A new law has gone into affect in the State of New York (that's NY's Capitol building at left) that protects the commissions of real estate brokers. Known as the Commission Escrow Act, the law ensures that brokers will be paid the commission that the seller & broker both agreed to when they signed a contract known as a listing agreement.
Seems logical that a seller should pay a previously agreed to commission amount, right? Well, not in all cases. Many times a buyer learns of the property because of the word-of-mouth spread by the owners or due to their networking skills. Telling fellow parents at P.T.A. meetings or at your son's Little League games is a great way to find a buyer. Why should a seller have to fork over a 6% commission ($18,000 on a $300,000 home) if it was them who found a buyer in the first place?
There are plenty of other legitimate reasons why a seller doesn't feel that the broker has earned the commission. The number of Realtors in the U.S. has increased from 756,000 at the beginning of the decade to nearly 1.2 million today and, as many agents will be the first to admit, the industry is chock-full of people who act in a less than professional manner. The Commission Escrow Act protects even these people at the expense of the seller.
At the recent Inman Connect real estate conference in New York City, there were calls for tougher standards in the licensing of real estate agents. Let's hope that the industry moves in this direction in order to safeguard the financial interests of real estate sellers and buyers.
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2 comments:
As a 13-year broker I certainly echo your calls for higher standards for licensees in New York.
Brokerage is far, far more than who first bird-dogged a property. When that property closes and transfers title, the listing broker has represented the seller's interests in a maze of events, from engineer inspection to appraisal, to remedying code issues to title, mortgage, survey and buyer agent issues. Agents and brokers (including this one) work quite hard in the overwhelming majority of cases. To withold commission over "who saw it first" denies the vast array of work that went into representing and advocating for the seller client and shepherding the tyransaction to a close. This is to say nothing of contract law, which doesn't take those things into account.
Some agents, such as myself, do give the sellers an exclusion on people the seller found themselves in the form of a discount providing that the seller refers the people to the broker to promulgate the transaction.
Some agents do act unprofessionally. I share the frutration, because I have to work with and around such people. However, the seller, especially in the state of New York, has recourse both with the Department of State and the REALTOR board process, to say nothing of litigation if the need arises.
Last thought: the herd of licensees is thinning now in this slow market, and the majority of those who remain in the profession are those who can cut it thanks to their higher professional standards.
I think that having this act, is a brilliant thing like J.Philip mentioned in their comment, one does get those dodge agents that give the others a bad rep, so having this for all can maybe weed out those bad apples.
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