With my entrance into the NY market offering a vastly different perspective from "whence I came" (out of state), it has been confounding to me, particularly after reading this featured post: http://activerain.com/blogsview/549893/Educating-consumers-on-how to understand how it is that NY consumers seem so confused over the commission concept, and who gets what.
In my real estate history, there was the sellers agent, and the buyers agent. Something like 95% of sold homes were co-ops, with the commission being split and designated. They're called "co-brokes" here.
In Long Island, however, I've come to understand the there is a large contingent of the real estate community that views the commission this way: an agreement between the seller and the listing agent.
The result of this thought process is problematic to the consumer for the following reason: buyers are becoming aware in New York that there is commission "built in the price" for a buyer's agent on mls listed properties. Sellers don't care who gets the money in a "split" situation, as long as the house is competently closed.
If listing appointments were handled with this assumption (a split fee) by the listing Realtors (more importantly, by their Long Island brokers), it would loosen up the atmosphere. I am certain that this is not the comprehension here, because there are still signs that go up regularly, not put into the mls for a week-or month- after the sign is up. If a seller understood that the objective is a sale, from whomever may bring a buyer, they would surely eschew a "pocket" listing.
To hang on to an outdated notion that permits exclusivity and limited exposure for sellers who receive NO BENEFIT from this practice seems dicey in a market of properties sitting. It's unethical in a good market- pick your poison.
If a Long Island agent who is involved in this type of listing effort would explain the benefit, perhaps it would clarify this issue for other agents that are part of the MLSLI, in addition to buyers who believe that the agreed to commission in the form of the advertised mls rate is "theirs"- to the extent that it pays for their representation (and is funded by them, as it's in the price of the house as an expense to sell).
Until then, I'm sticking with the philosophy that commission offered in the MLS to the buyers "side" is money well spent by BOTH seller and buyer as it offers a "fair" transaction. Whether it's good for the li$ting broker, from where I stand, is irrelevant.
GA requires that ALL listing agreement be filed with the MLS within 7 days of signing.. so this prevents "pocket listings" Also our Listing agreement says they agree to pay x% and I the listing agent agree to give Y% to a co-op agent.
Laurie, You were missed! I sure wish I had an answer for you why things are different here but I hope someone else can help you answer the question. I read your posts and learn more with every one!
Laurie, our contracts in Arizona are between the seller and the seller's agent. Then, when we - as a Seller's agent - put the listing into the MLS, a co-broke is written in so that the potential buyer agent will know up front what they will be getting. I hope this makes sense. AND we don't use attorneys. Love that part. ;-)
Eric, disclosure is muddy in my area- I can't imagine, with full disclosure of facts, why ANY property wouldn't #1 BE in a local MLS; and #2 would offer several weeks of exclusivity to the listing company. I just wonder about the conversation with the seller, when this happens- surely, Realtors get written permission...
Carole, between the Options blog and AR, and of course SPRING (YAY)- I've been remiss. Thank you so much for hanging in there with me!! After this week, more time to comment (although I still do much reading, as time permits). Sometimes thinking of a decent comment is challenging for me lately, especially if I've really enjoyed the post.
Teri, the fact that you don't use attorneys must be a HUGE benefit ;). While I understand exactly what you are saying, and agree that in THEORY, it's a listing agent/seller contract, I am guessing that you don't view the commission as "entitlement" somehow- a grasp for a double end. It's the philosophy that is so different here. It never occurs to me that collecting the full amount is going to happen. If, in some odd circumstance, it does, OK. It's just not in my marketing "agenda".
Laurie - I can still sense your frustration, there are pockets of agents who continue to operate in the old way which is not in the best interest of there clients. Educating the public as Loreena pointed out would make a big difference. One common practice in my area that I find troublesome is the use of an exclusive rider on a sign which gives consumers the opinion they have deal with that agency to get information on the property. This is misleading considering the properties are also advertised in the MLS Systems.
Jennifer, you are PURPOSELY egging me on- THE MAJORITY of the mls listed signs out here still have an "exclusive" sign rider. While it is most definitely frustrating, it's not insurmountable, and I agree- education is best. Big problem on Long Island- the "educators" have, in my experience, not offered much. At all. But really- wouldn't it be fascinating to be a fly on the wall IF an explanation is provided to sellers as to why, for a week or month, the property remains pocketed? How can the financial benefit to the listing agent not be disclosed? I REALLY wish that some of these numerous agents on Long Island would explain- maybe it would make sense in a way that we can't understand, because we are missing a consumer benefit. Great to "see" you!
