Retainer Fees

[mei lan]

For instance, the homes in my 325-home neighborhood (before the downturn) were pretty much in the $250K-$300K range...not much variation off that except in homes like mine that had been unimproved and sat on the market for 18 months before I bought it. (I'm one of those weirdos who actually LIKES to put work into a house. heh) Anyhoo, now, of course, the prices are drastically lower, with several foreclosures.

There is a house that has been totally renovated inside and out, up to and including new roof. Really nice fixtures and finishes (not million-dollar-home nice, but very nice even for this neighborhood), and very nice renovation overall. The only area not included in the renovation is the yard, which could use about $20,000 because it's on a busy corner lot and could use a massive privacy fence with nice evergreens here and there.

It started out on the market about two years ago at $229,000, I think. Now it's down to $179,000 for the last several months. And still it sits there. Clearly, the home is not worth $179,000 in today's market. Sad, really, but it is what it is.

A seller can either lower his price to meet the market demand, or he can sit there and wait for a buyer, which some are willing to do.

 

[unionmom]

On the price issue ... I feel really sorry for one of my neighbors. They are the only conventional listing in the neighborhood right now. Everything else is a foreclosure. They are listed at nearly double what everything else in the neighborhood is listed for. 2-3 years ago, it was an amazing price for the house. Today, I just don't see any way possible that it is going to happen. It's the only floor plan like it available but I can't see that being anywhere near enough to make people make that huge number jump.

 

[mei lan]

Wow...that is truly sad. But the way this downturn is affecting the housing market reminds me of the Great Depression. Not that I was there, and CERTAINLY NOT that I think we are even close to suffering as much as they did. But all the same, this is a time like we haven't seen in this country in my lifetime, and it may be quite a while before we climb out of it. And in the meantime, much money will be lost.

 

[Winchester]

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.

You are asking some good questions! And I have to be careful how I answer as you are asking legal questions that only an attorney can answer.

First off, you have the right to FIRE your agent any time if they are not performing according to the contract terms. There are specific ways to do so, but as with any other contract you sign, you must consult an attorney before doing so. But they usually want a retainer fee also. ;-)

You can also file a complaint with their broker, their Board of Realtors if they are a member of one and the GREC if they have violated the law. But as far as getting a financial reward? They would be a legal issue for the courts, just like any other dispute.

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.

You are asking some good questions! And I have to be careful how I answer as you are asking legal questions that only an attorney can answer.

First off, you have the right to FIRE your agent any time if they are not performing according to the agreed contract terms. There are specific ways to do so, but as with any other contract you sign, you must consult an attorney before doing so. But they usually want a retainer fee also. ;-)

You can also file a complaint with their broker, their Board of Realtors if they are a member of one and the GREC if they have violated the law. But as far as getting a financial reward? They would be a legal issue for the courts, just like any other dispute. There are ways to handle such issues.

There is no guarantee of any fees to the agent. There is no "double protection". It's only there to help the agent recover their expenses should the other party default on their agreement, that's all. If the other party completes their duties, then it's simply added to the closing paperwork. This is no different then any other business arrangement with a lawyer, doctor, accountant, lawn care guy or fitness gym when their are service contracts involved.

Besides, who in their right mind would want to work with someone who does not respect their time? This goes as much for the agent as the clients. If the agent is not being helpful, they do not deserve any commission. I have fired clients in the past because they kept standing me up, I would expect the same if I had done that to them.

 

[Winchester]

On the price issue ... I feel really sorry for one of my neighbors. They are the only conventional listing in the neighborhood right now. Everything else is a foreclosure. They are listed at nearly double what everything else in the neighborhood is listed for. 2-3 years ago, it was an amazing price for the house. Today, I just don't see any way possible that it is going to happen. It's the only floor plan like it available but I can't see that being anywhere near enough to make people make that huge number jump.

I agree. And now since there are foreclosures in the neighborhood now, the house will never appraise for the sales price. No appraisal, no loan for the buyer and no buyer.

 

[unionmom]

Winchester ... do you not see how the contract and retainer are basically double protection for the agent? And you're still just stating extra steps that the buyer/seller would have to go through in order to take action against a bad agent but your retainer idea is giving the agent an automatic fee for dealing with a bad buyer/seller. Lopsided.

