Here is the second in a series about bad listing agents, bad practices and bad results.
Have a wonderful Memorial Day weekend!
There will be NO OPEN HOUSE GOOGLE MAP posted this weekend – we are taking off! (There are hardly any open houses anyway and you all should be at the beach).
Inequitable commission sharing – As of this writing there are 396 active listings on the market. 288 (73%) of them are 5% commissions split evenly with 2.5% going to the listing agency and 2.5% going to the agency that brings the buyer. Of the remaining 27%, whether they be 4% or 6% commissions, the vast majority of those are also split 50/50 between the real estate agencies on each side of the deal. There is at least one a particular agency in Hoboken, however, that charge the seller a 5% commission, but keep 3% for themselves and only give 2% to the agency that brings the buyer. The seller pays the same commission, so it might not seem to matter – but it does.
If an agent has 11 units to show a buyer and time only to get to 10, which unit do you think the agent will leave out? Often its the one that pays the lowest commission. If a buyer has narrowed his choices down to two comparable units – which one do you think the buyer’s agent is more likely to push? The listing agent who keeps a disproportionate percentage of the commission does not give other agents an incentive to show and sell his customer’s listing. If the property ultimately sells for $10,000 less than it could have, the listing agent makes more money, but the seller gets much, much less. I believe this is unethical – but it is legal. So be aware – don’t just ask what the commission will be, but ask how it will be split as well.
Stealth Listings and Stealth Open Houses – In the industry these are called “pocket listings” but I prefer the word “stealth” because it refers to listings that fly below the radar. Stealth listings refer to agencies that get a listing, but don’t immediately put them on the MLS or share them with other agencies for a week or two. The word also has a vaguely sinister sound and I, personally, disapprove of the practice. These agents are trying to sell their own listings (i.e. get both sides of the commission) before allowing other agencies to bring their buyers.
Stealth open houses are generally not advertised so that only other agents within the listing firm know to bring their customers. The thought process is – “if we can sell it for a price at which the sellers are happy, what’s the harm?” I believe the harm is that new listings have the most “heat” when they are brand spanking new – and that the best way to sell a place quickly and for the most money possible is to blanket the market with quality advertising and to bring as many buyers as possible through, even if you have to share the commission with another agency. Selling a listing for full price through a stealth listing may seem like an “everybody wins” situation, but who’s to say that had many more potential buyers seen it there would not have been multiple offers and an above-asking sale? My pledge is to try to sell my customers listings quickly and for the most money possible – not to make the most commission for myself. If you sign a listing agreement with an agent today – check and make sure it’s on the MLS tomorrow!