experts: real estate column Tuesday, March 16, 1999

WHO REALLY PAYS THE COMMISSION?

Interesting point of view in the January issue of REM by guest columnist Aaron Klassen in an article titled "Is it Agency or Brokerage?".

By Marty Douglas

Interesting point of view in the January issue of REM by guest columnist Aaron Klassen in an article titled "Is it Agency or Brokerage?". I mean, I'm sure there were many interesting points, but the one that got me thinking was a new slant on the old question of who really pays the commission. In case you were dozing, I'll rehash. If the market value of a property is $100,000, but the owner lists for $110,000 and a buyer just has to have that property because his karma will fit in the garage perfectly, then the buyer who pays $110,000 pays the commission.

But if the owner is moving to Toronto (leaving aside the nation's condolences for the moment) and has to buy a refrigerator crate when he gets there and so lists his home for $110,000 and the greater fool theory is not in play, his home won't sell. Finally, a buyer offers $90,000 and since it's been six months with no offers and fridge crates on Yonge Street are spiraling upwards, a deal is made at $ 90,000. The seller pays the commission. Somewhere in between is the nirvana of both parties paying the commission, or to use words to warm the cockles of a buyer broker, the commission flows from the transaction, not either party.

So what? So nothing. I just thought it was a fresh look at an old red herring and would turn into a much longer column. But it didn't. So now I've lured you in to the parlor, you might as well slip out of that straight jacket and get comfy for a few more paragraphs.

By the way, Mr. Klassen's title deserves a final comment. Agency or brokerage? The fast answer is the question is a redundant red herring. A broker is an entity that gets paid a fee for acting as an agent. Despite repeated attempts across North America to reshape the old duck called agency, by concocting imaginative terms like 'transaction broker' or 'facilitator', the quack still sounds like some breed of agent. Since the true test is only likely to be found in court and, in my jurisdiction at least, fewer than half of one percent of transactions result in claims, the hollow comfort afforded by pseudonyms continues.

So to get more material for this column, in January, I went to the Western Connection Conference, perhaps the best networking and educational real estate exchange in Canada. Four provinces, plenty of Ontario jokes, good beef. But there's a downside. I'm the albatross of modern travel. See me coming and travel plans are altered like light through a prism.

It all started innocently enough - "Your bags are tagged right through to Calgary." A few hours later, proving once again that bad things happen to good people, I'm searching for my bag on the empty belt in Calgary International . "What kind of bag is missing?" the lost bag person inquired. "Well it's a maroon leather Samsonite flight bag given to me by my wife in memory of . . ." My dissertation was interrupted as she hollered over her shoulder, "Hey Jerry, it's a red 22! See if it fell off the belt." "Hey," I say, "if any luggage fell off the belt, I'll take it, especially if it's got men's clothes in it. But I can wear silk in a pinch. With my eyes, I prefer blue."

Bagless in Banff. In a couple of hours I was narrating my tale of woe to the desk clerk at the Banff Springs. "We'll take your mind off your luggage with a nice room, sir. How about a two level with a spiral staircase to the master bedroom and an in-room Jacuzzi?" "Oh if I must." I whimpered. She disappeared behind the counter only to return with an abashed look to say, "I'm sorry, those people aren't checking out after all. We'll fix you up in something with a cot, a large sink and a view of the pool."

I did get an emergency kit from the front desk - deodorant, toothbrush and paste, razor, shaving cream, and mouth wash. Yahoo! After I checked the prices in the mini-bar, I turned out the lights, set fire to the deodorant, ate the toothpaste, drank the after shave, covered myself in the shaving cream and . . . . My bags arrived before I could hurt myself.

You think column writing is easy?




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Recent Articles by this columnist:

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