I’ve gotten used to reading about cobrokes in the 6%-10% range, particularly in Pinal County (south of Phoenix) However, when I was forwarded this ad, it really got my attention. I especially took notice of the heading that said, This is a professional real estate communication. Do NOT forward to the general public. Knowing that Housingdoomers would be interested in top secret real estate stuff, I thought I would share it with you. (Besides Doomers are a select group, not to be considered the general public!) At the request of the sender, all information regarding the broker and address has been deleted. This home is in Phoenix. That, folks, means Maricopa County, which in general hasn’t had the hefty cobrokes they’ve seen in Pinal County. [click on image for enlarged version.]
A $75,000 commission on a home that sells for $550,000 works out to be a 13.6% commission- and that’s just for the selling agent. There’s no word as to what the listing agent stands to make on this deal. [I understand that it should be about 2% though.] You have to wonder about any poor individuals in the neighborhood trying to sell against the builder. How hard are the agents going to work on selling their house if they can more than double their money selling the builder’s house next door?
Anyone purchasing a home from a builder now had better be prepared to stay at least until the neighborhood closes out. Otherwise, those nice folks who sold you the house last year, will make it impossible for you to sell anytime soon.
Another issue to consider is how objective is an agent liable to be when he is representing a buyer. In a Wall Street Journal article printed in yesterday’s Arizona Republic, it states:
The problem with agent incentives is that consumers may not know their agents have a potential conflict of interest when they show and discuss certain properties. Of course, agents can’t make buyers want to buy an unsuitable home, and most buyers have strong ideas of their own. But agents can have a big influence on which homes consumers see. And agents’ influence can be particularly strong with newcomers to an area who don’t know which builders are considered most reliable and which neighborhoods most appealing. [emphasis mine]
Is it any wonder that the ad reiterates twice that the public isn’t supposed to know about this?
[Thank you to our source for the the lead! : )]
wow!!!!
Jan Marin,
I’m glad I’m not the only one that thinks so. I’ve been surprised that more people haven’t been concerned about the implications of these cobrokes.
this graph fits to this topic.
sorry if postet before
http://immobilienblasen.blogspot.com/2006/11/special-incentives-for-real-estate.html
have a nice weekend
$475,000 house, $75,000 comission -> 15.8%!
All you need is an illegal appraisal that matches.
Techscan-
It’s a good thing we know those illegal appraisals are hard to come by! : )
What’s the address of this splendid investment?
Jungleman606-
Because I promised my source to leave the broker out of it, I purged the MLS number, broker name and address from the ad before posting it. I looked it up on Realtor.com though- the photo doesn’t look near as good as the picture. I have the feeling that any realtor who talks someone into paying that much for this home is a heck of a salesperson- maybe on that basis we can figure they “deserve” their $75K. (Then again maybe not)
As intelligent consumers we can fix this problem. First, given the spread of such “arrangements” whenever I am using a “buyers agent”, (or any agent for that matter since listing agents in some states feel free to say they represent everybody) I tell them clearly at the outset that I will require them to disclose the basis of and amount of all compensation associated with anything they show me before I make an offer and if there is more than the standard commission offered I want to know it at the showing. If they are either dumb or think I am dumb, or both, they will say something like “don’t worry about it the seller pays me”. If they say this then it is much like house training a new puppy. I look them straight in the eye and say: “don’t be silly, I am the only one bringing any money to this transaction so I really pay EVERYBODY. Are you really trying to convince me that the amount of transaction costs will not affect what the seller is willing to take?” If I get any further argument, I walk away, they are officially a waste of skin representing only themselves. If they say ok, then when I make an offer I make it an explicit writtten condition that total commissions and other compensation paid shall not exceed x%. Despite what an agent might say, I do not know of any rational seller that would reject this condition in an offer, since it protects both buyer and seller. In theory if a seller was willing to offer the higher co-broke, any amount in excess of x% should flow to me, the buyer, in a price reduction. If the seller is a builder trying to avoid showing the “real price”, perhaps because prior or subsequent buyers of the same type of house would claim the right to a similar reduction, I am not sure I would even consider doing business with that kind of seller at any price. It looks too much like an undisclosed inducement to “my agent” designed to make the agent fail to look out for my best interest and to allowthe seller to avoid treating other buyers fairly. How could you ever trust such a seller, or an agent who would show you such a property without first telling you about the offered inducement? This is truly disgusting!!! Pour it on Twist, this issue has legs.
13.6%? Peanuts! A 20% cobroke is exposed over at BloodhoundBlog: http://tinyurl.com/yzz5oe
“I searched our MLS yesterday, and found a co-broke of 20%! New construction 4 bed 2.5 bath listed at $270K.
…
It’s no typo… the listing agent spelled it out in the public remarks.”
NVMike-
You might almost think sellers were getting desperate, wouldn’t you?
You bubbleheads are all wrong!
No one’s desperate, this is a great time to buy OR sell a home (didn’t you see the ad?), the worst is behind us and that wasn’t really an iceberg we just ran into.
Sure, the ship may be listing slightly, but it’ll soon be upright again. Just wait ’til next year!
You should trust me. Why would I lie? It’s not like I make money by encouraging you to buy and sell homes during inopportune times.
Sign me,
Chief Economist of the S.S. Titanic