The Succession Plan

For the newer readers, Donna and I have two daughters.

After Kayla graduated from the University of Oregon, she worked with us for five years and then moved to Manhattan where she’s been a realtor there for the last six years.

Natalie has always been a dancer, and she graduated from UCLA with a degree in dance. Since then, she has lived in Los Angeles doing smaller gigs in hopes they would lead to a full-blown concert tour with a major artist. She got her break last year, and has been on tour with Karol G. since August.

For those who aren’t familiar with Karol G., she has been called the latin Beyonce. The tour will conclude in Madrid, a city where she is bigger than Bruce Springsteen and Taylor Swift:

While it has been the dream tour of a lifetime for Natalie, it will come to an end in July (not June – the wiki clip above has the wrong month), after which she will continue to pursue her dance career. Stay tuned!

At the same time, she has also been our full-time marketing director. She authors our email newsletters and handles all of our social media accounts!

Because dance careers tend to be limited to younger people, we anticipate that Natalie will take over our business at some point. She handles Kayla’s marketing too, and if it all goes right, the future of the Klinge Realty Group will be bi-coastal and continue for decades!

Attention realtors who don’t have kids taking over their business. We can help you!  When the times comes for you to exit the realtor business, we will buy your database, and take care of your people! Contact me when the time is right for you.

Unlisted Commissions

The recent NAR settlement clearly states that the MLS is prohibited from publishing a buyer-agent commission paid by the seller.

It means we might be hearing more commission talk, not less, as listing agents take responsibility for publishing the buyer-agent rate their sellers are offering.

It won’t last for long.

Many have speculated that the residential resale business is heading the way of commercial agents – an arena that has never had an official MLS, and where each listing agent decides their own policy on how to pay the buyer-agents.

Go to Loopnet or Crexi, the two commercial real estate websites of last resort (where agents put their listings after they have exhausted their stable of waiting buyers).  You’ll read about cap rates, FARs, NOIs etc. but you won’t find ANY mention of a buyer-agent commission unless desperation is in play.

Why is that?

They want you to make assumptions (in order):

  1. No commission is being offered to buyer-agents.
  2. Some commission might be offered, but you have to call to find out.
  3. The commission they offered over the phone won’t change.

Those are some hasty conclusions, and don’t be surprised if they are a moving target. Even when it gets down to putting terms in writing, the listing agents want to commit to a commission rate “as stated in the listing agreement” and hope you don’t ask questions. One agent this year said that the commission was on a sliding scale, depending upon how much I offer – but wouldn’t commit to any hard numbers.

Residential listing agents have always loved being vague so nobody can ever pin them down about keeping their word. When they figure it out that they don’t have to publish any commission rates, soon all will be offering zero (or close) to the buyer-agent – and will only acquiesce if they have no other offers.

A bad market will fix it though.

If the political hysteria over the next seven months freezes up the market, the motivated sellers and listing agents will be forced to pull out all the stops to make a deal – including the offering of a generous commission to buyer-agents. We haven’t seen a buyers’ market for 10+ years, so many won’t remember – but sellers will want to try everything else before they lower their price.

But will it come to that?

Probably not, because they will wait it out instead, and we’ll look up next year to see who is left! It won’t be the buyer-agents though. They are walking dead men, and by this time next year, single agency (buyers going direct to the listing agent) will be emerging as everyone’s solution.

Reducing Commissions

In January, 30% of the NSDCC sales offered less than a 2.5% commission to the buyer-agents, and in February it was 25%.

Since the NAR settlement was announced on March 15th, 40% of the listings are offering less than a 2.5% commission to the buyer-agents.

There isn’t a new rule that directed listing agents to offer less commission. They just felt like doing it.

Is it due to the listing agents being weak and inexperienced? Or are the listing agents are still charging their full fee and taking more for themselves? Either way, they are under-appreciating of the job of buyer-agents, which isn’t good for their sellers.

What’s going on?

  1. Agents who lack solid sales skills will offer a reduced commission rate as their reason to hire them. Importantly, these agents are unwilling to improve their skill set. They believe that completing the forms is all there is to being a realtor, and offering a reduced fee is the only way for them to get business.
  2. Those who still charge their full fee but are now paying less to the buyer-agent are flat out greedy. Their commission rate is never disclosed to anyone besides the seller – at least not yet, and if the DOJ wants to focus on the nefarious, they can start right there.

Would you want either of those agents in your corner when the action starts?

Smart home sellers will recognize a critical issue.

The eventual sales price matters more than the commission rate.

Homeowners who don’t want to pay ANY commissions can sell their house to the buffoon who advertises on television. But he only pays 70% of the home’s value – yet he gets business because there are people who fall for the ‘quick cash and no fees’ enticement.

