C Tann-Starr's Outside Blog

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Brokerage Commissions Must Be Earned

Brokerage Commissions Must Be Earned... Seems like a simple statement but I find it amazing some people don't get this. It's not about an Open house, a flier or a passing conversation; it's about (a) procuring a meeting of the minds and (b) getting the important essentials into an executed contract.

The paper trail is very important. Some people are pretty casual with their e-mails. You may want to rethink that and do more negotiations in writing. If you do have a phone conversation, re-cap and follow it up with an e-mail. E-mails can help you reconstruct a time-line sequence in the correct chronological order if you habitually use them. They can also refresh your recollection if you forget something that may turn out to be very important later on... As a matter of fact your blog post conversations and posts can also time stamp your business activities. :-)

My gal pals are really gung ho regarding sending me all over cyberspace to understand the intricacies of a commercial transaction. They want me to get out of the books and into the historical life of real estate transactions. From 1986 to 2009, I have a reading list that has been making me go "hmm" since last night. I spent the wee hours this morning with this blurb from Real Estate Weekly, Sept 7, 1994 by Edward L. Schiff.

Do you want to know my favorite points to quote? Check these out:

(1) Helmsley-Spear, Inc. v. Melville Corp. (611 N.Y.S. 2d 240), holds that the mere introduction of a property by a broker to a perspective purchaser does not entitle the broker to a commission. "Despite Melville's refusal to engage the broker's services, Helmsley-Spear claims that in February 1987, one of its brokers made a "cursory showing" of the Dictaphone Building in Westchester to Melville's real estate manager as a possible building to lease. This building was not managed by Helmsley-Spear nor was Helmsley-Spear exclusively engaged to represent the building."

Seems to me the buyer or potential tenant gets to choose who negotiates/writes up their offers and represents their best interests.

(2) Heelan Realty & Development Corp. v. Skyview Meadows Development Corp. -612N. Y. S. 2nd 192 is also a very interesting read regarding "commissions claimed by a broker resulting from a deal which collapsed." Hmm... "It [the court] ruled that no brokerage commission is earned until the buyer and the seller have a meeting of the minds on all substantial issues. Mere agreement as to the price on a proposed sale of real property does not constitute a "meeting of the minds" of the buyer and the seller, absent an agreement as to other terms that are essential and customary to real estate transactions. It is only when the seller wrongfully or arbitrarily prevents the completion of a deal does a broker's commission become due."

Seems to me the binder is only the beginning... We don't stop working until we close escrow. Anything can go wrong at any given moment so if brokers don't cooperate and our clients become entrenched in inflexible ideals, the potential is there for everyone to lose. This deal went south because sets of people (LB, BB, Seller, Purchaser) refused to get a very important letter while demanding the others do it... I am not an attorney so I have no idea why the seller didn't do it and don't know how the buyer could have done it without being the owner of the property. Hmm... I don't know what was technically required but I do know stupidity when I read it.

Non cooperation is the height of stupidity when you are supposed to be dealing in good faith and representing the best interests of both parties involved in a real estate transaction. Do you want to collect days on the market or do you want to close escrow? I am still reading cases from the 1980s and find myself thinking the same crappy attitudes are here in the Rain right now that were evident in the squabbling of old.

Sure you want to keep pissing on another agent about not paying them if they don't attend your Open House? Seems the courts are more interested in the actual work done and the exact factor that proved to be the decisive moment when a buyer and seller has a mutual meeting of the minds.

Our attitudes spill over into the lives of the people who observe us. There is more to negotiating and earning a commission than opening a door and handing a prospect a flier. Your 5 minute conversation may not be the reason they are or are not buying a property. The whole reason is usually the sum of all of the components that factor into their decision making. I routinely have to speak with my buyers, their spouses, their relatives and their friends before some of them will actually say yes. When did your 5 minutes trump my 2 weeks, 2 months, or year?

No practitioner should take any prospect, customer or client for granted. If they decline to choose you and go with someone else you can bet your bottom dollar there is a reason. It doesn't even have to be a good one. People can be irrational and/or generally do what they are comfortable with. It's up to the buyer and/or seller to determine who they want to work with, how and when. It's up to us to service them to the best of our ability when they do select us. A lot of time and conversations passed between the people who eventually litigated their positions.