In Missouri, we are employed by the seller and offer a co-op fee to the selling agent. I occasionally have a buyer tell me they are using me to save on the coop fee. I politely let them know that the commission is negotiated with the seller prior to listing.....has nothing to do with who buys the home.
Kay, do you then let buyers know that obtaining a buyers agent is the recommended way to go? And, do you let your seller know that there is a buyer that would like 1/2 of the co-op fee to be deducted, because they are not utilizing that designated portion of the fee? Thank you for your honest response- I'm really wondering about all of this here.
If you have "fiduciary", wouldn't that require you to let the seller know that a buyer had interest, but wants the amount offered to the buyers agent reduced from the price, at which point you accomodate the seller by reducing by that amount 1/2 of the fee, and selling the home?
Hi Laurie, we have MLS issues with members, they have to place listings within a time frame as members. The other issue that is very clear...our state law does not permit sharing commissions except with other state licensed people. Seems to be a function of MLS making policies that are policed. Nice post.
Gary, do you view reducing your fee to the seller, as requested by a buyer (to the benefit of your seller ) as "sharing" commission? I guess that I don't, to the extent that the "designated" amount wouldn't be paid out, and there is no kick back or illegal practice occurring. What I see in many cases are Realtors that are philosophically focused on a double end, offering marketing efforts that reflect this agenda. It's being questioned more by buyers, which is why I ask. Thank you for your valuable contribution- it's appreciated!
Pocket listing is technically not legal around here, but in some cases it still happens - although its not done out in the open like that. We are supposed to submit everything to the mls within 24 hours. I think LI is unto itself!
Hi Laurie I just wanted to comment on something you mentioned.
"To hang on to an outdated notion that permits exclusivity and limited exposure for sellers who receive NO BENEFIT from this practice seems dicey in a market of properties sitting. It's unethical in a good market- pick your poison."
1st let me say for 99% of listing agents out there it is a waste of time to the seller and a disservice to the seller to not get it on the MLS ASAP.
On the flip side what is wrong with that if the listing agent has the ability (massive pool of buyers or what not) to sell that listing on their own and rather quickly? (under a week)?
Laurie great post. It is called double dipping. Since Mike, posted late and you haven't responded yet let me answer him until you can. There is a great deal wrong with that. By not putting the property on the MLS and alllowing all of the potential buyers out there, regardless of who they are working with, an opporutnity to see and buy it, you are not insuring that the seller gets his best offer. You may sell the property but you are not necessarily getting the best offer. You are concerning yoursellf more with yourself than your seller because someone else's buyer might have paid more. It's unethical.
As I stated for 99% of the agents out there it is stupid not to go on the MLS... But I have to disagree that it is unethical.
1st off I have clients that don't want it on the MLS for whatever crazy reason or not so crazy reasons so in those cases it is what THEY want. In addition I can't tell you how many times I meet sellers who are not ready to sign with an agent for reasons such as their neighbor/cousin/buyer agent who sold the house to them, etc etc will get upset if they see it listed with another agent and they want me to try to bring one of my own buyers to the house before it is put on the MLS (if it ever gets on the MLS). On both of those occasions I have always brought my own buyer and sold the home.
Then there are for sale by owners that don't want it on the MLS so they tell me to bring my buyers.
It is VERY rare that I request to hold off putting on the MLS but myself and team members deal with so many buyers I always know who is looking for what and if a house I am at is a right fit for them. And lets not forget the smart seller on a listing appointment who says why he should hire you/me, etc over another agent and after showing the presentation he/she wants you to bring by these so called "buyers I have for your home" ... which I do...
So again I think it is silly not to put it on the MLS but then again, if a listing agent 100% NEEDS the MLS than that seller does not need that agent.
Forgot to mention - 99% OF THE TIME not just 99% of the agents is it a not so smart move to not put the house on the MLS.
Real estate practice in NY today reminds me of practices in MD in the 1970s and 1980s. Of course, that was before Buyers Agency.
Promises, promises. The listing agents promise a lower commission to the seller for a pocket listing promising "I'll find the buyer and you'll save money".
IMO, that is a practice that is loaded with misrepresentation.
But, shucks, who listens to a buyers agent??
Mike with all due respect. Individuals who want you to bring your buyers ---- may not be getting their best price, it is a dated practed going back many years and is called double dipping for the agent. If their friend, cousin, etc gets upset, well guess what, that is not a trade off for selling real estate and not attempting to get the best price. I have done it your way Mike and I understand what you are saying but I believe it is a disservice to the seller. If the seller understands that they are not getting all of the buyers in and that one of those buyers might have given them a higher price then that's fine. You would also be acting as a dual agent -----since you are bringing your buyer, right?
