Fiduciary: fi·du·cia·ry; adjective, from the Latin fidere, meaning “to trust”.
Realtors have a huge problem with fiduciary responsibility. This, despite endlessly promoting themselves as the beacons of trust. If you read the websites of NAR, GAR or any local Board; you’d think the Realtor; “Code of Ethics” was some sort of divined tablet delivered from on high. But in reality, it’s just a slogan.
At the heart of the “Code of Ethics” is the idea of fiduciary responsibility. People looking to sell their homes need to “trust” a Realtor to have financial responsibility when it comes to selling their most valuable asset. You’ll often hear Realtors say things like; “I treat my client’s asset as if it were my own”. But, do they?
To test the promise of fiduciary responsibility, we looked at the detached homes sold within the last year for the zip codes of 30306 and 30307. We chose these zip codes because they’re popular. We chose these zip codes because anyone with a cursory knowledge of our industry knows the DOM for these zip codes is extremely low. The (Days on Market) DOM statistics get even lower when you consider the “sweet spot” of homes sold between $500K and $1M.
Over the last year, there were 266 detached homes sold in zip codes 30306 and 30307 that fell within $500K to $1M. That amounted to $192M dollars being transacted. Of the $11.5M paid in sales agent commissions, roughly $5.7M went to the buyer’s Broker. Did we mention the average DOM for each of the 266 transactions was a whopping 35 days!
Life has very few “sure things”. Quickly selling a detached, sub-million dollar, home in 30306 and 30307 appears to be one of them. There is absolutely no reason why those sellers needed to pay 3% to the buyer’s agent. And yes, we checked, they all did. Every one of those listings could have had a 2% co-op and NOTHING would have been different. Nothing, except those homeowners keeping close to $2M dollars of their own money. Most of those listings would have just as easily sold with a 1% co-op. But it didn’t happen, not even once, in ANY of the 266 transactions.
Guy walks into a bar and asks a Realtor to sell his Candler Park home. Realtor says, first thing we do is sign an agreement guaranteeing about $25K to whatever Broker your future buyer’s agent has affiliated with. Oh, it’s not a joke, it’s what a Realtor actually says. The Listing Agreement signed most likely has a 6% fee which is divided between the sales agents. And yes, it means the Seller is paying the sales commission of the agent he is negotiating against. Oddly, Realtors never saw a conflict in this?
Funny how the seemingly holier than thou types often end up being their opposites. NAR, GAR and the National chain stores all tout the “idea” of fiduciary responsibility. They just don’t believe in the actual implementation of it.
Newer agents, this is a huge door for you to walk through. You can make inroads with a statistics and a technology based approach. Make DOM statistics critical to your presentation. Don’t just talk like a Capital R, actually show you HAVE fiduciary responsibility. Work with your homeowner and try to SAVE them money! Imagine that.
Veteran agents, the next generation will not protect the buyer’s agent like you did. Agents will soon be touching our industry’s shaky “third-rail”. The story of the traditional approach and it’s, “marginal fiduciary effort”, is simply too compelling. It will be used against you. To date the only comeback I have heard about blindly paying the buyer’s agent is; “they’re bringing the client”. That line worked in a pre-Internet era. But today, it sounds out of step and foolish. We all know buyers have the apps and tools they need to be as up-to-market as most agents. Today, it’s not uncommon for buyers to bring their agents along for the ride—hell, it doesn’t cost them—it’s a FREE ride courtesy of the Listing Agent. Yeah!
We can debate a 1% co-op or a 3% co-op. What isn’t debatable, is the ex-homeowners of 30306 and 30307 unnecessarily lost several million dollars. Also un-debatable, there are popular neighborhoods all over town. Neighborhoods where the sellers don’t have to pay 3%. The new era in real estate will exploit this.
Bad news for the franchises. Great news for homeowners and agents with a different approach.