I’m still reeling from the incident that left me speechless Thursday evening. And let me say, I’m never speechless! But this woman’s words were so unbelievable and unethical, I couldn’t muster an intelligible response. She said to me…
“It’s simple economics. I only show buyers houses that I can make the most money on. If 10 houses meet their criteria, I’ll only show them the 5 that pay me the highest.”
Yes, you read that correctly and yes, she said those words. And she was also pretty darn proud of her tactics. She told me her agents (this woman actually manages a big brand office, how scary is THAT?) follow this guideline as well. It never occurred to me that agents would be so brazen in their cheating, and I surely never believed one would openly boast about it.
Let me break this down for you:
You pay your listing agent a commission when they sell the house. This commission is set in the listing contract. When you sign a listing contract, there is verbiage that describes how the listing agent will compensate a buyer’s agent from the total commission paid to them.
Let’s look at an example using a 7% listing commission:
Total commission on a 200K home at closing = $14,000
If split equally, which is at the listing agent’s discretion, the BAC (buyer’s agent commission) = $7,000 and is paid by the listing agent to the buyer’s agent’s brokerage. This is typically done directly through the HUD, so it appears that the buyer’s agent is being paid directly by the seller, but that’s not actually the case.
The BAC percentage is shown at the bottom of an “agent MLS,” which is the format of MLS print-out designed for agents. It has some information on it that agents would rather you not see, such as agent to agent remarks, which might state that the home is a wreck, has tenants living in it, or that the sellers are desperate. It also has the listing agent’s information on it. If you had that, you’d be able to call the listing agent and verify any information that your agent is giving you about the home. Your agent definitely doesn’t want you to have THAT (more on this in a moment). And, most importantly, the “agent MLS” has the BAC. Your agent REALLY doesn’t want you to see that!
So back to my gut-punching, utterly disturbing conversation with the big box agent. If her clients could see the BAC of all the houses they were interested in, they would know if she was steering them away from a house they would really love. All for the sake of another grand or two.
After talking to several agents who are friends of mine and learning that this was a common practice, I was stunned. I called my friend Jenni (one of the purest-of-heart agents I know) and asked if she ever used this practice. She shrieked, “What?! Of course not! That is SO WRONG!” After my ears quit ringing, I called MIBOR and asked if it was an ethical violation. “Of course it is,” came the response. So why is it so common among agents?
The Difficulty With Change
It’s common because no one on the inside wants things to change. All this is well-known within the real estate industry, but this practice is considered the best way to protect ourselves from sellers who would offer less than the “standard” commission (though a “standard” would be a violation of the Sherman Anti-Trust law). QUICK FACT: Sellers in Indianapolis pay some of the highest real estate commissions in the United States! Buyers don’t know the difference, because the real estate industry ensures you can’t get to the information you need without using an agent. So how do you know if your agent is lying to you or steering you so they can earn an extra buck? Here’s what you need to know:
- Ask to see the “agent MLS” print out of all the homes you tour. If an agent refuses, find another agent. There is no rule restricting us from sharing this information with you.
- Look for the BAC% in the bottom right corner. If you don’t see some 2.5% or 3.0% sprinkled in the homes you’re touring, you might want to talk to your agent about that. Be prepared, however, for a defensive response.
- If your agent tells you a home is unavailable, call the agent on the sign and ask. Remember when I said that your buying agent won’t want you to have the listing agent’s info? That’s because you’d be able to call and confirm whatever information your agent fed to you. There is no rule restricting you from calling to confirm a home is pended or wracked with mold like your agent told you. You might be surprised, though. That home just might be the one you always wanted, and the dragon in the basement is just a lie your agent made up so he/she could steer you to a bigger paycheck.
What You Can Do
If you’re angry about what you just read, call MIBOR and tell them you want BAC moved to all versions of MLS listings, and you want a system that requires an agent to show ALL properties that meet a buyer’s needs, not just the ones with the highest payout. Their number is 317-956-1912. These two changes would go a long way to protect consumers and keep agents honest.
If you are selling your home and worried that you are missing potential buyers because your BAC is too low, talk to your agent about it. Not all agents are dirty, and some buyers don’t let their agents bully them. Your agent can help you find the right approach for you.
And let me conclude by saying I’m sorry. It keeps me up at night that there are those in our industry who are more worried about their paycheck than you finding the right house for you and your family. I’m doing my best to make sure those people don’t have a job for long. In the meantime, be diligent!
Good luck out there!