I read this article last about how Panera Bread is piloting a “pay what you want store” in St. Louis and it got me thinking. Since there’s no established fee or percent for what a real estate agent can and can’t charge for his or her services, would this type of model work in the real estate industry? Could a real estate agent simply ask the client to only pay what they thought was appropriate for the services rendered? Theoretically, anything is possible. With the emergence of the discount brokers and flat flee brokers over the last decade I’m sure other brokers out there have given this concept at least some thought. And without a doubt I’m sure there’s a large number of consumer that probably feel that this should be the standard in the real estate real industry. Can I get a show of hands, please…
A quick disclosure: I can’t mention any specific amounts or rates that agents charge for their services on this post due to anti-trust laws and the possibility of my words being used as a form of collusion or coercion. Furthermore, I would like to keep my license-it kinda pays the bills.
Let’s preview this idea from the seller’s side: On the MLS each listing specifically indicates how much the cooperating or buyer’s broker will receive in the event of a sale. This fee could be flat or it could be a percentage of sale price or even a combination of the two. The commission paid out the cooperating brokers is usually half of the total commission, but not always. The listing is almost an agreement between the listing broker and the cooperating broker. It simply indicates that the listing broker will pay the broker who brings a buyer X commission. Logistically, only an amount or percentage can be entered into this field in the MLS. There’s no room to enter, “fee will be determined by seller at closing“. I’m not sure any buyer’s agent would be wooed by such a commission either. Although, legally agent are bound to show their clients any home that they want that’s for sale regardless of commission and even if the home is not listed in the MLS, such as a For Sale By Owner–I bet you didn’t know that?
From the buyer’s point of view: In Westchester County, buyer’s agent are usually paid from the proceeds of sale of the home by the seller. In rare instances, a buyer may chose to hire an agent and pay their commission instead. But again, that’s very rare. I’ve personally have never been compensated by the buyer. Under this structure of “paying what you want” would probably not apply to home buyers, that is unless you employ the “refund the buyer part of commission” method like some brokers out there. Yes, they do exist.
From the seller’s side this concept could potentially work with the listing agent only. The listing agent, could theoretically forgo on his/her half of the compensation and instead insure that the seller at least compensates the buyer’s agent. The seller would compensate the listing agent (their agent) if and when he/she successfully sells the home and at the seller’s discretion. That sounds fair, right? Leave it to the seller to compensate the agent based on the level of work the agent put forth.
Then I got to thinking. I don’t know if you’ve heard, but real estate agents don’t exactly have a 5-Star reputation in the public’s eyes. We rank up there right below ambulance-chasing lawyers and slightly above used car salesman. True or not, that’s the public’s perception. And perception is reality. However, did you also know that some consumers are real pains. They try real hard to rip the agent a new one during the whole process. And usually the greater the agent attempts to please them, the less appreciative they are. For one, they know more than the agent. They sold a home 20 years ago or purchase a home once before. In addition, they have all the market data they need from the internet. So in they’re mind, they are as if not more qualified of doing the agent’s job. Remember, perception is reality. All they need is for the agent to list their home on the MLS and they’ll take of everything else. And if they’re buying, all they want is for the agent to email them every listing in the MLS.
Therefore, although I may be inclined to employ the concept of “pay what you want” for selling a home in my business, would an asterisk (*) be appropriate? Could I increase the commission at my discretion if the client was more difficult to deal with? Believe it or not, the probability of selling a home depends more on the owner’s willingness to cooperate than perhaps any other factor. Luck has a lot to do with the sale of a home too, however I heard a saying once that goes, “Luck is when opportunity meets preparedness.” If luck comes around with a decent offer, is the seller going to be prepared to negotiate with that offer, or is the seller going to insist that his house is worth more than house B, that it has X and Y, or worse make the sale contingent on the agents lowering their commission?