Excellent post! I don't carry pocket lisings around - I want a buyer's agent to bring me a buyer. Chances are I am not going to list and sell any given property. I gladly split the fee - lets just work together!
Hi Laurie,
I have to agree, when you have educated sellers they want to be in the MLS. In 25 years I have only had 2 or 3 sellers who really didn't want to be in the MLS. Usually it is a divorce or other personal reason. I have also heard of very famous people not wanting to be in the MLS.
It is a disservice to the seller for a broker to list a home this way.
All the best!
Hi Laurie ... In my area of NY, the listing must be in the MLS within 24 hours of the signing of the listing agreement, and fines apply if we do not comply. However, I have seen both signs and ads for homes that are not listed.
Is the listing agent trying to get a jump on the competition? I'm not sure, but I agree that it is a disservice to the seller. It is also not fair to other agents searching the MLS for customers.
Thank you Marie - that was the practice I was alluding to previous post. It's not on the market....but it is...sort of..maybe. Please - bad idea and a disservice to the client no matter how you "spin" it.
Laurie, in my area of Virginia we are required to put a listing in the MLS within 48 hours of taking the listing unless the Seller says otherwise. In my opinion, there is no benefit for the Seller for the listing agent to try to sell it themselves before putting it in the MLS. Could be the agent is discounting the listing, if they sell it them self. Should the agent do it for their benefit, then they are doing a disservice to the Seller.
Good Post!
Michael, I think you truly believe that you are doing the best for the client and I read your sincerity about that. It is a fine line we walk and I am not saying it can't be done.
However, I tend to lean on the side of the "others" here as you will never know if there would have been two buyers interested that could have upped the price and/or terms for the seller if given FULL market exposure. The sellers will never know either because they didn't really expose it to the "market". They just exposed it to your satellite market. If it's ok with them, well then we know sellers make decisions all the time not in their best interests, however I don't think the average consumer/seller/homeowner knows the intricacies of our industry like we do and I would feel obligated to leave no shadow of a doubt that every buyer possible had the opportunity to view and bid on that property. And, I don't want to think they are happy about it because they don't know any better. That's all.
Thank you so much for your participation. The second half of the question posed remains unanswered, and I'm equally curious to get a "take" on it. If you have a buyer who is aware of the potential for a discount via the commission offered (let's face it- it's all over the internet), would it not be the right thing to do (in this circumstance) to disclose the MOTIVE for the requested discount to the seller (i.e., "seller, the buyer is aware that 1/2 of the fee that you are offering pays for his agent- he'd like US to reduce the price by that amount, because he feels that it is a cost that you will no longer incur- my commission is negotiable, so we will lower the fee by half to compensate for the discount offered." OR, is it a feeling (in this circumstance) that when the MLS was explained (two sides), it was also carefully explained that if YOU, as the selling agent locate the buyer, the fee will remain or be reduced (which would seem the ONLY reason a seller might consider a delayed mls entry)? Why would a person with fiduciary to the seller not afford them the amount offered to the entity that DIDN'T participate? It seems like many mixed messages in order to explain the facts (REGARDLESS of which way your opinion/practices lean).
Thank you Lenn,Ruthmarie, Michael, Miriam, Gary, Kevin, Marie, Michael S., and Terrylynn- I love intelligent input!!
It might be that the house is not quite ready for showings yet and the listing agent wants to start to generate calls to see what the interest would be. Then, as soon as it's listed, it might ensure a quicker sale with all the buyers seeing it at the same time. I do this every once in a while when the seller needs an extra week or two to declutter so I can get the pictures taken. I will not list a house in the MLS unless it's completely ready for it.
Donna, that makes sense. Lousy pictures in the mls just don't work, but you can't (nor would I) walk away leaving the seller without a listing agreement. If it's a "readiness" issue, it could always be entered into the MLS with the date that the property is available for showings, and just an outside photo for a week. Although, I completely agree that extensive photos are hugely important.
We here in Louisiana have just got new state wide purchase agreements and are required to disclose "dual agency" as well as get a signature seeking buyers/sellers agreement to same. We are required to have any client we show property to sign the disclosure before we show it on the buyers side. and furthermore if the seller does not agree to allow dual agency we simply must refer the buyers side out in that case.
THe above could be slightly of track but I have had encouters with agents and "pocket listings" I definatly agree that is not the best way to get our sellers "highest price in shortest time" and after all that is my primary position when I sell myself to listing clients.
My sister in law did tell me of an agent infoming a friend of hers that "had to go through him" to purchase his listing. I told her that was not true and to let me know next time and I would research them an agent .
GOOD POST !