In addition, there are plenty of agents who offer a reduced rate in exchange for reduced services – but what real estate services can you do without? What are the vital sales skills needed to sell for top dollar?

The best agents have sales skills that cause your home to sell for more money, and they are successful enough that they don’t need your listing. Do you think they are going to discount their rate?

Are you going to hire a great agent who will push the sales price higher? Or will you settle for any old licensee just to save a point on the commission?

Reducing commissions aren’t going to make agents better, or have them put in extra effort. They aren’t going to do the same job for less pay. Because they agreed to be paid less, they will want to do less.

Is that who you want working for you?

The top agents employ a collection of superior sales skills that deliver a top-dollar sales price AND make the experience easy and enjoyable. Isn’t that what you want?

More on Single Agency

Most people think that the lawsuits are going to cause lower commissions, but if that happens, it will be in conjunction with the buyer-agents being eliminated. I’m calling it single agency for now.

Here is this week’s installment on the evidence supporting my theory. Even though I suspect this is BS like most of the things he says, he put this out for public consumption:

Kelman, for one, doesn’t seem too concerned about the settlement’s impact on his business.

“We’re just getting more aggressive about selling homes directly to consumers,” Kelman answered in response to a question about how Redfin is adjusting in the aftermath of the settlement. “There are so many people who called us over the weekend after the news of the settlement broke and said, ‘I don’t want to pay a buyer’s agent. I want to hire you to sell homes directly to homebuyers.’”

The new search portal, (who wasn’t kidding about spending boatloads of money on advertising) is making a campaign out of Your Listing, Your Lead. They direct all buyer inquiries back to the listing agent, instead of sending to a third-party agent who pays for the lead.

But look at how much they are charging!

The only listing agents who are going to pay this money are the big teams – who will then be more excited about selling their listings directly to their own buyers, rather than co-op with buyer-agents via the MLS.

Forty percent of the NSDCC listings since March 15th (the day the NAR settlement was announced) have a buyer-agent commission under 2.5%. We saw the Berkshire Hathaway listing that didn’t offer any commission to a buyer-agent.

Being a buyer-agent is so tough that they aren’t going to do it for nothing – they will quit instead. Will buyer-agents convince buyers to pay them a full commission directly? No – they will quit instead.

It’s only a matter of time.

It isn’t what is best for buyers, and when buyers are harmed, it isn’t good for sellers either. Especially if the market slows. But here we are!

Zero Commission Offered

In this new listing, Berkshire Hathaway agents are boldly offering no commission at all to the buyer-agents, and instead suggest that we take it up later – which leaves the amount uncertain, at least for now.

It has the potential to be anything from 3% to zero. Will it be a moving target?

I think there will be different trends for different areas, and the outcome will depend on how bold and brash each individual brokerage wants to conducts itself. The $10,000-commission brokerage in Silicon Valley is offering a downright insulting fee for high-end neighborhoods ($4 million and up), and I wish they would just do zero/negotiable. But they have enough market share that they will get away with it.

If this is company-wide among Berkshire Hathaway agents, it will hurry up the overall transition, that’s for sure. Every buyer-agent will need a written employment contract with their buyers immediately.

Weren’t we going to work this out slowly over the next few months? Guess not! 😆

NAR Settlement – The Truth

From the CEO of a large Sotheby’s brokerage based in Florida:

Last week the National Association of Realtors announced a settlement agreement in the Sitzer Burnett case that would take effect in July. For those who missed the declarations in the media that this outcome will render transacting real estate almost free, protect consumers, and make homeownership affordable once again, the settlement does none of that.

Here’s the truth.

1. The settlement forces brokers to reduce their compensation. False.

The settlement in no way establishes a standard or limitation on Realtors for what they may charge, nor services they elect to deliver. Those fees have always been negotiable and there has never been any collective bargaining. In every market, there is a wide variety of fees, just as there are levels of marketing, service and competence.

2. The settlement will, for the first time, allow sellers to no longer pay compensation for an agent bringing the buyer. False.

There has never been an obligation for a seller to pay buyer agent compensation, yet it is a practice that’s worked well. A past rule requiring an offer of some amount of compensation was a rule of display on a Realtor-owned MLS, yet it could have been as low as $1. That limitation was removed and today the MLS accepts all listings, regardless of buyer agent consideration.

3. The settlement prohibits sellers from paying a commission to a buyer’s agent and relieves sellers of the financial burden. False.

The mandate restricts properties with an offer of buyer agent compensation from displaying on association-owned MLS, yet the practice can’t be restricted in any other form of marketing. Sellers may still elect to pay buyer agent compensation to differentiate their properties. While sellers can elect not to pay buyer agent compensation, that doesn’t mean they will avoid the economics as buyers may write into any offer a contingency requiring the seller to cover the cost or request other concessions.

