Who is the biggest influence in the home buying process?

This seems like a pretty cut and dry question, but the answer might surprise you.

You may think it's the bread winner.  "I make the bucks! I make the call!" You may say "It's the Mrs., of course.  Happy wife...happy life!"  You may think...it's you!  You'd be surprised just how often that's not the case.  More often than not, the buyers' real estate agent is the most influential person involved in the home buying process.  They are, after all, the resident expert with the experience and expertise to confidently guide home buyers toward the right home and away from the probable money-pit.

Like many of my posts, I'm pretty certain that this will annoy a few agents.  No disrespect or judgement intended, but it is what it is; the truth as I see it. I write what I practice, and I practice what allows me to sleep peacefully, knowing that I've given my clients the very best representation possible. To say that sales commission doesn't motivate sales agents is naive.  Sales commissions were designed to motivate sales people.  It's that simple.

Here's a bit of background on sales commissions as they apply to real estate transactions.  In the areas I have served over the past 9 years, which include most are of the state of California, 6% is the standard sales commission paid buy the sellers at the close of escrow.  This commission is typically split equally between the cooperating brokers, with 3% going to each side of the transaction.  Listing Agents and Buyer's Agents both have their fair share of responsibilities, tasks, hurdles, and headaches that they encounter throughout the days, weeks, and months.  Some transactions are simple.  Some are complex.  It's my belief that, at the end of the day, it all comes out in the wash.  "But I worked so hard to get this one to close!  I deserve more!"  Yea?   No!  Maybe you made bad choices when screening your client.  Maybe the property you wrote on was a money pit.  Maybe you had a cash buyer with low expectations who's buying everything in site and all those transactions are simple!  It all evens out in the end.

So looking at the question posed at the beginning of this blog, what does it matter who the biggest influence is in the home buying process?  Because, and here comes the part that can make folks uncomfortable, it's very easy to see how (with a Realtor's personal income as a direct function of the sales price of the house and percentage commission to be received at closed) agents might encourage their buyers to write on one home over another, based solely on the commission being paid by the seller.

Of the 57 homes sold in Redlands, California in November of 2015, 22 had the buyer's agents' commission at 3%.  The rest were 2.5% or lower with a few as low as 1%.

As someone looking to sell your home, don't you want the market (meaning willing and able buyers and their agents) to be highly motivated to see your house as often as possible, with as much enthusiasm as possible?

Here's a guiding question.  If an agent is looking at what we call "Like" or similar properties; one is paying her 2% and another paying her 3%, which one is she likely to encourage her buyer to write an offer on?  "But aren't agents supposed to have their clients best interest in mind?" Absolutely!  Many, many agents do!  Some, however, don't.  After all, although sometimes we're not treated as such, we are actually human.

There are exceptions to this rule, as there are to most.  But it's a safe bet that a relevant percentage of homes closing with a cooperating broker commission split that is out of balance likely closed at a price lower than they might have if the buyer's agents had been sufficiently (or equally) motivated. That was a mouthful. In short.  Lower commission means fewer showings means less demand means lower sales price.

If you're meeting with a Realtor to discuss a possible listing, please discuss this topic. Don't be shy.  Don't let a real estate agent try to convince you that he or she needs $X to successfully market your property.  Unless you're selling true luxury real estate, it's just not the case.  If you are selling luxury real estate, the hefty commission you're paying will cover your agent's marketing efforts.  So ask the question, "How much of the sales commission that we are paying your firm goes toward the incentive for our buyers?" If your Realtor addresses this topic in a manner that leaves you with a comfortable understanding...game on!  If they hem and haw around the issue, press on until you have an answer that satisfies you.  If they give you a load of crap about advertising budgets...fire them before their hired.

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Until next time.

 

Andy Blasquez  Cell ~ 909.539.3292
BRE#01826135
E-mail me on Andy.Blasquez@gmail.com