Retainer Fees

[Winchester]

I'm looking for honest feedback on a topic that has recently been discussed at my office.

As some of you know, I'm a full time Real Estate Agent and a Realtor with a large real estate brokerage. Yes I know, full time real estate agents are a rare breed now-a-days, but I'm running wide open right now. Recently the use of a "Retainer Fee", such as attorneys use, as been a hot topic around the office. And to be honest, I'm giving it some serious consideration.

Real estate agents have always been allowed to charge a Retainer Fee to their clients but now it's starting to become a recommended business practice for many reasons. A Retainer Fee is a non-refundable fee charged up front to a client (buyer or seller) at the time the clients enter into an "agency agreement" with a real estate agent to help them with the purchase or sale of real estate. The Retainer Fee is usually fully credited to the buyer or seller at closing , usually as part of the agent's commission. Only if or when a client defaults on a contract for whatever reason and the "agency agreement" is terminated, that the retainer fee is dispersed to the broker and then the agent.

The Retainer Fees help the agents recoup some of their out of pocket expenses when a transaction does not close. Because real estate agents ONLY get paid on commission of the sale at closing, agents still incur extensive out of pocket expenses if there is no closing, not to mention their valuable time involved.

What I want to know is what other people think about a real estate agent they have asked to help them buy or sell real estate in today's market, wanted to charge them a retainer fee before conducting any business? Be honest and open about your comments please.

 

[unionmom]

My brutally honest response ... not a chance in h*** that I would use a realtor that charged a retainer fee. Not at this point. My opinion may change in later years but that's where I am now.

 

[Winchester]

My brutally honest response ... not a chance in h*** that I would use a realtor that charged a retainer fee. Not at this point. My opinion may change in later years but that's where I am now.

I understand. Why do you feel so strongly against this? Not trying to change your mind, just want to know why?

Please keep in mind that few licensed real estate agents right now are Realtors. In fact, the number of Realtors are dropping for many reasons.

If you had to choose between a full time real estate agent that charges a retainer fee vs. a part-time agent who does not, but works a a full time job and is not available during that time?

 

[unionmom]

To me a realtor/real estate agent is a commissioned sales person. As with all other commissioned sales people, they don't get paid unless/until the sale is made.

As for the full time vs. part time, it all comes down to the person and the effort they put out there.

 

[mei lan]

Agree with unionmom. (I am a licensed agent, but my license is inactive at this time.) I totally see the logic behind the retainer, but unless you're dealing with mega high-dollar clients, I don't see it taking off. Knock yourself out, though, if you wanna go that way. Personally, I'd rather go with a signed agreement saying I won't use anybody else for this transaction or whatever, than pay a retainer.

RE: FT v. PT, I agree with her as well. I'd rather have a FANTASTIC agent who cares about me and what I need but happens to have a regular job and does this in his/her off-time, than a FT agent with six assistants who can't even remember my name. Not to say that I would have to make that choice, and the agent I used last time was a FT agent (who no longer lives here), but believe me, his service was what drew me to him, not the fact that he was FT.

 

[mei lan]

Oh, btw - the Realtor thing (if by that you mean being a member of the Board of Realtors) I don't care about in an agent, either.

 

[unionmom]

I'm not even a fan of contracts with buyer agents. I've seen and experienced too many slacker agents on that side. I can understand it much more from the seller side. There is a good deal of money and time involved in selling a home. Sure there are slackers there as well but even getting the house listed in MLS is a value added item to be considered and the agent should get something out of it. A buyer agent has little more than time invested at the beginning and by the time they get much more invested they've had a chance to prove themselves and should no longer need a contract. (Understand that by contract I'm talking about more than one that spells out their compensation upon closing. I'm talking about exclusivity clauses, etc.)

 

[Foxmeister]

There's no way I would list my home with an agent who required a retainer, especially in with the way the market place is now. My neighbor tried to sell his house and used three different agencies in just over a year without a single potential buyer looking at his house. Imagine if he had paid a retainer to the first one whom he had his house listed with for six months.

