That’s basically the headline of one of the articles in the weekly email that I got from the National Association of Realtors (NAR) on Friday morning. Well, the headline certainly doesn’t apply to this realtor!

The very short article references a recent LA Times article that features quotes from realtors like “You’d be foolish to give part of your salary away. I’m worth what I get paid” and “[realtors are] really digging in their heels because they aren’t selling as many homes.” Hmmm. First of all, if the realtor works the low end of the real estate market they are worth what they get paid but in Chicago there are an awful lot of realtors collecting pretty fat commission checks from $500K+ real estate transactions. As for realtors not selling as many homes these days…well, that’s not the customer’s problem now, is it? All that means is that there are still too many real estate agents out there.

Given the tone of the NAR article and the fact that it was only 158 words I couldn’t help but wondering if it was nothing more than a blatant attempt at price signaling – i.e. “don’t cut your commissions”. The original LA Times article, at 1547 words, conveyed a much different tone which I summarize as follows:

• Some real estate brokers are willing to discount their commissions but you have to ask – well, not always
• Agents are reluctant to discount their commissions because in this market they have to work a lot harder to close a deal
• Some discount brokers may underprice a house in order to get a quick sale
• In a related article the author points out that a discount broker may overprice a house in order to have a listing to attract buyers
• There are several special situations in which you might be able to get a discount – e.g. when the listing agent acts as a dual agent or when the broker is independent of a national chain (these chains usually take 8% of all commissions)

On the whole it’s a much more balanced picture than that presented in the short NAR article. The only peculiar thing I noticed was that in one article the author cautions about discount brokers overpricing a house and then in another article cautions about them underpricing a house. The truth of the matter is that any realtor, discount or not, can either intentionally or unintentionally overprice or underprice a house. I would not assume that it’s more likely to happen with a discount broker.

One last point: there were two glaring omissions in the LA Times article. First, there was no mention of service level. Many discount brokers offer a discount because they provide a lower level of service. Consumers should always find out how the realtor can afford to offer a discount real estate commission. Second, there was no discussion of the buy side, where buyers can get rebates of the seller paid commission from their agents. Let’s face it, for every seller there is a buyer (eventually we hope), so you can’t ignore this half of the equation and the savings can be just as substantial.

When people are picking a listing agent to sell their home they can fall victim to any number of self-imposed myths or outright lies perpetuated by the agents they talk to. When I hear about these it really gets my dander up. Of course, in reality, I don’t have dander. Dander is “loose scales formed on the skin and shed from the coat or feathers of various animals” so I’m not entirely sure how I can get mine up. But any way, many of these conversations are inane. Here are some of my favorite examples.

“I don’t discount my commission because if I did I wouldn’t work as hard selling your property”. Some sellers already subscribe to a variation of this lie themselves: “I don’t want to negotiate the commission down because then they won’t be motivated to sell my house”.

This is utter nonsense. The reason a real estate agent won’t discount is because they are sitting fat and happy with lots of referral business with people who are willing to pay full commission. They’ve got a strong network that they have been very effective at leveraging to get more business. Furthermore, many of these same agents will take referrals from other agents or take Internet referrals from their broker and forfeit up to 30% of their commission in each case. So, obviously they don’t have an issue with earning less under the right circumstances. If you want a deal, move on to someone else.

Also, if a real estate agent takes a listing at a reduced commission don’t believe for a minute that they are going to work less diligently on it. First, if they took the listing they must have decided it was worth it. Second, if they are the kind of agent that would take a listing and then neglect it you were going to have trouble with them anyway. Third, if their degree of attention was proportional to the commission rate then perhaps you should pay them 15% and get lots of attention, right? After all, there is no reason to believe that you coincidentally get the optimal amount of attention at 6%.

“I will look for buyers in _____________” or “I have a lot of buyers for this type of house” or “My office works with a lot of buyers for houses like this”. This falls under the heading of the listing agent delivers buyers. Many sellers already believe this without a listing agent having to tell tall tales of their prowess with buyers.

More nonsense. The fact of the matter is that the listing agent is usually not the one that delivers buyers. It’s the buyers’ agents that deliver buyers. The listing agent gets the listing in front of the buyers and their agents and positions the house in the most favorable light for them. For instance, I just pulled over 600 sales of single family homes in Lincoln Park over a more than 2 year period from the MLS. In less than 15% of the cases did the listing agent produce the buyer. The other 85% of the time it was a buyer’s agent.

One other thing. If a potential listing agent is talking about delivering the buyers herself or through her office I would get very worried. That might be a red flag that she is trying to get both sides of the commission and might pursue that strategy to the detriment of exposing your house to other agents. I have heard conversations where this appears to be an explicit strategy.

“My list-to-sell ratio is___” or “My average time on market is______”. You’re supposed to be impressed with a high list-to-sell ratio or a short market time. However, how do you know the agent isn’t giving the houses away? That would certainly make both of these numbers look favorable. I’m not suggesting you ignore these numbers entirely, but you should be aware of the limitations of these numbers and take them with a chunk of rock salt.

As always, when dealing with those slippery real estate agents caveat emptor.