Corporate transfers often surface in the first quarter of the year. While some companies bend over backward to accommodate and facilitate, many workers are on their own to find a new address in a new town in a short period of time. This can lead to rapid house-hunting trips and a lack of loyalty toward real estate agents.
For example, a veteran agent, had spent years developing a relocation relationship with four national organizations. Recently, she had chauffeured her out-of-town customer from the airport to for-sale houses on three different occasions. The woman had spent a significant portion of six days narrowing the list of homes for her buyer before settling on two prime candidates. The buyer then flew back home, mulling which property would receive his first offer.
The offer never surfaced. The potential buyer had entered an open house in a nearby development and signed a purchase and sale agreement with the agent holding the “open” who told the buyers they would save money by signing that day. The hardworking agent was cut out of the deal. Where’s the buyer loyalty?
The “phantom” agent – one who surfaces at the last moment and collects commissions for work done perhaps by another – has been the focus of many commission discussions. Some areas have handled the subject with a “first time” rule, but many agents say the practice is unfair and that it curtails their ability to enforce buyer-agent agreements, which, ironically, became common practice because of phantom agents.
While practices vary, here’s an example of the “first time” rule: Some developers will pay a 3% selling commission on the first $100,000; 1.5% and the remainder when the agent accompanies the buyer to one of the developer’s communities the first time they visit. (In many cases, the selling office receives 3% and the listing offices receive 3%, totaling 6%. Developers often pay less.) If the agent does not join the potential buyer the first time, the agent receives 1% commission.
Some agents say the potential buyer knows nothing about the setup until they are greeted by the agents on the premises. And, if the buyer has an agreement with an agent that the agent will receive 3% on any home sold through the agent, the buyer might have to come out of pocket at closing.
Obviously, agents should go out of their way to tell customers about certain developments and their commission schedules. If the buyer’s agent, especially one who has spent hours showing a customer dozens of homes, is not available on a certain day, perhaps the tour could be delayed.
“I don’t know why it’s so important to sign in on the first visit,” one agent said. “It definitely is going to put off a lot of agents who usually can be with them.
“What would happen if they treated listings the same way? For example, the seller signs a deal to put his house on the market, hears he can get a better deal elsewhere, so the seller immediately cancels. It would make people furious, wouldn’t it?”
Buyer’s agents have brought a new and generally healthy dimension to the home-purchase process. They have helped set up an independent camp for the buyer that is clearly out from under the huge umbrella once controlled by the seller.
Historically, all agents represented the seller, thus creating a huge network of “subagents.” Consumers began to question the traditional way of doing things, prompting mandatory agency disclosure earlier in the home search. Buyer’s agents surfaced, then became common, bringing definition to the two sides.
However, if you sign a contract with an agent to represent you, make sure you understand all provisions. In some cases, it can be an exclusive agreement wherein the agent can seek the agreed upon commission even if you eventually purchase without the agent in an area miles from the agent’s area of expertise.
The problem has been around for years, but it becomes more pronounced when new homes are easy to sell because of a lack of inventory. The “first time” rule often requires developers to publicize the commission schedule if it differs from common practices. While developers don’t feel they need any help on the selling side during hot market times, that need changes quickly when the market turns and activity slows.
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