4. The settlement will serve to meaningfully lower prices and make homeownership affordable again. False.

Values in real estate are determined by supply and demand. Fees in a real estate transaction represent additional expenses, yet these include not only commissions but many other related charges. Should real estate commissions be reduced by 1% because of compression, that $500,000 home will now cost $495,000. Not only is the potential impact marginal at best, but do you think the seller now believes the home is worth less and will happily give the difference to the buyer? The reason home ownership is increasingly less affordable is that homes in our market have significantly risen in value these last few years.

5. The settlement is a win for buyers who will now be able to negotiate the fee for representation. Questionable.

For readers who have purchased homes, it is more than likely you were happy to have the seller compensate your agent so you didn’t have to. For buyers who had to provide the down payment and closing expenses, having the commission paid by the seller and incorporated in the home price allowed them to finance the amount over time instead of coming up with additional cash at closing.

6. The settlement will result in significant restitution to consumers who were “harmed” over recent years in their transactions by Realtors. False.

The settlement is huge, yet when one divides the amount by the number of potentially qualifying consumers it works out to about $10 per person. Those benefiting are the attorneys who have submitted a request to the court for over $80 million in fees.


As a real estate professional for over 40 years, I have had the privilege of working with Realtors who represent the public in what is likely their largest investment. What I have witnessed are the countless situations where an agent has gone above and beyond to help buyers realize their dreams and sellers maximize their returns, often serving in ways far beyond their job description.

Everyone would like to see costs lowered yet I do not see the Department of Justice going after attorneys or other professions we wish would charge less. I always believed in the concept of free enterprise. If one is willing to assume the risk of running a business, one may do so at rates that allow a reasonable return for the capital investment and time. As my dad would say during his 60-year career, you wake up every day unemployed and have to find a job. Then you spend out of pocket and don’t make a cent unless you achieve someone else’s goals.

The brokerage community has always adapted to best represent buyers and sellers whenever there is a shift in the environment. And we will again. Yet when an industry I love is singled out and the justification is for false reasons, I will not be quiet.

Direct To The Listing Agent

The conspiring events – softer market, fewer and less-experienced agents, and lower commissions – are all leading us to the same place:

The destruction of the traditional model of residential real estate sales will be triumphed by the unknowing, but it will be the worst thing to ever happen for consumers because agents will be so tempted to tilt the table.

The only savior will be the company that brings home auctions to the masses.

Lower Commissions – The Truth

Oh, you’re going to get lower commissions alright – on the backs of the buyer-agents.

The last time I checked a couple of months ago, there were 30% of the monthly closed sales that offered a buyer-agent commisssion under 2.5 percent. Of the 92 closings so far this month, 25% of them were under 2.5% – and those were determined before the NAR debacle.

The listing agent determines how much the buyer-agent gets paid.

Not the seller, not NAR, not the attorneys – it is the listing agent who decides the commission rate to offer the buyer-agents. It makes for an easy solution. Want a lower overall commission rate? Just take it off the amount paid to the buyer-agent. What’s worse is the MLS rule that buyer-agents are not allowed to negotiate the rate – hopefully that will go away now.

Listing agents aren’t lowering their commission rate – they are taking the same or more than ever, and paying less to the buyer-agents. They are under-appreciating the amount of work it takes to conclude a successful buyer-side transaction (usually 3-6 months of frustration and losing).

If the listing agent has superior skills that result in a higher sales price and a smooth transaction, then no one will mind them getting paid accordingly, but their success is also at least partially due to the buyer-agent doing his job well. The good buyer-agents shouldn’t be penalized, and ideally, there would be a sliding scale based on performance.

But because everyone will be hearing that commissions are negotiable (for the first time, says Biden), the listing agents who feel the need to agree to a lower rate with their sellers will just subtract the same discount from the buyer-agent side. But is that in the best interest of the seller?

This practice will expedite the demise of the buyer-agent.

Buyer-Broker Agreement – The Problem

Every realtor-related entity is scrambling right now to train agents how to get their buyers to agree to a contractual relationship where the buyer pays the buyer-agent commission.

It would all be well and good – and be similar to the listing agreement we have with sellers – if it weren’t for the paragraph in red above that allows for cancellation by either party. Even if the parties agree to Exclusive Representation, the buyer can still cancel with a 30-day notice (in C1ii). Both boxes on the left need to be checked to eliminate the option to cancel.

The big problem is that listing agents will be advertising to buyers to come direct to them to buy their listing and not pay ANY commission.

