Enshittification: The gradual deterioration of a service or product brought about by a reduction in the quality of service provided.
~ Macquarie Dictionary, word of the year 2024.
This month we are going to skip Nick’s Numbers and the story because there is a new law (AB 2992) which affects buyers and sellers of commercial real estate. Most of us read the news last year about the National Association of Realtors settling a lawsuit that now sellers of houses no longer set the commission rate for the buyer’s agent. Now buyer’s agents need to negotiate their compensation with the seller or arrange the buyer to pay them. It’s sort of a six or a half dozen proposition to me.
But…the California Legislature recently passed Assembly Bill (AB) 2992, which was signed by the Governor on September 24, 2024, and affects commercial property for sale! Effective January 1, 2025, all buyers’ agents in California will be required to sign a buyer-broker representation agreement with their buyer clients as soon as practicable, but no later than the execution of the buyers’ offer to purchase real property (So far it does not appear to apply to commercial leasing).
AB 2992 will require the agreement to include the buyers’ agent’s compensation, the services to be rendered, when compensation is due, and the date when the agreement shall expire, provided that the expiration date shall not exceed three months from the date it was executed. Once the buyer and buyers’ agent agree to compensation terms and sign the buyer-broker representation agreement, the buyers’ agent will know what services to provide, and the buyer will know how much they need to pay for those services. Although the buyer will be responsible for compensating their agent, the buyer has several options available to them.
- The buyer may compensate their agent out-of-pocket.
- The buyer also may request the seller to pay some or all of the compensation owed to the buyers’ agent as a seller’s concession of the purchase price, which the seller may accept or reject.
o If the seller accepts, then the buyer may be relieved of some or all of their financial obligation to the extent covered by the seller’s concession.
o If the seller rejects, then the buyer remains financially responsible for paying their agent if they proceed with the acquisition.
- If the out-of-pocket costs to pay their agent remain too great and the seller and buyer have not yet reached an agreement on the sales price and/or terms, the buyer may walk away from the subject property, proceed without representation, or approach the seller’s agent about possible dual agency representation.
While DRE is not charged with enforcing the terms of the class action lawsuit settlement, DRE will enforce compliance with the requirements added by AB 2992 and the Real Estate Law related to conduct, such as performance of fiduciary duties and appropriate representations.
So there! We will now have another form to fill out and add to our standard four pages of disclosure!
Finally…I thought it would be worth sharing with you the story of what a real estate broker/agent does to get a deal done.
What a Broker / Agent does
SO…YOU WANT TO BE A REAL ESTATE BROKER?
There is a lot of talk in the news about real estate agent commissions. They LOVE what they do, and they do it because they LOVE helping people but there is almost always a huge misconception on what they do and how they get paid. It’s not a secret so here you go…
The average FULL TIME Broker / Agent earnings last year were $31,900 @ 40+ hours a week. (Notice I wrote full time 40+ hours not 0-20 hours a week) which is well below the living wage.
As a Broker / Agent they do not get paid an hourly wage or salary and they only get paid if they sell or lease a property and it closes. They can only get paid by broker to broker. As an agent you could work with someone days, weeks, months, or years with no guarantee of a lease or sale ever.
Essentially, they wake up each day unemployed going on Job Interviews and they deal with constant rejection. They dedicate time away from family, use our time, gas, pay for babysitters, miss dinner and weekends, and rarely take vacations. They are on 24/7! You constantly need to be on, or you could miss an opportunity. Once they do close a deal, usually half goes to the other persons agent. From the remaining half, they have lots of upfront expenses that must be paid out before they even get paid:
- Broker Splits and Fees
- Office rent and utilities
- Association Fees
- NAR Fees
- Local Business License
- E&O Business Insurance
- Extended Auto Insurance
- Self-Employment Tax
- State Licensing Fees
- Advertising Fees
- Multiple listing Service Fees (CoStar / Loopnet, MLS ect..)
- Website Fees
- Assistant’s Salaries
- Showing partners
- Transaction coordinator
- Signs
- Photographers
- Videographers
- Office Supplies
- Business Cards
- Property Flyers
- Lockboxes
- Continued RE Education
- Legal Fees
- Gas
Income taxes are not taken out, so they must put that aside around 25-30%.
Don’t forget health insurance if you don’t have a spouse who provides it.
As a listing agent they have lots of tasks far more than just selling or leasing a property.
