Shouldn’t Sellers Invoice Listing Agents?

I suppose it’s pretty rare that a seller actually hands their listing agent an invoice during the course of a listing, but it shouldn’t be. Based on what I see, the vast majority of listing agents should be billed by the seller, same as they would be by any other third party vendor. The fact that it doesn’t happen simply means most sellers don’t understand what is really going on during the course of a listing and, I’d wager, neither do most agents – or if they do they certainly haven’t informed their client.

Here’s a question every seller should ask their listing agent: “Why are you going to put up a For Sale sign in my front yard?” Standard answer: “A sign is just one part of my ‘Handy-Dandy, Super-Duper, 24 Point, 7 Step, Maximum Sales Price Marketing Plan’ or HDSD-24/7-MSM Plan… which I offer to all my clients completely free of charge.” (The standard answer is impressive, wouldn’t you agree? We agents are very creative indeed.). Of course, given the use of internet these days, I suggest to you, dear reader, that most For Sale signs are more directional than informational, but let’s not split hairs. Okay, so the sign is a part of the marketing plan. Next question by an informed home seller: “If that sign is part of your plan to market my house, why doesn’t it mention anything about my actual, you know… house?”

This is old Greg Swann stuff, but I’m rehashing because it needs to be taken further. There are actually two correct reasons for placing a sign in someone’s front yard:

  1. Sell the actual home. (The primary objective from a fiduciary standpoint.)
  2. Attract future home sellers from the neighborhood. (Secondary objective, but a legitimate expectation of work well done.)

So why is it then, that the vast majority of signs fail both of these objectives? Because they are designed with a different purpose altogether; they are designed to advertise the brokerage (hence the uniform colors, logos, big brokerage name and phone number). To a smaller degree, they are also designed to advertise a brokerage’s presence in a neighborhood (hence the requirement that most agents not deviate from the standard issue signs). Wait a minute, I thought we were hired to sell the client’s home; did we also contract with them for advertising and marketing allowances? Put another way: next question from informed seller: “Do you expect me to allow a company (even a one-man real estate company) to erect an advertising billboard on my property without charging them a fee?”

Yes, a fee. If we are going to advertise our business on someone’s property, we should expect to pay them for use of their property. And please don’t insult anyone’s intelligence by suggesting the contract signed by the sellers gave us permission to do this. We have a fiduciary obligation with our client. The fact that we have not explained that we are going to erect a small advertising sign on their front yard – a sign for which they would be paid were it any other business – is a breach of that obligation.

(Note: we see this played out in the home remodeling world as well. Signs in the window or yard. But these signs are, generally speaking, negotiated into the contract for what they are: advertising.  Whether or not the homeowner is smart enough to ask for a discount or fee does not impact here because general contractors do not engage their customers in a fiduciary relationship.)

So, what should an agent do? For my small little band of rebel agents, the answer is easy. First, we explain what’s actually happening. Then, we can either offer to pay our client for the right to advertise on their property, or we can create a sign that satisfies its two stated purposes. We find it cheaper and more appropriate to actually do our job and create a custom sign. For many agents, however, and many reading this article right now, that is not an option; you are required to use the sign the broker wants you to use, rather than a sign that actually helps the client. That’s alright; once the seller understands what’s happening and passes along an invoice, maybe you can bill it to your broker…

Here’s a second question every seller should ask their listing agent: “Why are you going to hold my house Open this weekend?” Standard answer: “To attract buyers.” Yes well, that is an honest answer, isn’t it? But it’s more than a bit misleading too. Statistically speaking, Open Houses don’t sell homes.  According to NAR, when asked, less than 1% of eventual homebuyers first found their home through an Open House. But then, that’s sort of the point, isn’t it: to meet new buyers who, while not buying the house we’ve held open, will probably buy something. Wait a minute, I thought we were hired to sell the client’s home; did we also contract with them for lead generation? Put another way: next question from informed seller: “Do you expect me to spend time cleaning and prepping my house, then spend more time and money keeping my family and I busy all afternoon while you use my home to build your business, and not charge you a fee?”

Yes, a fee. This is no different than the sign business. If we know that the primary (and secondary and even tertiary) purpose of holding an Open House is to meet new buyers who, more than 99 times out of 100, are not going to buy our client’s home, then we have a fiduciary obligation to inform them. Did they think we were actually trying to sell their home rather than increase our client base? Do they have any idea we are using their house as bait? Do they realize they are, in fact, acting as a third party vendor at that point and entitled to the same fee? If they don’t… who’s not doing their fiduciary job?

Again, my little band tries very hard at the beginning of the listing to disabuse the seller of various beliefs and chief among them is their misunderstanding of Open Houses. We will certainly hold one (ONE) if they request it. But if we request it - and there are properties where we are definitely interested in attracting similar property buyers – the client should expect payment for their time and money. Wouldn’t you?

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