Sunday, April 10, 2011
Money for nothing
A few weeks ago my friend suggested to his friends who are moving to Cocoa Beach that they contact me to help them with their search for a property. A couple of days later I got an email from a Realtor in another Florida city asking if I would be interested in paying her a referral if she sent her clients my way. She mentioned as an aside that I had already been recommended to her clients by my friend. I responded that I would be happy to help her clients and asked for details on what they were looking for, what involvement she intended to have in the process and what sort of cut was she hoping for. No response and three days later a couple shows up at my office unannounced ready to look at houses. They seemed confused that I wasn't present with a list of properties for them to see. They thought their agent had actually done something to assist. I'm not sure what she told them about how the process works or if she actually told them anything. She is likely hoping for a 15 to 25% slice of my eventual commission check just for inserting herself into the process and doing nothing but screwing up first contact. It has now been weeks and the agent has not followed up and I haven't seen her "clients" again.
This whole referral thing is common in the real estate world. In the most innocuous referral situation your friend or relative who has a real estate license in another city hears you mention that you plan to buy a property in Cocoa Beach. She tells you to let her find you a good agent to help you in Cocoa Beach. She may actually be intending to look out for your best interest by reviewing offers and contracts, offering advice, etc. History tells me, however, that her definition of "good agent" is likely to be the agent who is willing to pay her the biggest cut, not necessarily the agent who will do the best job. The other end of the referral spectrum includes situations where an agent is blindsided by a previously unmentioned relative expecting a cut after the property search has been concluded and a contract accepted. The smelly end also includes many of the big franchise real estate companies who parcel out website inquiries and other sources of leads to their agents after slicing off a healthy chunk of the agent's pay. I have seen situations where more than 75% of the commission paid was siphoned off before getting to the actual buyer's agent, the bulk having gone to the money-sucking machines above her.
This post is not intended to bash the referral process, just to inform readers of the abuses of it like those mentioned above. I have good relationships with other agents who send me referrals and have accepted dozens of referrals over the years that were completely fair and mutually beneficial. I have declined just as many because they were impractical or unfair. The first couple mentioned probably thought their agent would be helping out in their search here. Surprise.
Conclusion: Aunt Hilda, loving though she may be, may not be doing you a favor inserting herself into your search for a property in a distant city. Will including her benefit you? Knowledge is power.
"When the facts change, I change my mind. What do you do sir?"
_________ John Maynard Keynes