1. Prepare Listing Presentation for Sellers / Lessors
2. Research Sellers Property Tax Info
3. Research Comparable Sold / Leased Properties for Seller / Lessor
4. Determine Average Days on Market
5. Gather Info from Seller / Lessor about their property.
6. Meet With Seller / Lessor at their property.
7. Get To Know Their property.
8. Present Listing Presentation
9. Advise on Repairs and/or upgrades.
10. Provide Lessor/ Seller To-Do Checklist
11. Explain Current Market Conditions
12. Discuss Seller / Lessor Goals
13. Share Your Value Proposition
14. Explain Benefits of Your Brokerage
15. Present Your Marketing Options
16. Explain Video Marketing Strategies
17. Demonstrate 3D Tour Marketing
18. Explain Agency Relationships
19. Describe the Buyer/Lessee Pre-Screening Process
20. Create Internal File for Transaction
21. Get Listing Agreement & Disclosures Signed
22. Provide Sellers Disclosure Form to Sellers
23. Verify Interior Room Sizes
24. Obtain Current Mortgage Loan Info
25. Confirm Lot Size from County Tax Records
26. Investigate Any Unrecorded Property Easements
27. Establish Showing Instructions for Buyers / Tenants
28. Agree on Showing Times with Sellers / Lessor
29. Discuss Different Types of Buyer Financing
30. Explain Appraisal Process and Pitfalls
31. Verify Owners Association Fees
32. Obtain a Copy of Association Bylaws
33. Gather Transferable Warranties
34. Determine Need for Lead-Based Paint Disclosure
35. Verify Security System Ownership
36. Discuss Video Recording Devices & Showings
37. Determine Property Inclusions & Exclusions
38. Agree on Repairs to be Made Before Listing
39. Schedule Staging Consultation
40. Schedule Cleaners
41. Install Lockbox & Signs
42. Set-Up Photo/Video Shoot
43. Meet Photographer at Property
44. Prepare property For Photographer
45. Schedule Drone & 3D Tour Shoot
46. Get Seller / Lessor Approval of All Marketing Materials
47. Input Property Listing into Multiple Listing Services
48. Create Virtual Tour Page
49. Verify Listing Data on 3rd Party Websites
50. Have Listing Proofread
51. Create Property Flyer
52. Have Extra Keys Made for Lockbox
53. Set-Up Showings
54. Coordinate Showings
55. Gather Feedback After Each Showing
56. Keep track of Showing Activity
57. Update Listing on Multiple Listing Services as Needed
58. Schedule Update Calls with Seller
59. Prepare “Net Sheet” For Offers
60. Present All Offers to Seller / Lessor
61. Obtain Pre-Approval Letter from Buyer / Lessee Agent
62. Examine & Verify Buyer’s Qualifications
63. Examine & Verify Buyer’s Lender
64. Negotiate All Offers
65. Once Under Contract, Send to Title Company
66. Check Buyer’s Agent Has Received Copies
67. Change Property Status on services.
68. Deliver Copies of signed LOI and or offers.
69. Keep Track of Copies for Office File
70. Coordinate Inspections
71. Explain Buyer’s Lessee Inspection Objections to Sellers
72. Determine Seller/Lessee Inspection Resolution
73. Get All Repair Agreements in Writing
74. Refer Trustworthy Contractors to Seller / Lessor
75. Meet Appraiser at the Property
76. Negotiate Any Unsatisfactory Appraisals
77. Confirm Clear-to-Close.
78. Coordinate Closing Times & Location
79. Verify Title Company Has All Docs
80. Remind Seller / Lessor to Transfer Utilities
81. Make Sure All Parties Are Notified of Closing
82. Resolve Any Title Issues Before Closing
83. Receive and Carefully Review Closing Docs
84. Review Closing Figures with Seller
85. Confirm Repairs Have Been Made
86. Resolve Any Last-Minute Issues
87. Coordinate closing or full execution (lease)
88. Pick Up or order signs down & pick up lock box.
89. Change Status in Services to “Sold” or “Leased”
90. Close Out Seller’s File with Brokerage
As a buyers / lessee broker/agent they also have many tasks.