Glad to hear it's not just Seattle that is starting to see it that way.
The Mls is vital, like selling a car in the auto trader, you want maximum exposure
I don't get it! Whether my listings are sold by me, or by another agent, I'm happy. My buyers don't get pushed into buying my listings and my sellers don't get shorted by my trying to keep things all in house. If only the buyers and sellers knew what these outdated practices do to them....
Hello Laurie, enjoyed your post and found the comments very interesting. Since I'm studying for the NY brokers exam I figured I'd chime in because I use the MLSLI.com database as well.
LIBOR Rule 501.1 in sum and substance states that the listing of real or personal property for sale, rental or exchange which are listed subject to a real estate broker's license, and which are located within the territorial jurisdiction of LIBOR shall be entered into the data base, postmarked or delivered to the Multiple Listing Service within 48 hours after all necessary signatures of sellers have been obtained.
To quote LIBOR Rule 501.11: "All listings to be submitted to the Service must contain a written authorization by the owner(s) of the property to appoint MLS Participants as Cooperating Brokers."
Here's my favorite rule (since 1981) that ensures I get paid as a Buyer's Brokerage representative:
LIBOR Rule 601.2 "The Listing Participant shall establish the division of compensation between himself and Cooperating Participants. Such division shall be clearly stated on the Listing Contract at the time it is executed by the homeowner. (4/22/81)"
If any MLSLI.com buyer's agent thinks they are being "robbed" or "shorted" of their commission, ask the listing broker this: "If I ask the Zone Chairman to arbitrate this matter, will the listing agreement delineating my potential wages % the home onwer contracted for match what you are offering me?" Then quote Rule 601.2
I've actually had agents call me back and offer a % split, stating they were "mistaken" about the details of THEIR listing. Hmmm... (I learned that trick from a Manhattan Broker, God bless her soul. :)
I posted the rules above, but I got cut off from the server. Enjoy. Regards, C.
Thank you Laurie, this is well stated and shines a light on the truth and the necessity of the subject. I appreciate and agree with you~Later in the rain~Deb
Hi Laurie...This just shows how many opinions there are regarding this issue.
I read all the comments and agree with those that believe in the importance of entering listings in the MLS as quickly as possible. Each MLS has its own rules and regulations which we must adhere to. Some might want to check what theirs are and make sure they are abiding by them.
Great post and a lively discussion.
Kathleen
Hi Laurie...This just shows how many opinions there are regarding this issue.
I read all the comments and agree with those that believe in the importance of entering listings in the MLS as quickly as possible. Each MLS has its own rules and regulations which we must adhere to. Some might want to check what theirs are and make sure they are abiding by them.
Great post and a lively discussion.
Kathleen
Eric, imagine how confused the misrepresented buyer must have felt, hearing such contrary information from one agent to the next. Thank you!
Ardell, it seems so much wiser to go into a transaction assuming one side.
Brett, one would think, huh?
Chris, the information is available for them, but they are hearing and reading conflicting practices- makes it confusing.
C., I had been complaining with significance to MLSLI to eliminate brokers that put "tbd" and "neg" under the buyer agency compensation field in my area. It was corrected by them three months after the pestering began, but they did threaten to fine those that don't show either a percentage, or a dollar amount. The problem that I saw clearly with tbd and neg is that it's against the rules of mls, and it's WAY too vague. While buyer agency permits any amount to be included in the offer, bringing a buyer in without a clue seemed absolutely ridiculous. I'm glad that you're taking the time to really understand it all by reading the parameters of the mls. And C., THANK YOU.
Thanks, Deb!
Kathleen, excellent advice- understanding the concept begins with understanding the tool that we're using with the MLS (and all of the required parameters).
99% of the time in FL, the seller pays the commission, regardless of who brings the buyer. But, any member of the MLS is required to place their listings in the MLS within 72 hours, unless otherwise dictated by the seller, which is rare. And the view that the commission is "built into the price" is not quite right either. No REALTOR(r) who is worth their salt is going to take an overpriced listing. We're going to price the listing according to the comps, while keeping the competition in mind as well. The commission is paid, regardless. But the seller doesn't get to increase the price, to accommodate the commission. And the buyer doesn't get to buy a house for X% less than the comps, by buying a FSBO.
In this market it seems to make no sense at all for agents to hold onto listings and not put them into the MLS. Really don't understand why they still do that.
