Brian E. Adams is a real estate agent with StarPointe Realty
Fort Hood, Texas. Follow him on Facebook or YouTube.
I define “commissionectomy” as the following:
An agent’s voluntary but begrudged and unforeseen surrender of all or part of an earned commission to compensate a client for a perceived mistake, whether or not it was the agent’s mistake.
Sometimes, it might be my mistake — like when we closed on the house without verifying that the agreed HVAC servicing had been completed or getting invoices (Doh!). After funding, when we learned it hadn’t been serviced,
I ponied up for the cost as it was my fault for not being more diligent. (You’d better believe I updated my transaction template so it wouldn’t happen again).
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Sometimes, it might not be my mistake — like when the seller shorted my buyer on the prorated rents on a rental. It was a relatively small amount and we could have taken it further through legal means, but I wanted my buyer to have as smooth a transaction as possible, so I forked over the difference.
I’ve paid my fair share of money out of pocket to fix a mistake or make a client happy, but as I get wiser and more experienced, I’m getting closer to lowering that amount to $0.
Here’s what I’ve learned.
Transaction management software
This is number one on the list because it’s the most crucial component of an airtight real estate transaction. I’ve used Reesio and Realvolve, both of which I highly believe in and recommend.
Other programs to look into are Folio and monday.com. (Monday.com is not real estate-specific, but I was wowed by how simple and usable it is for basic project templates and tasks.)
Maybe your transaction management software (TMS) is part of your customer relationship management (CRM) — like Realvolve — or it is a separate software product — like Reesio. Whatever works for you, use it!
With my TMS, I can start a new transaction with each executed contract and apply a template that reminds me of everything I need to pay attention to.
Did I get copies of the leases? Is the option period expiration coming up? Do I need to check on whether the survey has been ordered?
When you have multiple deals at once, it is impossible to keep track in your mind. One slip could mean $100s, $1000s, or more.
Prepare for the worst.
When estimating the buyer’s cash at closing or the seller’s net, be very conservative!
For example, show the worst-case scenario on your seller’s estimated net sheet. I know the temptation is to be optimistic during listing presentations.
Your competition may be painting a much rosier picture than you, but it is so much better when you get the final closing disclosure (CD) and can show your sellers that they are getting more than your original estimate.
It also gives you some wiggle room if an expense comes in higher than expected or a new item arises during the transaction.
For example, I include a standard $1200 for “buyer-required repairs” on my initial seller’s estimated net sheet, just because repair concessions are common in my market and because I want my sellers’ net to be on the safer side. We aren’t offering $1200 in repairs or agreeing to anything. I just want that cushion on the numbers.
Don’t sign for stuff.
I remember an email from the buyer’s agent on a deal I was listing. “Here’s the new survey.”
My response: “Hello [Agent]. My apologies. I didn’t realize you had ordered one. Was there an issue with the existing survey we sent to everyone at the start of the transaction?”
Oops. That poor agent ended up paying $550 for a survey.
When I started in real estate, I would order surveys in my own name. I was lucky not to get burned, but I now know better!
If there is no existing survey, I have my seller sign the survey order form while they sign the rest of the listing agreement. If my buyer pays for it, I make it clear to them when we order it. No takesies backsies.
That way, it is their survey, not mine. If a deal goes south, I’m not the one caught holding the bag.
That is true of anything else that involves money you do not intend to pay for yourself—utilities, staging, repairs, lawn care. Have your buyers and sellers sign and order everything you are not willing to risk paying for yourself.
Communicate
Closely related to the scenario above, it is essential to communicate!
Continuously keep the other agent informed about what you are doing, when repairs have been completed, and when you expect to close. Loop the title company into the communication so everyone is on the same page.
That is why I ultimately chose Realvolve as my CRM.
It has letter templates that I can draft when I complete tasks, and it automatically messages other parties in the transaction when we achieve relevant milestones: “Hey, title company and listing agent—I just ordered the pest inspection. You should be getting it from Mantis Pest Control soon.”
In Realvolve, I can make a template with all that wording minus the title company, listing agent, and pest control name, which can be filled in automatically with merge tags.
Communication is a good business practice in general. However, it can be more than just creating smooth transactions and happy customers. Communicating can save you money.
Know When to “Shut up”
So, the opposite of communicating is to be quiet. Don’t make promises you can’t keep. “Don’t worry about that — the seller will pay for it,” is an easy line. Hopefully, it’s true, or you’ll be paying for it.
My biggest personal “commissionectomy” fell into this category. It was a VA foreclosure, and I advised my buyers that the VA would cover closing costs if we added them to the price. “Don’t worry about it!”
Well, I was right. The VA did pay closing costs if we added it to the price, but they limited it to 3% of the purchase price. It’s a VA rule.
