Blog :: 01-2012

The Inherent Conflict of Buyer Agent Pay

Most agents that represent buyers require the buyers to pay them a percentage of the purchase price as their fee for assisting in the purchase of a new home. There is an inherent conflict in this model.

A buyer agent has a fiduciary obligation to act in the best interest of their client. However, because the buyer agent requires their client to pay them a percentage of the sales price, the agent's interest is actually in conflict with the buyer's interest.

The buyer's interest is to pay as little as possible for the home. In contrast, the agent's interest is to get paid as much as possible for each transaction. Because the agent gets paid more if the buyer pays more, there is a divergence in the interest of the client and agent.

Arguably this inherent conflict is itself a breach of the fiduciary obligation an agent owes to its buyer clients. We recommend that buyers fully discuss this potential conflict with their agent before signing any agreement.

At Flat Fee, we do things differently. We charge lower fees and will set you up with exactly what you need. Don't want a full service agent? At Flat Fee, you don't have to pay for one. To learn more about what makes Flat Fee different from other real estateagencies, check out our website.

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                                        Don't Be Bought

                                        Because of the emotional aspects of homeownership, it is natural when selling a home to believe that your house is better than any other comparable property on the market and as a result is worth more than any other comparable property.

                                        Real estate agents are very cognizant of these feelings and some unscrupulous agents will prey upon these emotions to help secure your business.

                                        Some real estate agents will intentionally provide a homeowner with an unrealistic valuation of their home when trying to secure their listing. The theory is that if the agent can secure the initial listing that they can later convince the seller to reduce the listing price to a more realistic one.

                                        It is normally easy to convince sellers to reduce the price after the initial inflated listing price because the seller sees little activity at the unrealistic price. The agent will say something like, "in a good market your home would have sold quickly at this price, but because we are in a challenging market I think you need to reduce the price to help stimulate activity."

                                        The practice described above is known as "buying a listing" and it is unethical. Please "Don't Be Bought". Thank you.

                                        If you want a real estate company you can trust, contact Flat Fee.

                                        Why So "Aggressive"?

                                        Way too often these days I hear real estate agents tell prospective clients that their firm "aggressively markets" its listings.

                                        Agents use the term "aggressive" when referring to their services because it is a buzz word. Agents want to invoke images in the prospective client's mind of a fast paced "wheeler and dealer" type that can get results fast.

                                        The truth of the matter is that "aggressive marketing" of listings is an illusion. Every firm utilizes the same tools and has access to the same pool of buyers.

                                        Every firm utilizes the MLS. The MLS then pushes the listings out to all of the local and national brokerage websites. Agents also have access to Craigslist and other message boards to post listings. Thus, all agents advertise their listings in the same places and in very similar ways.

                                        In addition to having access to the same listing websites, firms have access to the same pool of buyers. No firm has a secret or exclusive pool of buyers. Most, if not all, buyers these days search for properties online themselves before ever contacting a real estate agent. Thus, every firm has access to the same pool of buyers.

                                        The only reason agents and firms use the term "aggressive" is to create a perception of strength and power. Instead of creating perceptions based upon an illusion, agents should explain to potential sellers what the benefits of their services are and how they differ in substance from the services provided by other firms.

                                        At Flat Fee, we do things differently. We don't use buzz words, we use honesty. We're here to help. See what our clients think of us. If you have any more questions about Flat Fee, visit us here orcontact us here.

                                        The Zillow Effect

                                        While the internet has made the process of buying and selling homes much more efficient, there have been a few drawbacks associated with the ability of buyers and sellers to easily access volumes of property information online.

                                        One notable drawback has been what I refer to as the "Zillow Effect".

                                        Zillow is a popular website that allows buyers and sellers to look up listings of homes and then determine an estimate of the home's value. Zillow, like other desktop appraisal software, bases its values on recent sales from databases of public information.

                                        Zillow is very good at giving broad general estimates of value. However, Zillow does a poor job of providing a detailed analysis of value based upon a particular home.

                                        Zillow does not have the ability to judge the interior quality of a home. It also has no way of knowing whether the home has large items of deferred maintenance or needs immediate repairs. As such, Zillow's estimate of value can be off by more than 10% in many cases.

                                        The problem with sites like Zillow is that sellers have started relying upon the values provided as the absolute accurate fair market value for their home. In many cases, the estimate provided by Zillow creates unrealistic expectations for sellers. This unrealistic expectation of value and sales price is the "Zillow Effect".

                                        Sellers need to understand that Zillow is a great tool for getting a general sense of the market but a poor tool for determining exact value for a home. Zillow is simply processing readily available public data of sales. It does not process the quality of individual homes. As a result, sellers need to take Zillow's estimates with a grain of salt and need to understand the other market factors that drive prices.

                                        At Flat Fee we do things different. We send real people to our properties and use our real estate expert's opinions toappraiseproperties. If you're tired of automated everything, try a company that is, too. Contact us or visit our website to learn more about Flat Fee and how we do business.


                                        1. Tba on

                                          Great little article, but it also goes both ways. So much of a house or property are the intangables. For example if you border govt. land, a huge private estate, or a park where no one can build and it provides shelter and other things for you, if your house is well situated in regards to other neighboring houses, the view, valley or hill, weather patterns, etc One thing that is obvious is home structure. Build it like a football team, with a strong offensive line ie foundation. If you have that and of course a sick location, forget the NYSE, RE is the way to go IMHO. Good luck.
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