 

[newsjunky]

I am familiar with a lot of real estate agents and companies. I would never go with one that charged a retainer fee. If business is good right now I would not take a chance on losing it as a result of charging a fee like that. Just my 2 cents.

 

[Madea]

It would have probably worked when home values were high and the market was hot. I don't see it going over well in today's market.

 

[Winchester]

To me a realtor/real estate agent is a commissioned sales person. As with all other commissioned sales people, they don't get paid unless/until the sale is made.

As for the full time vs. part time, it all comes down to the person and the effort they put out there.

The way the agent gets paid would not change, it would still be commission based. The ONLY time the retainer fee would be paid to the agent is if the client defaults on the contract. Such as a buyer signing a "Buyer's Brokerage Agreement" with an agent and then stepping out on their own and submitting an offer on another house, without their agents knowledge, or buying a new car just before the closing, etc.

And we are only talking about $250 to $500 retainer's fee. Not the full commission an agent would normally make.

Thank you for responding, I like your honest response and jumping right in there. This was what I was expecting but I wanted to do a little research before taking any such action.

 

[unionmom]

It would have probably worked when home values were high and the market was hot. I don't see it going over well in today's market.

Which is kind of funny because that's the exact opposite of when their need is. (And I still wouldn't pay it then.)

 

[unionmom]

To me a realtor/real estate agent is a commissioned sales person. As with all other commissioned sales people, they don't get paid unless/until the sale is made.

As for the full time vs. part time, it all comes down to the person and the effort they put out there.

The way the agent gets paid would not change, it would still be commission based. The ONLY time the retainer fee would be paid to the agent is if the client defaults on the contract. Such as a buyer signing a "Buyer's Brokerage Agreement" with an agent and then stepping out on their own and submitting an offer on another house, without their agents knowledge, or buying a new car just before the closing, etc.

And we are only talking about $250 to $500 retainer's fee. Not the full commission an agent would normally make.

Thank you for responding, I like your honest response and jumping right in there. This was what I was expecting but I wanted to do a little research before taking any such action.

And let me throw the other side in there ... What fee would the buyer/seller get if the agent didn't hold up their end of the contract?

 

[Winchester]

There's no way I would list my home with an agent who required a retainer, especially in with the way the market place is now. My neighbor tried to sell his house and used three different agencies in just over a year without a single potential buyer looking at his house. Imagine if he had paid a retainer to the first one whom he had his house listed with for six months.

Most home owners are not realistic about the price to sell their house at now. ANY house will sell in this market.... if it's priced right. But most people will not accept that their property value was set back to 1995 to 2000 values. Regardless of what is owed. That is the reality of today's market. Not fair to blame the agent or agents if the seller would not set a reasonable price.

I have walked away from a listing because the seller would not agree with my suggested price. I have not seen one of those properties sell either.

 

[unionmom]

And it is no fair to stick a seller/buyer with a lopsided contract.

 

[Winchester]

To me a realtor/real estate agent is a commissioned sales person. As with all other commissioned sales people, they don't get paid unless/until the sale is made.

As for the full time vs. part time, it all comes down to the person and the effort they put out there.

The way the agent gets paid would not change, it would still be commission based. The ONLY time the retainer fee would be paid to the agent is if the client defaults on the contract. Such as a buyer signing a "Buyer's Brokerage Agreement" with an agent and then stepping out on their own and submitting an offer on another house, without their agents knowledge, or buying a new car just before the closing, etc.

And we are only talking about $250 to $500 retainer's fee. Not the full commission an agent would normally make.

Thank you for responding, I like your honest response and jumping right in there. This was what I was expecting but I wanted to do a little research before taking any such action.

And let me throw the other side in there ... What fee would the buyer/seller get if the agent didn't hold up their end of the contract?

That would depend on what the agent did or didn't do. The agent most likely would not be able to collect the retainer fee if they defaulted on their end. And if the agent did really bad, they could loose their license or heavy fines from the Ga Real Estate Commission.