Awwww.. I love it.. Reading all the comments.. Absolutely ridiculous and is further proof that the business model of using real estate agents is so outdated and so inefficient that it amazes me it is still being used. Instead of wasting your time here you should be trying to figure out what the future holds for real estate transactions and be the first to create a new career. Otherwise you are all doomed.. Real Estate Agents and the current business model is done. Just go and do your research with all the venture capital firms. There are so many new models and ideas being introduced that will finally eliminate the commission percentage structure and the inefficiencies costing homeowners billions of dollars of hard working money going to agents with a certificate in hand from a 2 week course.
ps what's up with NAR and New Jersey!! Nice...
Geeze, I almost HATE to bring this up...as there's always a possibility that someone will view this as an opportunity instead of an abuse...but one of the practices that was being done here in Southern California by an EXTREMELY WELL KNOWN INTERNATIONAL FRANCHISE (and yes, actually taught by their trainers) was to put the property in the MLS at $1.00 commission to the buyer's agent.
In doing so, they reaped the benefit of having free worldwide exposure via the internet (thank goodness Realtor.com can't make the distinction between a 'good listing' and a 'bad one', huh?) All the while, they were obviously going for the double dip. Call IMRMLS, and they reply that they cannot police commission agreements....even when it's an obvious abuse of the MLS system.
Hmmm....I wonder why it is that our reputations sometimes suffer a bit?
Dave
In my area (Atlanta, GA) I have not seen much of this in residential; but it is the norm for agents to not list in commercial. In fact, commercial agents won't even put out a sign and won't send you property information if you ask for it unless they know you well and you and your client both sign a non-disclosure agreeing that you promise not to tell anyone else that the property is on the market. I never could understand this and it rubbed me the wrong way because I always believe that regardless of whether a property is commercial or residential that the concept of co-op agents is in the best interest of the seller and the best way for a listing agent to property represent their clients.
Don 't know where you were before and it's hard to imagine that consumers would be that confused...we have had a few...but would someone really think that buyer's agents worked for free ? Selling is all about numbers...the more the merrier...the more targeted the better...and who better to target than agents who sell homes ?!
Lisa, it's certainly an ongoing debate (who really pays the commission) and I appreciate your perspective on the subject.
Bob and Carol, me either!
Annon, there is no question but that big changes face the real estate community, and the behavior described in the post does nothing to bolster the need for an agent from a consumer perspective. Thanks for your observation.
David, I've seen $1.00. Can you imagine a seller, with full comprehension, saying, "eh- let's offer them a dollar- we don't need more buyers".
Matthew, you are so right!
Sally, the buyers aren't assuming anything- they are caught in a process in which real estate agents haven't got a consistent "agenda", so it's confusing to hear the various methods, IMO. I sold real estate (new and resale) in Denver for 20 years before coming to NY.
Here in Texas, our agreements seem to be fairly similar to those in Arizona- between the seller and listing agent. And, while not the norm, we do sometimes have "pocket" listings. In just about every case, it is because the SELLER wanted it that way, even though we usually try to talk them out of it. Here are the reasons we have listed a home as a pocket listing:
#1 is the only one that (as far as I know) has ever been because of our advice to the seller, rather than against it. We occasionaly refrain from putting a home in the MLS for a week or so to build "hype" and word of mouth. When we do this, we always send out an e-mail blast to as many agents as possible, and frequently call agents that we know work that area. We tend to do this in "hot" areas, frequently sell the home without ever putting it on the market, and often end up with multiple offers. The home gets sold, and the owner never has to deal with tons of people going in and out of their home. By the way- we almost never end up with an unrepresented buyer when we do this.
The resons why a seller might request not to be put in the MLS
- They don't want pictures of their home on the internet, freely available to the general public.
- They don't want to deal with the calls for showings, or the showings themselves
- They would like to sell, but don't NEED to sell
Now, I'm not saying I agree with these reasons, or that we don't try and show our sellers the reasons why being a pocket listing might not be in their best interest. Sometimes it takes letting them be a "pocket" listing for a while before they get serious. I will say this much: that the sellers who request this are usually upper end, luxury homes.
Patricia, if the seller is simply testing the market, I'd pass on the listing- too many sellers need to sell, and "testing the waters", while fine, is better done via FSBO than with any real estate company involvement- just an opinion. Thank you for your thoughts!
Thanks for the info. it never ceases to amze me how devious some of the listing realtors are and how their clients do not have a clue as to what their "realtor' is actually doing marketing the listing.Am from Manhattan up until 6 years ago. Just started in real estate 5 years ago.
Michael- I'm guessing that you're experiencing the difference. It's a better way to "learn" real estate- and enjoy it.
Laurie,
how are you? long time, great post and congratz, this is a great info to share, thanks ! :) I will try to read you often, I have missed many of you.
Ray SAenz
Ray, after a quick trip to Colorado, I'm great- hope all is well with you!