Here’s a new consideration – how solvent is your agent?

I ran into my old law partner (actually, he was the partner, I was a lowly associate) real estate attorney Dean Montgomery today and he told me of a new development that neither of us had heard of before: the Coldwell Banker agent with whom he has listed his Dolphin Cove residence is expected to pay for all advertising out of her pocket! It has always been customary for the brokerage house to pay for this stuff – after all, they take anywhere from 10% -50% of an agent’s commission and presumably that money goes for something – so I don’t know if this departure from practice is peculiar to one Stamford branch of Coldwell Banker or if it’s a new industry model, but before listing my house with someone I would want to know who was going to pay to advertise it and, if it was the responsibility of the agent, I’d demand to see her financial statement. (Hiram, if you’re really bored, feel free to diagram that sentence).

It would be a real bummer to have your house out on the market with just a few hand-written cardboard signs posted at the local deli to advertise it.

14 Comments

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14 responses to “Here’s a new consideration – how solvent is your agent?

  1. anonymous

    Interesting times indeed

    But so much of success of any financial transaction has always been based upon basic judgment in one’s choice of advisor, valuation, location/timing, etc….stuff that supersedes fancy legalese or pseudo-precise models

  2. Walt

    Dude -
    If agent solvency is an issue, you, my comission deprived friend, are toast.
    I saw you on Greenwich Ave last week, walking around with a sandwich sign over your chest. Just like this guy:
    http://wwwdelivery.superstock.com/WI/223/1557/PreviewComp/SuperStock_1557R-85001.jpg
    Did you sell the double wide? Just curious.
    Your Pal,
    Walt

    • christopherfountain

      Not yet, but I’ve got a couple of guys in Cos Cob who sound serious. Thanks for asking.

  3. Riverside Roger

    CF,
    I had a look at this listing #98430506 on the CMLS. It’s actually listed by a Greenwich CB agent and knowing this person, she hasn’t put her hand in her own pocket in years. I’d assume it’s a line she’s giving her client.

  4. anon1

    If an agent has to pay for the advertising, a huge part of why we hire a well known firm, why would I hire them? I could hire a real estate attorney, put several adverts in the local papers, and hold my own hand to sell my home. For 3%, $180,000, I will try.

  5. Wondering...

    This is an interesting point. Since the RE firms are getting financially hit by the the sales slump, are they scaling back their advertising and thus contributing to a downward spiral?

    • christopherfountain

      Wondering, newspaper ads were always mostly done to soothe the seller and make him think the broker was doing something. at least since the Internet took over as the primary source of information for houses. Fortunately, the Internet’s cheap, so even if your house isn’t showcased in Greenwich Time ($5,000 per b/w page), it’s still being exposed to the market.

  6. Peg

    Christopher, we’ve had to do this at our brokerage for years. All I can say is: thank GOD for the Internet!

  7. Jane

    If memory serves, Sotheby’s has been doing this for a while. I remember hearing this from my agent. Check it out.

  8. Anon E. Moose

    Half of the fee kidked to the other agent; half of the half left kicked upstairs for “protection” (to an acronym of “Put In My Pocket”.

    Asside from the subject matter of the transaction, can we once and for all admit used house sales is part of what was traditionally called the “Oldest Profession”?

  9. Anon E. Moose

    Q: If at least part of the overhead justifying the sales commission is to pay for advertising, and that part comes out of the 1.25% that the listing agent gets to keep, what expenses does the seller’s agent incur to justify their cut of 2.5% (or 1.25% presuming they kick half to their ‘protector’)?

    • christopherfountain

      Six months of ferrying buyers around to 400 houses. Listing agent puts the house up on the MLS and sits back. In fact, until the recent shift to a buyers’ market, agents craved listings precisely because it was so nicely leveraged – you have 100 agents out there trying to sell the listing for you. These day’s I’m delighted to have lots of buyers.

  10. Anon E. Moose

    Then to cast the transaction in other terms, it seems fairly accurate to describe the listing agent as the captial, and the “buyer’s” agent as the labor. Kind puts a new perspective on who’s working for who.

    I don’t bring any of this up to impugn you personally, CF. In light of your candor I’m actually quite a fan. However the structure of the bid-ness leaves much to be desired.

    • christopherfountain

      I don’t know Anon, I think the system works pretty well at achieving its objective: full market exposure of a property to the world. Buyers agents are now permitted by law to owe no allegience to sellers and so are free to give candid advice to their clients (they did that before the law of agency was changed, but they weren’t supposed to, in the eyes of the law) and sellers’ agents can tell all sorts of half-truths and ommissions to buyers. I think the unrepresented buyer is at a disadvantage in this system but the answer to that is simple. While you’re right that buyers agents are “the labor”, we are free to fully represent the buyer – if some of those agents chose to represent themselves instead of their client well, I refer you to Mickey Sherman’s representation of whatshisname in the Moxley case. No system is perfect.