On April 12 we posted a news story done by Brahm Resnik on the practice by the Arizona Multiple Listing Service (ARMLS) of forbidding any bonuses offered to buyers agents not being permitted in the realtor remarks. Yesterday Bob Bemis, CEO of ARMLS, posted a response. In fairness to Mr. Bemis, I thought I would repost his remarks, rather than leaving them at the bottom of an older thread:
Sorry to be the cause of your choking and sputtering.
There are two problems with TV news: is it doesn’t have enough time to tell the whole story and it is audience/advertising driven. I know because I worked in television business for 20 years prior to real estate. There is grim truth behind the adage “if it bleeds, it leads.”. Audiences watch controversy. News directors know it and look for it, and when it isn’t there they have been known to create it. Thus the birth of the investigative reporter.
No slam on Brahm Resnik here. He did his job well. He asked provocative questions and got answers interesting enough to make a story. But I do have an issue with the editing of the sound bite. They clipped the part of my answer wherein I explained that the role of the MLS is to serve the brokers and agents, not educate the public.
Indeed, we go to great lengths to avoid conversations with buyers and sellers because most already have fiduciary relationships agents and brokers. We risk interference with that relationship and potential legal liability whenever we talk to them. ALL communication has to go through the broker, often via the agent.
Should the buyers be made aware of all elements of the sale that affect them? Absolutely. Does bonus commission affect them? Potentially. (Certainly not if they have a buyer’s representation agreement with their agent wherein the agent declines all cooperative commissions and is paid per contract directly by the buyer.). Is it the MLS’s job to tell buyers what offer the listing broker made to other agents, whether or not it affects them personally? I think not. It is the job of the agent to inform and when needed to disclose all facts relevant to the transaction. By putting this info in the agent remarks, not the public remarks, we give the buyer’s agent options as to if and when it is appropriate to disclose this information, rather than make that determination for them. That’s the part of the agent’s business I was referring to when I made that comment.
One more thought. When the payment to a buyer broker depends on a percentage of the sale price, and rises as the buyer pays more, not less, for the home, how is that being fiduciarily responsible to the buyer client? This seems to me to be a more important issue than one very large bonus payment that could probably never be earned given the condition of the short close window.
Bob Bemis
ARMLS
Mr. Bemis-
I’m afraid I’m going to have to beg to differ with you. You state
It is the job of the agent to inform and when needed to disclose all facts relevant to the transaction. By putting this info in the agent remarks, not the public remarks, we give the buyer’s agent options as to if and when it is appropriate to disclose this information, rather than make that determination for them.
What about any selling agent that wants to disclose all facts relevant to the transaction? Obviously you are making that determination for them. According to your message to agents:
All inappropriate language, as reviewed and deemed to be inappropriate by the Arizona Regional Multiple Listing Service, is immediately banned from inclusion in all listings on the MLS.
d. Any monetary value items potentially given to the buyer’s agent, which may appear to steer a prospective buyer’s agent to show his or her clients your property over another property. This includes but is not limited to: Any type of bonus information (bonus information is allowed in the Realtor Remarks).
Clearly it IS the intent of ARMLS to interfere with an agents abiliity to disclose these bonuses- otherwise ARMLS would have no policy on these comments, and would allow selling agents to post bonuses in the public comments should they so desire.. According to the original message you sent to agents:
ARMLS, on the advice of its legal counsel, may refuse to publish information that may generate legal liability.
It appears from this remark that ARMLS is more worried about "the legal liability of appearing to steer prospective buyers" than it is about leaving disclosure to agents. About your other point:
One more thought. When the payment to a buyer broker depends on a percentage of the sale price, and rises as the buyer pays more, not less, for the home, how is that being fiduciarily responsible to the buyer client? This seems to me to be a more important issue than one very large bonus payment that could probably never be earned given the condition of the short close window.