That 3 % was $1800 short of the total closing costs, a difference my buyers weren’t counting on per my erroneous advice. My commission check was $1800 short (but my buyers were happy!).
Avoid escrowing repairs
I once loved escrowing repairs. Especially on the seller side. Why hold up closing because of a roofer’s schedule? Well, I’m not so sure anymore. Escrowing repairs leaves the buyer at the mercy of a third-party vendor.
I was the listing agent on a deal where the A/C needed a new coil. The part was two to four weeks from delivery, so we escrowed the estimated amount and closed.
Two months later (in hot, hot, hot Texas), the part still hadn’t shown up, and it became a concern. The only workaround was to replace the entire inside unit, which was two to three times the amount the seller escrowed from closing.
That is not necessarily an agent’s fault, but many “commissionectomies” are about making clients happy—not fixing agent mistakes. I don’t want that to happen to my client, and I try to avoid repair escrows whenever possible.
Get the seller’s sign-off on your advertising.
In Texas, we have a form called the “Seller’s Authorization to Release and Advertise Certain Information.” It’s designed to get permission to disclose why the seller is selling and any other advertising terms you might use when marketing the property (e.g., all offers accepted, priced to sell, some TLC, etc.).
If you haven’t already, I recommend taking it up a notch and ensuring your seller sees and signs off on everything. That means the photos, the agent multiple listing service (MLS) display, and any fliers, videos, or promotional materials you create for the property.
When I say “sign off on,” I mean it literally. DocuSign that stuff over! I have them initial the MLS page, photos pages, reason for selling, and public remarks. It is part of the listing agreement.
In particular, emphasize exclusions so that you are not advertising something the seller takes with them, like the fridge. The seller can also double-check your work, like catching language about a garage door opener when there isn’t one.
As the agent, you are responsible for what’s on the MLS. If you advertise something the seller isn’t selling, you just bought it!
Review everything before you sign or send
I once paid for a home warranty. My seller had agreed to pay for it, but the title company had left it off the CD, and I didn’t catch it at closing. It was seen several weeks later, but my seller was long gone.
I was embarrassed. I should have caught it. And I didn’t want to send the email saying they had to return about $550 of their money. So I made the problem go away.
Closely reviewing the CD is critical for a closing.
Make sure that the task is on your transaction list. Open the contract while you review it to ensure that all the numbers match the original contract. Get a second pair of eyes on it, and talk to the buyer after receiving the CD three days before closing to ensure they have no questions.
Another issue is sending incorrectly filled-out forms.
Maybe you are working with a customer who has made several offers, and none have stuck yet. In zipForm, you copy the previous offers into the new one so that most information is filled in. Then, you change the offer price, seller, and legal description.
Make sure you have made all those changes before you send! Having the wrong legal description in an offer, forgetting to update non-realty items to include the spa, or other missteps will make you look foolish at a minimum, and maybe cost you.
Have all documents at your disposal
There are many promulgated forms at our disposal that I think many agents, myself included, forget to use. Real estate is about more than the buyer’s rep, listing agreement, contract, and brokerage services disclosure.
For example, TAR has “Information about Mineral Rights,” handy for both buyers and sellers. Mineral rights aren’t a big deal where I do business, but they are an added protection that I include in my representation agreement and listing agreement.
Keep yourself updated on all the latest forms.
Even more important, one of your ethical obligations is to be competent. If your state’s real estate commission or industry association promulgates forms for your use, even if just ancillary, you are responsible for using those forms when available and applicable.
I’m sure a lawyer could argue that it is relevant on every transaction that a buyer or seller be familiar with how mineral rights are handled.
Budget for It
So this doesn’t count as avoiding a “commissionectomy,” but there are times when, in spite of all your efforts, it might make sense to contribute some fraction of your commission to getting the deal done or making a customer happy.
For example, at a closing with a builder, my buyer objected to a $250 HOA fee he thought the builder was paying.
In spite of having reviewed the closing disclosure beforehand and the contract clearly showing that the builder was right to charge the buyer the $250, I paid the $250.
My buyer was great to work with. She bought an amazing home, and it was a small price to pay to preserve her peace of mind and a good Google My Business review.
Conclusion
There’s only so much an agent can do. “Commissionectomies” are part of the job. Still, by implementing these steps, you will hopefully become a better agent, create happier customers and manage to keep more of your money at closing.
Copywrite © August, 2018 Daniel Dobbs MHM Mortgage /// All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed “Attention: Daniel Dobbs, Author- VP-Broker Mutual Home Mortgage 265 S. Randolph #120 Brea, Ca. 92821 Cell: 949 250-3981 Dandobbs6@gmail.com NMLS #307631 BRE #00986886