There is no question that there are bad customer. But I think adding the retainer fee would be a very bad PR move.

 

[unionmom]

On the price issue ... I feel really sorry for one of my neighbors. They are the only conventional listing in the neighborhood right now. Everything else is a foreclosure. They are listed at nearly double what everything else in the neighborhood is listed for. 2-3 years ago, it was an amazing price for the house. Today, I just don't see any way possible that it is going to happen. It's the only floor plan like it available but I can't see that being anywhere near enough to make people make that huge number jump.

I agree. And now since there are foreclosures in the neighborhood now, the house will never appraise for the sales price. No appraisal, no loan for the buyer and no buyer.

No doubt, they'd have to have somebody coming to the table with a lot of cash.

 

[lotstodo]

A commissioned sales person is commissioned for a reason, and that is to sell. No sale, no scratch. The commission is the incentive to either find the right home for a buyer or the right buyer for a seller. It seems to me that a flat retainer fee with no guarantee of any type of performance on top of a commission is a usury agreement benefiting the broker and not the client.

I know that you are aware of flat fee brokerages that operate on a fee for service arrangement and get paid for basically advertising and showing the property for a set period of time whether it sells or not. The retainer plus commission sounds to me like a little too much of the best of both worlds for the agent and his broker.

 

[unionmom]

I don't think that's what's being said. If the contract goes to completion and the sale goes through, the retainer is not added on top of the commission. For all intents and purposes, the retainer disappears. Basically, think of it as you would the earnest money ... a deposit. If the contract goes through, that deposit goes towards the commission payment. If the contract is broken, that deposit is not refunded.

l

 

[Winchester]

I don't think that's what's being said. If the contract goes to completion and the sale goes through, the retainer is not added on top of the commission. For all intents and purposes, the retainer disappears. Basically, think of it as you would the earnest money ... a deposit. If the contract goes through, that deposit goes towards the commission payment. If the contract is broken, that deposit is not refunded.

l

Exactly! You got it!

And I do agree with you about it being a bad PR move, that's why I asked here before trying it. But I seldom work with buyers anyway, so for me it's not a big issue. I guess I could try it with people I really don't want to work with? lol

 

[Winchester]

A commissioned sales person is commissioned for a reason, and that is to sell. No sale, no scratch. The commission is the incentive to either find the right home for a buyer or the right buyer for a seller. It seems to me that a flat retainer fee with no guarantee of any type of performance on top of a commission is a usury agreement benefiting the broker and not the client.

I know that you are aware of flat fee brokerages that operate on a fee for service arrangement and get paid for basically advertising and showing the property for a set period of time whether it sells or not. The retainer plus commission sounds to me like a little too much of the best of both worlds for the agent and his broker.

Yep, very familiar with the flat fee brokerages. That's why most of them have closed up shop. I've heard many a horror story about a few of them! They charged their full commission up front, non-refundable. They had no incentive to perform (and many did not) as they already got paid! There are a few that charge a flat fee paid at closing, but their services are limited.

The retainer fee would be part of the normal commissions and not an additional fee. The only time the retainer fee would be paid to the agent is if the client defaulted.

 

[unionmom]

... I guess I could try it with people I really don't want to work with? lol

 

[Guard Dad]

My initial reaction is that this could remove part of an agent's incentive to deliver a deal because it gives them a partial payday before they do anything.

You're probably very good at what you do if you're that busy in this market. But there are scores of realtors that are hungry and would work their butts off at any opportunity to close a deal.

I could only see myself considering paying a retainer if it was a very high-end deal or specialty situation, and doubtful even then.

 

[naturegirl]

I probably wouldn't pay a retainer. And the discussion about housing values I think they will eventually level off, but there are still a huge amount of foreclosures out there. It had to be adjusted, the prices in recent years were so over inflated it was just a balloon waiting to pop.

I'm glad we bought our house in 1993. The highest county appraisal was around $280,000.00, a ridiculous amount but now it's back down to around $150.00. Since we only paid $120,000 to build (including the land) we're still ahead of the game. We should also have it paid off within the next five years. Should have been sooner but it's been a struggle the last two.

 

[Blazing Saddles]

My oldest lost his retainers twice in a three month period. I told him that he was going to have to see the dentist next time if it happend again. Seem to work. :B_S :B_S :slappy

 

[Foxmeister]

My oldest lost his retainers twice in a three month period. I told him that he was going to have to see the dentist next time if it happend again. Seem to work. :B_S :B_S :slappy

Ours lost his, we replaced them and then they broke in his pocket at school.