If the agent is a Realtor, you can fill a complaint with their Board of Realtors on issues the GREC will not get involved in. This can also mean heavy fines against the agent or broker. But if they are not a Realtor, you are basically out of luck as the GREC will only investigate violations of earnest money and license law or criminal charges. A non-Realtor agent can be as crooked as a snake but never violate "the law" and remain in business. I have seen a LOT of this going on over the last couple of years.

 

[Winchester]

And it is no fair to stick a seller/buyer with a lopsided contract.

What's lopsided? The contracts are written to protect the consumer. I do not understand?

 

[mei lan]

There's no way I would list my home with an agent who required a retainer, especially in with the way the market place is now. My neighbor tried to sell his house and used three different agencies in just over a year without a single potential buyer looking at his house. Imagine if he had paid a retainer to the first one whom he had his house listed with for six months.

Most home owners are not realistic about the price to sell their house at now. ANY house will sell in this market.... if it's priced right. But most people will not accept that their property value was set back to 1995 to 2000 values. Regardless of what is owed. That is the reality of today's market. Not fair to blame the agent or agents if the seller would not set a reasonable price.

I have walked away from a listing because the seller would not agree with my suggested price. I have not seen one of those properties sell either.

I TOTALLY agree with this. A home is worth what a buyer is willing to pay for it today. Not what you owe on it, not what it sold for seven years ago, not how much you have put into it, etc. Period.

Yes, location sells. But price is what TRULY sells. ANY TIME you see a property on the market for more than a couple of months, you can just file it away in your memory banks that it is overpriced for that market at that time.

 

[unionmom]

You're writing in a guaranteed fee for the agent if the buyer/seller defaults on the contract but where is the guarantee for the buyer/seller if the agent defaults? The agent in your scenario is wanting money back for wasted time/money ... why should the agent get that and the buyer/seller get nothing if the agent did not do their job? If a buyer signs a contract and then their agent does not work to find them a home, why should that agent get any part of the commission on a home that the buyer finds on their own and why should that agent get a fee if the buyer cuts them out? If a buyer signs a contract with an agent yet an agent repeatedly misses appointments so the buyer moves on without them, why should that agent get the commission and/or the fee. And why should the agent get the double protection of the contract and the retainer fee and the buyer be basically out there with nothing? Look at all that you said they would have to go through if they wanted to try to get sanctions of some sort against the agent, assuming the agent is registered. And that still does nothing for the buyer.

And in the seller scenario ... the contract is enough protection for the agent. It is clearly spelled out (or should be) what the duration will be and what the commission will be. There is no need for a retainer in that scenario. That is locked in for the sale of the home and if the home does not sell the agent doesn't get paid. And if the agent is a slacker the seller has no recourse and they are damaged by their home being on the market for whatever period of time without selling. Where is their protection?



And on the other subject in the thread ... I do agree that in today's market (hell, in most markets) people are not realistic in the value/listing price of their home.

 

[Winchester]

There's no way I would list my home with an agent who required a retainer, especially in with the way the market place is now. My neighbor tried to sell his house and used three different agencies in just over a year without a single potential buyer looking at his house. Imagine if he had paid a retainer to the first one whom he had his house listed with for six months.

Most home owners are not realistic about the price to sell their house at now. ANY house will sell in this market.... if it's priced right. But most people will not accept that their property value was set back to 1995 to 2000 values. Regardless of what is owed. That is the reality of today's market. Not fair to blame the agent or agents if the seller would not set a reasonable price.

I have walked away from a listing because the seller would not agree with my suggested price. I have not seen one of those properties sell either.

I TOTALLY agree with this. A home is worth what a buyer is willing to pay for it today. Not what you owe on it, not what it sold for seven years ago, not how much you have put into it, etc. Period.

Yes, location sells. But price is what TRULY sells. ANY TIME you see a property on the market for more than a couple of months, you can just file it away in your memory banks that it is overpriced for that market at that time.

Exactly my point!

Right now I'm doing nothing but listing HUD homes. Some are really in bad shape and just plain nasty..... but they sell because they are usually priced right! But even HUD doesn't get it right sometimes and I have a few that are over priced and they get no activity and they are in great shape!