Gaps in Consumer Knowledge
This section of the report puts forth gaps in consumer knowledge that "may result in real estate brokerage markets functioning less efficiently." These include and are quotes:
"First, it appears that many consumers are not fully apprised of their marketplace options. For example, the most recent NAR survey of home sellers and buyers found that the majority of home sellers contact only one listing agent before hiring one to assist with the sale of their home. Further, there is evidence that some consumers of brokerage services are not necessarily aware that commission rates are negotiable."
"Second, consumers may be unaware of the possibility that their brokers may have
conflicting interests that lead them not to provide the consumer with the best possible
advice."
"In addition, consumers also may be unaware that when they pay their broker a
commission based solely on a percentage of the sales price at closing (as most do
today), the broker’s financial incentives are not necessarily aligned with the
consumer’s."
The first item is possibly overstated, but education or disclosure could easily take care of informing the consumer of their options.
The second point is a direct statement that brokers have "incentives" to "steer" consumers to listings that pay higher commissions to the broker, while "steering" them away from those paying lower coops. We all know that this NEVER happens. Though it makes one wonder why agents and sellers continue to offer bonuses to buyer agents.
The third point really gets sticky. Here are two quotes:
"Even though an agent’s commission increases with
the price of the home, he or she likely retains no more than 1 to 2 percent of the sales
price (after paying the cooperating broker and the agent’s brokerage firm). Therefore,
the agent may be less willing than the consumer to take the risks associated with getting a
higher sales price, such as waiting for what might be a better offer and perhaps having to
do additional work."
"Likewise on the buy side of the transaction, the broker may be less interested than the consumer in negotiating the lowest possible sales price because a lower sales price translates into a lower commission for the broker, likely requires additional work, and may increase the risk that the transaction falls through with no commission paid to the broker."
It seems that we won't help a seller get more money because it won't net us much, but we won't help the buyer pay less because we'll lose commission. Huh? If it's the same percentage either way, the opposed attitudes is quite a mystery. However, there have been few in the business that haven't had qualms about pushing for more for their customer if it would jeapordize the deal.
However, though those two statements seem at odds in that respect, they both clearly stated that we wouldn't adequately serve either buyer or seller if we had to do "additional work." At least we're consistent in our work ethic.
Entire series: #1, #2, #3, #4, #5, #6, #7, #8, #9, #10, #11, #12, #13, #14, #15, #16, #17, #18, #19 & final
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