Will agents be able to convince buyers to sign the Exclusive Representation with no cancellation? Or will it be a happy compromise just to agree to representation that they can cancel at any time. Yes, the happy compromise will be preferred, mostly because it is so clearly laid out on the form.

But it means that the minute the buyers see a hot new listing advertised as No-Fee-If-You-Come-to-Me, they will cancel their existing buyer-broker agreement and go direct to the listing agent.

Buyer frustration builds quickly even if you have a great buyer-agent because the good deals or cool houses are competitive and almost all picky buyers will lose a few bidding wars before they win one. Buyers don’t like losing houses they had their heart set on winning, and the temptation to go direct to the listing agent – especially when you can save the fee – will be very high.

I’m guessing this will all blow over in a few months because listing agents will be advertising to buyers directly – leading with the No-Fee-If-You-Come-to-Me mantra – and it will expedite the industry’s transition to single agency, and eliminate buyer-agents altogether.

After the Realtor Settlement

From the WaPo

The reporting on the NAR settlement seems to be focused on creating hysteria, rather than finding the truth. Realtors commissions have always been a juicy topic, and the media is intent on using this opportunity to fabricate wild and salacious stories to attract the maximum number of eyeballs.

The hysteria may just be beginning, however. The NAR settlement included penalties for every brokerage that sells more than $2 billion in volume per year. For Compass, the top brokerage in the country for total volume, it means imposing a fine of $500 million without consulting with Compass management, let alone negotiating. The NAR doesn’t have the authority to speak for us, or commit us to any penalty so who knows what they were thinking but it guarantees the end of NAR – why would any brokerage want to be associated with such bums?

Those fines will get litigated and drawn out for years. The requirement to remove the commission rate in the MLS will start in July, but listing agents can advertise the amount of buyer-agent commission everywhere else. We will hear more about the buyer-agent commission than ever before – and steering done by both buyer-agents and buyers themselves. Buyers will prefer the listings that pay more commission, so they pay less. So much for fixing the concerns about steering!

As realtor-panic goes, the beginning of Covid was much worse – we didn’t think we’d sell a house for months! Those who panic about this hiccup are the realtors who don’t have much to offer – those who aren’t real salespeople. Nobody will mind seeing them either get better, or get out of the business.

But houses will keep selling at a brisk pace regardless of commissions.

This will blow over in a few months.

My previous post mentioned the need for getting good help. Getting cheap help will probably be tempting until people get a feel for the difficulty of what it’s like:

  • We made a clean, full-price offer. Three days later, still no answer.
  • We made an offer on a Friday that was $50,000 under list on a 2-br house in original condition. The sellers decided to take their chances with open houses (in search of two in the bush) over the weekend, instead of responding. We attend, and the listing agent isn’t doing the open house; there is a trainee there instead. We look harder to find something better, and succeed. By Monday, the listing agent wants to re-engage, and by Wednesday she begs me to get back in the game. They receive another offer, but it’s $100,000 under list. We moved on.
  • I’ve had several solid buyers attend open houses in the last year – people I’ve talked to who sure gave me the feeling that they liked the home so much that they were going to make an offer. But then when I follow up with their agents – who usually don’t accompany – they can’t close the deal. It makes me want to sell my listing to their buyer and just send them a check in the mail.
  • Multiple offers – what do you do? I lost another one where we offered the exact same price ($100,000 over list), and the listing agent seller picked the one with the bigger down payment, instead of letting the buyers decide it. Don’t you think there might be some gas left in the tank? Like $25,000 to $50,000?
  • You get an offer while off-market. Then what?
  • When does a seller lower their price? Or not?
  • Buyers and sellers typically have little experience in fixing things – especially the big stuff – and agents aren’t much better. So instead, a proper discount is attempted, but sellers always think in pennies, and buyers think in thousands. With little or no buyer representation, how are those going to get handled? They’re not, and more deals will die. This is a problem on virtually every sale.
  • Inexperienced people tend to over-react, and any bump in the road could be a deal-killer.
  • How much should buyers offer? Most agents respond with, “Well, that’s up to you”.
  • What is the real value of the property? Once a home is on the open market, Zillow and Redfin adjust their estimates to within a buck or two of the list price, so sellers, buyers, and agents must each determine the value themselves. How good are they at determining the value? How much variance is acceptable? Virtually nobody knows, and unless there is a good agent involved, more deals that are 1% to 2% apart will die an unnecessary death.

How do you know when you’re talking to the wrong agent?

Their only line is “Let me know if you have any questions”.

Good salespeople ask the questions, and then offer opinions and advice!

The commission lawsuits are the best thing to ever happen for my slogan! Get Good Help!

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