They each thought they were correct to file their complaints. Things don't always turn out the way we plan...

 

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Comment balloon 6 commentsC Tann-Starr • September 25 2009 11:53AM

Comments

Carolyn - You make some excellent points here.  I learned many years ago that procuring cause is a lot more than just showing a property once.  In Texas, in order to prove this, you must have entered negotiations to have ANY shot at the commission later.

Posted by Jason Crouch, Broker - Austin Texas Real Estate (512-796-7653) (Austin Texas Homes, LLC) about 9 years ago

Procurring cause here used to be a bigger issue a few years ago.  Not so much now.  Agent needed to show consistent and continual proof of working with the client - not just showing the home and hitting the road.  I once had a open house where the  people came thru - no mention of an agent. They took a lot of my time that day.  In the evening I had a contract waiting for me by an agent, for those folks, that hadn't seen the home and was out of town.  I don't think so. We closed it and then did some talking and negotiating.

Posted by Anna Banana Kruchten CRB, CRS 602-380-4886, Arizona's Top Banana! (Phoenix Property Shoppe) about 9 years ago

C,

I feel your anxiety.  I understand and appreciate where you are coming from.  I have lived with the same feelings for 30 years and it is in Cow Pie terms... SSDD Same Stuff Different Day and you proved that with your specific research. 

So, to tolerate the situation, I think it is just like cyberspace.   Pick the people and the groups you want to engage with and you do the best you can to live the ethical principles by which you do your business.  It seems like the bar of expections is low and you are just going to have to step over it.. great chapter in the book!

If every broker was spending time with all the agents they are responsible for and talking about the CODE OF ETHICS they would operate within the direction of the Golden Rule.  The Realtor pledge and the pre amble of the code of ethics SAYS that is the way business is supposed to be done.. with the Golden Rule as the guide.   

I could go on and on but again that would be another blog within the blog!  Thank you for bringing this issue to the surface.  When things are not discussed they just get swept under the rug and nothing changes... identify the problem is the 1st step in the 12 step programs! 

Thanks for stopping by the Cosmic Cow Pie. 

Posted by Carra & Shae Riley, Helping people Transition at all ages! (Brokers Guild Cherry Creek Ltd) about 9 years ago

Jason, thank you. Some people up here take listings and do very little once they get them. Other people bust their butts to find common ground. The spectrum is pretty wide but I am noticing more and more agents making things unnecessarily difficult to start, maintain then conclude a transaction.

Anna, everything is negotiable. That's my position and I generally stick to it in a very flexible way. :-)

Carra, no anxiety because there is a lot of inventory. I tend to get pissed off depending upon how they come out their face or I simply move on and make it a point to stay away from people who waste my time. My job as a buyers broker is to get the home on terms acceptable to my client. I don't work for the seller and I don't work for free when I'm in that mode.

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) about 9 years ago

"Do you want to collect days on the market or do you want to close escrow?"  Great question! I think we should all ask this of our sellers when we take their listings, and several times during the listing period!

And regarding the buyer getting to choose the agent they want for representation, if it happens to be the buyer who's being flaky/inconsiderate, and not the agent's fault, I just wanted to add that although the buyer may choose to waste someone's time, then write a contract with a different agent, they may be able to choose the agent, but they don't get to choose who gets the commission. They don't get to decide who is the procuring cause.   ;-)

Posted by Lisa Hill, Daytona Beach Real Estate (Florida Property Experts) about 9 years ago

Lisa, so true. They certainly don't get to decide who is procuring cause but sometimes procuring cause is neither the listing or selling agent. Fact of the matter is I've seen church folk get together with church folk, work out the sale over chicken and biscuts and then call people to write that puppy up (ROTFLMAO). My mother is a perfect example of this. She caused several homes to be sold simply by picking up the phone and stating to a relative, "you ought to buy this house before someone else gets it." My Godmother brought a 3.9 property sight unseen because my Mom called NY and said the property next door is for sale. Called my cousin in San Diego and said, "you can buy the house across the street from me..." Damn if the check wasn't put in the mail (LMAO). Hell, I'm on my third land deal now because my mother liked the trees.

I can't wait to get my broker's lic in SC. I am soooo hiring my mother. Seriously... ;-)

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) about 9 years ago

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