Commission Rage, Commission Love

Real Estate Justice? ... "If agents don’t like it, then it must be better for consumers.”

This quote is from a client of (residential) discounter Redfin, complaining about the difficulties experienced looking at other brokers' listings. (New York Times, Sep 3, 2006, "The Last Stand of the 6-Percenters?")

Hmm. Traditional commissions may not necessarily align the interests of buyers, sellers and brokers?

That's why Redfin and others, including Zip Realty and BuySideInc.com, rebate commissions to buyers and sellers.

Now consider an alternative to commission rebates. You quote a buyer or a seller a flat fee. If the client is unhappy with your work, he pays you up to 50% less than your quote. If your client is happy, he pays up to 35% more. Would you do it?

This is the fee structure offered by The Trium Group, a strategy and leadership consulting firm in San Francisco. (Wall Street Journal, Aug 21, 2006, "Consultant Lets Clients Use 'Gut' to Set Final Fee")

Wow, that sounds like a risky business. But it reminds me of a (difficult) client that I had about twenty years ago.

I estimated the market value of his 250-unit apartment complex and quoted him a fee. He wondered why I would quote a fee larger than 1% for selling "at the market." Why not an escalating fee for a sale price above "market"?

We finally compromised on a fixed fee, and a condo converter agreed to pay an "over market" price. But the deal blew up when the city refused to approve a conversion, and I lost the listing. Oops.

So what's your best or worst (or funniest!) commission experience with a client?

-- Peter Pike