Entry by Lester Langdon

States with Minimum Service Standards


There are five states which have laws regarding “Minimum Service Standards”

Meaning that If I sign a listing agreement, I have a minimum fiduciary responsibility

This was passed because some brokers listed a property on MLS for $500 and did nothing else.

Brokers have more responsibility to the seller

If I sign my brokerage name to a listing agreement, then more responsibility means more liability and more exposure, therefore higher fees and more tasks.

Hopefully new ACREs know if they are in a “Minimum Services” state

In Texas, I have met some agents that are Uncertain and do not know to their responsibility in "Minimum service" states.

The issue remains of working on contingency when offering discount rate listing services or non-contingency (agents get money upfront).

I think that the discount listing services for $500 are hoping to pick up a buyer at full premium high commissions on contingency, to make the big score with buyer agency on contingency premium high commissions.

I have decided to be very careful when choosing contingency clients

And with non-contingency, I offer to reduced listing by $4 for each $1 that I get up front when agreement is signed (whether seller or buyer)

(to a maximum reduction of 50% of listing broker commission)

Recently listed a property which I expect to sell for $400,000 and normal contingency commissions for broker side would be $12,000

I reduced the listing commission to 4.5% and the seller gave me $1,200 up front upon signing listing agreement

I will give buyer broker 2.5% and will keep 2% for listing broker

Yes, I may be reducing my commissions by 33% or 50%, but I am getting paid by all 100% of my clients and seldom wasting time, instead of getting paid by 25% of my clients when I work on contingency.

Therefore I am making money on 4 of 4 clients instead of 1 of 4 clients, therefore my commissions income doubles when I reduce my commission rate 50% but work with Non-contingency and get some money up front.  The clients have "skin in the game" and are more committed. They are more apt to listen to you. I am finding that I am speaking with more authority and not sheepishly because I am not worried about sellers going to other brokers when the listing expires.

I feels good to get rid of clients who will not pay me on contingency and gives me more time to find clients to believe like I do.



Great points Lester.

As I said in my book, The End of 6%, minimum service is not, IMHO, "restraint of trade". Rather, it discourages outfits that charge for 20 minutes of typing with nothing else that the uninformed seller thinks will sell their home.

We ACREs have a great opportunity to provide quality, fiduciary level service while giving the consumer choices in how they pay. I like Lester's practice of reducing the percentage based on how much up-front the consumer pays. Our industry would be well benefited by having the consumer have some "skin in the game".

Just curious, Lester, which are the 5 states with Minimum Service Standards laws?

Quite frankly, I have no idea if TN has passed a minimum service standards law (at least I haven't seen, read or heard about it since I got my license in March, nor was any law discussed while I was in classes). That said, there are standards in TN that Realtor's must adhere to, particularly ones fiduciary duty to their client (not so much to a customer).

Which states have enacted minimum service laws?

Twelve states and the District of Columbia require consumers to purchase more services than they may want, with no option to waive the extra services. Those states are:

An additional eight states have minimum service requirements but allow consumers to waive those extra services, preserving choice. Those states are Delaware, Florida, Nevada, New Mexico, Ohio, Pennsylvania, Tennessee, and Wisconsin.

Okay, NOW I know what you're talking about. Honestly, it is frowned upon to do only the minimum services, at least *I* was taught that unless specifically told NO by the client (in writing) that the minimum is not sufficient. (At least in my corner of TN)

Interesting ... Virginia has a very reasonable approach:

If less than fiull service (whatever that may mean) then the agent (Broker) must define in writing which services will be performed and those that will not be performed for the price of the engagement and have the client sign acknowledging same.

My Activity Based Pricing (SmartPlan™) approach is a perfect tool to conform with this requirement.

Bonnie may be correct, I may have understated the number of "minimum service states"

Here is a link to the Dept of Justice website which has a map of those states



IMHO, the fight should be taken to the consumers in those states that force them to overbuy services and to take away their freedoms as consumers. 

There is an agent in my area who is listing houses for free on the list side, offering 3% to the selling agent if the seller buys their next house with him.  I am sure when he lists the house with this strategy he is also getting them to sign a buyers agreement.  He also advertises his services and outlines this listing arrangement on the local news, community spotlite segment at least once a month.  It is an interesting proposition and the agent has quite a few listings.

John I don't get it.  Even if he serves as their buyer's agent, why would he work for FREE to sell their home.  I don't know about anybody else, but if I work to sell their home I'd like to get paid.  And paid again when I work to find them a home.  That's ludicrous o me.

The agent who works listings for free is the ultimate contingent fee agent. If the owner then decides to move to another city or to rent, then the agent makes nothing, maybe he is hoping to work with buyers to get the 3% on his listed house or to find other buyers if they want a different house. Again, his is working on contingency with those buyers. This is a marketing strategy to find buyer clients to work on contingency.

That's possible Lester and maybe that's the part of the story that John didn't reveal or possible does not know about.  Otherwise, It's a bad deal to me.

In Texas, My understanding of the law is that you must provide minimum service (that is minimum fiduciary duty) to a Seller, Only If you use an Exclusive Right To Sell listing.

If you use Exclusive Agency then you can stipulate the terms of the Agreement.  We use this very effectively when it comes to working with Builders that want to use our networking and marketing ability but have their own contracts and sales reps to write those contracts.

I offer 3 different packages to builders and then have a separate package for home Sellers.  For my sellers I do not offer them the opportunity to use exclusive agency agreements and my minimum package that I offer sellers accounts for my requirements under the Law.  I work really hard to make sure that you are getting great council if you need it. 

Hi Bradley

Interesting post - are you using the TAR 1403 for builders?  You mentioned that you have 3 packages available. Could you elaborate on that. We have not done anything simialr in my office and I am very curious.



This page contains a single entry by Lester Langdon published on November 1, 2011 4:29 PM.

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