Realtors want to lynch me today because of an article I penned in The Globe and Mail. If they’re mad, I must be on to something.
And for the record, here’s what a portfolio manager wrote to me: “Great article. I’ve always thought that the conflict of interest that an agent faces (between selling fast, versus maximizing the price for you) is one of the riskiest financial arrangements facing consumers. A delta of a couple of percent, with today’s housing prices, is a very significant amount of after-tax dollars to most people, but yet so few people – from what I have seen – think about it at all.”
Hi Fabrice – We all need a refresher of laws and regulations from time to time. Overall yours is a good article and you included some useful suggestions.
Regarding your escalating commission suggestion you state that “They can cut one to achieve this logical incentive system without contravening the (idiotic) law. A listing agreement can be changed after an offer is received to reflect the dollar amount agreed on”.
Let me remind you a principle of law here in Ontario and pretty much throughout the world. You cannot make an agreement LEGAL or enforceable if the law prohibits you from doing so.
You can make any agreements you want, within the listing or outside of it, but they’d better be legal, whether you agree with the law or not.
There are no provisions under any law to change it because we think such law is ‘idiotic’.
I find it interesting that Fabrice Taylor from his Globe and Mail Article How to find the right real estate agent to sell your house is advocating real estate brokers to contravene REBBA 2002 with her suggested Tip:
“Takeaway tip: You should always negotiate the commission. Before you even let an agent in your door, ask them what they charge. You can also structure the commission as an incentive. For example: 2 per cent of they sell your house for the asking price, double or even triple it if they exceed asking price by 10 per cent.”
If a broker were to suggest this, they would be breaking REBBA 2002 (Real Estate and Business Brokers Act – 2002). Commission or other remuneration payable to the brokerage must be an agreed amount or a percentage of sale/rental price, but not both. If no amount is agreed upon, the prevailing rate in the community applies. As further clarification, a brokerage can charge a commission based on a declining percentage as the sale price increases. As an example, the commission could be 4% on the first $350,000 and 2.5% on the balance. It should be noted that the sliding scale cannot increase as the sale price rises, but only decrease. Further, a brokerage’s commission cannot be based on the difference between the purchase price and the listing price. For example, an agreement which provides for 15% of the difference between the purchase price and a listing price of $350,000 would be prohibited. (Act, Sec.36).
It seems that Fabrice Taylor needs to do his homework before publishing such preposterous advice.
Sincerely,
Dallas Smith
Broker
Fabrice,
Your article today is completely lacking in identifying the key metrics to determining whether or not a Realtor will generate the maximum profit for a Seller. In fact, you failed to mention the process behind evaluating a home’s value (market value) as it relates to other recently sold homes that are comparable in terms of size, upgrades, finishes, etc.. not to mention what the inventory supply is or if there are any unique attributes about the home that warrant an even higher price. Not to mention that there are a number of strategies that can be employed to create a higher demand such as offering more commission to a buyer representative which typically translates into more showing activity and exposure for the home OR even holding off Offers until a specific time and date.
Sadly, you missed the mark in outlining what a true real estate professional’s job is and that is to provide information, guidance, experience and the type of results that allow homeowners to make informed decisions so that THEY know what is happening in the marketplace and that they have received full transparency throughout the process (even before it begins).
A wise person knows that you ‘get what you pay for’- clearly your evaluation lacks any depth of knowledge or background when it comes to knowing (or writing) about such an important investment topic.