ANY sort of compensation that would reward a buyer’s agent for acting against their client’s best interest is inappropriate, in my opinion. Consequently I concur that a percentage of the selling price makes no sense. I would prefer to see a flat fee for a buyer’s agent. In addition, while the $50K ever being paid on the listing that was shown in the clip might be unlikely, you know as well as I that there are more easily obtainable bonuses, i.e. "$5K for closing before 5/30" that can and do influence buyer’s agents- so the likelihood of any particular bonus being paid has no bearing on the discussion.
There’s an old saying, "You dance with the fella what brung ya." When a buyer’s agent is being compensated by the seller- it’s hard to know who they are "dancing" with. Transparency dictates that as a buyer, I should know of any bonuses offered by sellers before I ever see the property. I for one, want my realtor explain why, if this house is such a hot deal, the seller is willing to pay him more if he manages to talk me into buying it. I suppose it’s possible that a house with a bonus is my best deal, but it seems unlikely.
I suppose it is the right of the MLS to determine that they only serve the needs of agents, and not their clients. But don’t be surprised if those clients eventually find other alternatives, and decide to take their business elsewhere. The MLS is nearly a monopoly now- but life holds no guarantees.
Good post twist.
This kind of thing will also eventually play out in the courts – we’re seeing suits against agents and brokers already (obviously), but one factor we’re sure to see in one of those cases soon is a huge bonus to the buyer’s agent that was either not disclosed to the buyer at all or only at the closing table after financing had already been arranged and other decisions made.
If we’re lucky, the MLS will be drawn in to these suits for deliberately setting up an instrument to hide this information from the buyers and facilitating deceptive business practices.
Twist – I agree with you 100%. Especially in regards to transparency and flat fees for the buyer’s agent.
I won’t begrudge anyone a fair profit. We all need to make a living. But $50k or other smaller bonuses to the buyer’s agent reek. They are definately not in the best intrests of the buyer.
There are a couple of problems here: First, the ARMLS is NOT the Board of REALTORS. Although the various Boards have a stock ownership in the entity, the ARMLS exists only as a proprietary database. The policies of the MLS are directed by the various boards through a board of directors based upon percent of ownership. However, they do not always, and in fact rarely, agree on policies. The MLS’s have no authority over broker behaviour.
The issue of “steering” a buyer to a house depends on many factors, the first being the question of wheter there is a fiduciary relationship between the buyer and the REALTOR. This needs to be disclosed in writing. Unless there is an agreement then the REALTOR is legally obligated to represent the best interests of the sellers (slightly different agency rules in different states, but the effect is the same).
Now assuming that the REALTOR represents the buyer then there needs to be an agreement on how he will be paid. Since most buyers are cheap and do not want to guarantee a payment to them they usually opt to have the REALTOR be paid by the listing agent. Note that Buyer’s agents are NEVER paid by sellers directly. They are paid by the listing broker as it is he/she that is offering the co-operative commission.
This brings up the question of “steering”. Many listings have co-operative payments of 2%, 3% and sometimes 4%. Which would you show your buyers? Legally, the offered commission and bonuses can not come into consideration. But we all know it probably does.
This is why a buyer must have a written agreement with a REALTOR that upon closing they will be paid a commission of X%, with the remaining percent or bonus being discounted back to the buyer, and any shortfalls being made up by the buyer.
The question of whether or not the buyer should have knowledge of the bonuses and co-op offers depends upon agency and fee agreement.
“I would prefer to see a flat fee for a buyer’s agent”
I respectfully disagree.
Be careful what you wish for…you just might get it.
Now…what kind of negotiator do you have representing you in dealing w/ the seller or the listing agent when your agent can’t even negotiate w/ you? Would you consider your agent strong or weak when it comes time to cut a deal for you w/ your money?
Do the best surgeons charge the least? If your loved ones need critical care…would you hire the cheapest doctor?
Cheap isn’t always cheap.
I have no problem if you agree or disagree w/ me. Think about it. Has there ever been a time that you purchased something because you thought “At this price how can I go wrong?”