 

[MacDaddy]

I probably would not sign with an agent that required a retainer fee.

My reasoning comes from a couple of reasons. First, I'm in commissioned sales. If I don't sale, it doesn't matter how much expense I incur - I don't make any money until I sell. This seems to be a pretty prevalent way of doing business.

Second, my wife and I are trying to sell two houses. have been for a year. She tried to sell her's several times before we were married. I can summarize all the efforts of all the agents we have used, and there have been nearly a dozen reputable well known agents - come in, make suggestions on improvements that should be done in order to market the house, take pictures, post the listing on their website and the MLS, and that is about it. After the initial attention and reports, feedback, etc., their contact is primarily "You need to reduce the price in order to be competitive." Lowering the price appears to be the main selling tactic after the honeymoon period has passed.

My apologies if this sounds like a bitter reply, it is not meant to be. Besides listing in the MLS, and having a system that automatically generates reports - none of the agents we deal with have provided much in the way of a service that would justify a retainer.

 

[Winchester]

My oldest lost his retainers twice in a three month period. I told him that he was going to have to see the dentist next time if it happend again. Seem to work. :B_S :B_S :slappy

Ours lost his, we replaced them and then they broke in his pocket at school.

hey hey, get that rift raft stuff outta here! We are having adult talk here! lol

 

[Winchester]

I probably would not sign with an agent that required a retainer fee.

My reasoning comes from a couple of reasons. First, I'm in commissioned sales. If I don't sale, it doesn't matter how much expense I incur - I don't make any money until I sell. This seems to be a pretty prevalent way of doing business.

Second, my wife and I are trying to sell two houses. have been for a year. She tried to sell her's several times before we were married. I can summarize all the efforts of all the agents we have used, and there have been nearly a dozen reputable well known agents - come in, make suggestions on improvements that should be done in order to market the house, take pictures, post the listing on their website and the MLS, and that is about it. After the initial attention and reports, feedback, etc., their contact is primarily "You need to reduce the price in order to be competitive." Lowering the price appears to be the main selling tactic after the honeymoon period has passed.

My apologies if this sounds like a bitter reply, it is not meant to be. Besides listing in the MLS, and having a system that automatically generates reports - none of the agents we deal with have provided much in the way of a service that would justify a retainer.

I'm sorry to hear about your bad experience. Don't know anything about properties or what was attempted, marketing wise. But is all truth, this housing market over the last 3 years has worst we have every seen in 40 years. There was a period when you could not sell a house for a $1.50. Buyers just were not around, nothing was selling.

It seams to have turned the corner now. But price is the determining factor. Everyone wants the low end, low priced houses. I still believe PRICE will sell any property. It's finding that price for THAT property is the hard part. Finding a buyer for that price, for that property is even harder. Most people do not want to hear the price it will take to sell that property most of the time. And until the seller is not ready to get to THAT price, the property will not sell. End of story!

Four years ago, buyers were willing to pay whatever someone wanted for their property and the lenders were willing to play along. That is no longer the case now. Want to know what it will sell for? Have an appraisal done and then cut 20% off of that. It sucks, the truth that is, but that is where we are at right now. Or, you can take the lowest 3 sales in your neighborhood and go lower, by 20%.

If your properties are not currently listed, and you want an honest opinion on the current value, send me a private message with the addresses and an email address. It will take me a couple of days to get to it, I have a full calendar for the next few days.

 

[Grey Colson]

I can understand your reasoning for requesting the fee, but as the average Joe Hot Coffee, Cream Only, if I had a choice between 8 realtors who didn't charge the fee and 2 that do, I'm probably taking a shot at one of the 8 that I don't have to commit it to.

Just being honest, Bro

I've only heard of that once before. The old gentleman that owned our first quartet had an intersting real estate business. He dealt only with wealthy people who were moving to the Atlanta area and wanted him to find them a certain house, in a cartain location, for a certain price. He did the leg work and when they moved to town, they we set to move in. Now I could see even paying up front for that particular service, but until it becomes standard practice with 95% of realtors, my guess is they will try someone else first.

Good luck with whatever you decide. ;D