them market advantage in the coming age of customer quality. The first is their market appeal as agents, something being crippled by their own ill-advised double dealing legislation (Chapter 8).Copyright(C)1998 by Ray Wilson. All rights reserved. ....The second current resource traditionalists could be wasting is the MLS itself. Holding out and refusing to provide low-cost flat-fee MLS access to sellers will not only destroy MLS's current competitive advantage, but eventually, its competitive viability.
Return to top Copyright(C)1998 by Ray Wilson. All rights reserved. |
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In real estate, the "cards" are the available homes. In poker, all cards should be available to all players -- provided the deck isn't stacked. Your stake, the money you bring to the table, dictates what game you're in. Every property in your price range should be available for you to consider; but, what cards you ever get to see depends on who controls the deck. Sellers' agents bring their own deck of listed houses.Copyright(C)1998 by Ray Wilson. All rights reserved. One way to play high-stakes poker is to hire a pro, i.e., literally "stake" a good player to play on your behalf. It is perfectly legitimate, provided the pro is not a "ringer", i.e. undisclosed to the other players. Home sellers traditionally hire stand-ins, so prior to disclosure laws, a typical traditional game put amateur players (buyers) against professional ringers with stacked decksCopyright(C)1998 by Ray Wilson. All rights reserved. .Copyright(C)1998 by Ray Wilson. All rights reserved. ....The only way to have real assurance that the agent knows what he/she is doing, and is fully representing you, is to have some substantive knowledge of your own about the areas in which you'll be enlisting an agent's help. The best way to begin is to do just what you are doing now -- read! (This is, of course, absolutely vital if you intend to proceed on your own, without an agent.)Copyright(C)1998 by Ray Wilson. All rights reserved. ....I'll get to the specifics of reconnaissance in a few pages, right after putting you through a necessary exercise -- the itemizing of what you already know about what you will be encountering. After reading this far, here are the essentials you should keep in mind:Copyright(C)1998 by Ray Wilson. All rights reserved. 1. You are the customer, and it is your money that will be paying for everything, all costs, all profits, all commissions, all fees. ....As a group, exclusive buyers' agents are among the most conscientious people I have ever met, and passionately dedicated to the customers' interests. Other people in most professions, including real estate sellers' agents can be just as conscientious and dedicated; but, at this early stage in the evolution of buyer agency, there is an obvious selective mechanism at work putting disproportionately more of the good guys on the buyers' side. These are the leaders in consumer advocacy in real estate, on the cutting edge of the customer quality revolution, taking on all the costs and risks that entails. For one thing this venture begins with the social cost of the resistance and even hostility of the traditionalists, no easy thing for people who inherently care deeply about others. All pioneering ventures entail risks, but this one has the added problem of highly organized sabotage of its income channels ranging from systematic "commissionectomy" to deceptive legislation. Return to topCopyright(C)1998 by Ray Wilson. All rights reserved. |
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Let's face it, you do not want to hire a buyers' agent -- or a buyer agency -- to sell your house. A word of caution: for your own protection, you should define "buyer agency" to include all firms promoting buyer agency as a regular service. That means especially those double agent firms pretending to fully serve both sides. The fact that dedicatedg buyer agencies would never accept such a firm as a legitimate buyer agency is no reason for you to now accept it as a legitimate seller agency.Copyright(C)1998 by Ray Wilson. All rights reserved. ....You hire people to do things you want done, but you either cannot (or choose not to) do on your own. More than simply having something done, agency creates an extension of yourself, empowering someone to not only act and speak, but see and hear on your behalf and in your interest.Copyright(C)1998 by Ray Wilson. All rights reserved. ....What is it that you cannot do, that you now need the function of agency to accomplish? What is it you will not get done, by using your own abilities, and then simply hiring the needed non-agency services?Copyright(C)1998 by Ray Wilson. All rights reserved. The answer is to SELL your property, i.e., if you want your property sold in the sense of someone actively selling it, aggressively and strategically moving it on the market for the highest price, in the shortest time, and at the best (for you) terms. Accomplishing this requires combining the "non-agency" services with strategic persuasive interaction with prospective buyers by either the seller or someone fully empowered to act on the seller's behalf. If you want active selling of something of significant value of yours by someone else, then you want that someone to both have the knowledge, resources and skills to do it effectively, and the clear-cut fiduciary obligation to do it in maximum fidelity to your interests. That is the benefit of agency.Copyright(C)1998 by Ray Wilson. All rights reserved. You will get genuine agency only from dedicated exclusive seller agencies, including those traditional agencies which do not extend their invitations to buyers to lengths that bring them into implied dual agency.Copyright(C)1998 by Ray Wilson. All rights reserved. ....Since the benefit of agency is that it supports aggressive "selling" in the full sense of what that word means, it follows that you would forego the cost of agency if either (1) such "selling" is not what you are looking for, or (2) you could effectively sell it yourself.Copyright(C)1998 by Ray Wilson. All rights reserved. ....An indirect risk of agency is the liability you assume for the actions of your agent, and the traditional system actually extends that risk through the network of subagency. .... you do want statements in your contract with the listing agent to the effect that:Copyright(C)1998 by Ray Wilson. All rights reserved. (1) the listing agent will clearly instruct subagents to make open, honest, and uncompromised disclosure; ....I stated above that liability is the indirect risk issue of agency, rising from disservice or damage to the interests of others, actually an indirect risk to your self-interest. Self-interest is, of course, your very reason for hiring an agent and placing trust in him/her. The direct risk of investing trust in another is that of it being placed in the hands of the wrong person, one who will put his/her interests above yours. There are certain tests you can make of an agency's trustworthiness:Copyright(C)1998 by Ray Wilson. All rights reserved
....If it is your intention to retain the right to sell it on your own, then it is up to you to know all the dynamics and the pitfalls. Read what is suggested here, and more; and talk with your attorney. You need to know three things: the selling system, what you are selling, and yourself! To the degree that you do involve a system professional, the less you need to know about the system (just enough to know you have hired the right professional).Copyright(C)1998 by Ray Wilson. All rights reserved. Knowing to a certainty at least one aspect of the property is crucial -- the market value! Nothing so delays the sale of a property as the owner's inflated view of the value, and nothing so speeds up a sale and guarantees a loss as the owner's underestimation of property value. And nothing in the traditional listing process is so unreliable and untrustworthy as the estimate of value placed on it by someone with a vested interest in the value -- i.e., specifically an agent who wants to list it, use it to attract buyers for other properties, and sell it for a commission.Copyright(C)1998 by Ray Wilson. All rights reserved. ........ despite all that has been said in this book about professionals poorly serving their clients, the value of those dedicated to quality client service should not be underestimated. Just remember who it is that defines "quality" -- by act of congress, by presidential proclamation, and by the common wisdom of the worldwide quality revolution it is you! The message here is not to avoid the professionals, but to be willing to use them because you know when to use them, and how to use them, and how to discern the useful from the users. |
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Copyright(C)1998 by Ray Wilson. All rights reserved. |
Copyright(C)1998 by Ray Wilson. All rights reserved.
Copyright(C)1998 by Ray Wilson. All rights reserved.
Copyright(C)1998 by Ray Wilson. All rights reserved.
Copyright(C)1998 by Ray Wilson. All rights reserved.