1. Schedule Time to Meet Buyers Lessee
2. Prepare Buyer / Lessee Guide & Presentation
3. Meet Buyer / Lessee and Discuss Their Goals.
4. Explain Agency Relationships
5. Discuss Different Types of Financing Options
6. Help Buyers Find a Mortgage Lender
7. Obtain Pre-Approval Letter from Their Lender
8. Explain What You Do for Buyer / Lessee as an Agent/Broker
9. Provide Overview of Current Market Conditions
10. Explain Your Company’s Value to Buyer/Tenant
11. Discuss Earnest Money Deposits
12. Explain Property Inspection Process
13. Educate Buyers / Lessee About Local Markets and Neighborhoods
14. Discuss Foreclosures & Short Sales and Unlawful detainee
15. Gather Needs & Wants in a property
16. Explain City or local jurisdiction permits and licenses
17. Explain Showings process
18. Learn All Buyer / Lessee Goals and Make A Plan
19. Create Internal File for Buyer / Lessee Records
20. Send Buyer / Lessee Properties Within Their Criteria
21. Start Showing Buyers / Lessee Properties That They Request
22. Schedule & Organize All Showings
23. Gather Showing Instructions for Each Listing
24. Send Showing Schedule to Buyers
25. Show Up Early and Prepare First Showing
26. Look for Possible Repair Issues While Showing
27. Gather Buyer / Lessee Feedback After Each Showing
28. Update Buyer / Lessee When New Properties Hit the Market
29. Share Knowledge & Insight About Properties
30. Guide Buyer / Lessee Through Their Emotional Journey
31. Listen & Learn from Buyer / Lessee at Each Showing
32. Keep Records of All Showings
33. Update Listing Agents with Buyer / Lessee Feedback
34. Discuss Owner’s Associations
35. Estimate Expected Utility Usage Costs
36. Confirm Water Source and Status
37. Discuss Transferable Warranties
38. Explain Property Appraisal Process
39. Discuss Multiple Offer Situations
40. Create Practice Offer / LOI To Help Buyer / Lessee Prepare
41. Provide Updated Market Data to Buyer / Lessee
42. Inform Buyer / Lessee of Their Showing Activity status
43. Update Buyer / Lessee on Any Price Drops
44. Discuss Market Data with Buyer / Lessee at Showings
45. Find the Right Property for Buyer / Lessee
46. Determine Property Inclusions & Exclusions
47. Prepare Sales Contract or Lease When Buyer / Lessee is Ready
48. Educate Buyer / Lessee on Sales Contract Options and Lease terminology
49. Determine Need for Lead-Based Paint Disclosure
50. Explain Warranty Options
51. Update Buyer / Lessee Pre-Approval Letter
52. Discuss Loan Objection Deadlines
53. Choose a Closing Date
54. Verify Listing Data Is Correct
55. Review Comps with Buyer / Lessee to Determine Value
56. Prepare & Submit Buyer / Lessee Offer to Listing Agent
57. Negotiate Buyer / Lessee Offer with Listing Agent
58. Execute A Sales Contract or Lease & Disclosures
59. Once Under Contract, Send to Title Company
60. Coordinate Earnest Money Drop Off
61. Deliver Copies to Mortgage Lender
62. Obtain Copy of Sellers Disclosure for Buyer / Lessee
63. Deliver Copies of Lease / Contract/Addendum to Buyer / Lessee
64. Obtain A Copy of Association Bylaws
65. Keep Track of Copies for Office File
66. Coordinate Inspections with Buyer / Lessee
67. Meet Inspector at The Property
68. Review Inspection with Buyer / Lessee
69. Negotiate Inspection Objections
70. Get All Agreed Upon Repair Items in Writing
71. Verify any Existing Lease Agreements
72. Check In With Lender To Verify Loan Status
73. Check on the Appraisal Date
74. Negotiate Any Unsatisfactory Appraisals
75. Coordinate Closing Times & Location
76. Make Sure All Documents Are Fully Signed
77. Verify Title Company Has Everything Needed
78. Remind Buyers to Schedule Utilities
79. Make Sure All Parties Are Notified of Closing Time
80. Solve Any Title Problems Before Closing
81. Receive and Review Closing Documents
82. Review Closing Figures with Buyers
83. Confirm Repairs Have Been Made by Sellers
84. Perform Final Walk-Through with Buyer / Lessee
85. Resolve Any Last-Minute Issues
86. Get ADA Documents Signed
87. Get lease fully executed
88. Warranty transfer Paperwork
89. Give Keys and Accessories to Buyer / Lessor
90. Close Out Buyer / Lessee File with Brokerage.
Whew…exhausting isn’t it!?!