Then in the end it costs you more…and then you kick yourself because thought you could get quality w/o having to pay for it.
Think about it. The agents that I know who are worth their weight in Gold are where they are because they are highly skilled negotiators and understand their business. These agents are able to select the clients they represent and have no difficulty finding clients. There are always buyers & sellers looking for a great agent.
You get what you attract.
Also…if you’re thinking…Maybe I can get my agent to share his/her comission w/ me at the close of the sale.
Think again…in my state it is illegal if you as a buyer(not having a RE license)accept this money in the form as a kickback.
Actually the percentage of the sale as a commission doesn’t bother me TOO much. While not ideal, I’m not overly concerned that my agent will try to get an extra $150 in commision instead of helping me get my price so we can close. Real estate agents point this out often, so I’m surprised Mr. Bemis even brought it up. The hidden bonuses on the other hand… Disclosed later at closing or not, it’s shady.
Daddymunster-
My apologies for not being clear-
1. By “flat fee” I mean “fee for service”- not a flat fee regardless of the complexity of the sale
2. I said “flat fee”- not cheap. A lot of people do equate “flat fee” with “cheap”- I don’t. The first agent I ever used put a lot of time in for over a year, showing me a number of properties. The house I finally bought was a fairly complex deal- and the agent helped me arrange great financing. I don’t expect that kind of service for cheap.
I like a system where the better an agent does for me, the better they get paid. I’m going to have a lot more confidence in the agent that way.
I like to think I’m an honest person, and I’ve tried to think about what my thought process would be as a buyer’s agent in the current market. I would hope this wouldn’t be my approach, but I could see an agent thinking:
“OK, so this house with the $5K bonus might not be the best possible deal for my client- but the difference in their monthly payment isn’t that much, and this one has a couple of nice upgrades. Yes I have a duty to my client, but I also have a duty to my creditors- and I might not see another sale for awhile.”
I’m all for good agents getting paid well- and the bad ones being financially squeezed out of the business. I think that could be better achieved with a different compensation system.
Village Idiot-
I agree they are shady at any point, but especially when you don’t find out until closing.
I can’t help but thinking that a seller who has the best priced home in their price range doesn’t need a bonus- these bonuses are offered in the hope that a buyer’s agent will talk the client into a less than ideal deal.
As a buyer, if I am at least told up front about a bonus, I have a chance to grill the agent about why they think this property is better suited for me than any other. If it is my best choice- I suppose I wouldn’t mind the agent making a couple of extra bucks.
I really don’t think closing– with the old house sold and the moving van in the driveway, is a good time to discover that perhaps your agent didn’t have your best interests at heart.
That said, I still hate these bonuses. Can you imagine having an attorney who received compensation from the other party to expedite a settlement?
Daddymunster:
I think I have to disagree with you, a flat rate doesn’t mean poor quality.
If we go by the assumption that all buyer’s Realtors’ fees are the same flat rate, then you’d have to agree that quality doesn’t matter – everybody is the same, whether you’re good, great, or horrible.
If the rates negotiable, then you do indeed have the opportunity to pay for what you get. The better agents will receive a higher (flat) rate than the poorer ones.
Twist & Sandman…
I respect your perspectives. All of us are simply looking for quality service. Yet a big part of it is…”who can I trust that will provide me w/ great service while looking out for my best interest.”
Twist…You’re right. There are some agents that think that way. (looking out for themselves rather than their client…no matter what the market conditions. Be selective, do your homework, and you will find the agent who will look after you. Focus on what you want. Thank you for your feedback on an important issue facing many potential buyers & sellers. And trust me on this one…it is survival of the fittest in this current market. Most of the bad ones (agents) are being financially squeezed out. Lots of people get in while it’s easy…many get out while it is hard.
Sandman…thank you for your disagreement…you have a valid point. I think we both can agree that quality does matter and that all agents are not the same when we speak of quality. Currently, rates are negotiable. My recommendation…find the great agent first & then see what your comfortable paying. You’ll know what to do.