Screwed: Real Estate Brokers Tell All

Success means being able to choose who you work with.

By John E. McNellis, Principal at McNellis Partners, for The Registry:

“Dear John, I think you should write about how everyone is a stand-up guy until money’s on the table. Over the past decade, I’ve been screwed by countless so-called stand-up guys. I’m talking about both other brokers and principals. Disappointed Broker.”

Dear Dis, I shared your woe with some of the most reputable brokers I know, asking them whether their experiences were similar, whether screwing with clothes on was rampant these days and what, if anything, they were doing about it.

One veteran replied:

“I use a belt, suspenders, duct tape, Velcro and condom approach with principals I’ve never worked with before. I’ll have the principal sign a commission agreement, listing agreement or include the fee in the purchase contract. My red-alert buzzes when a principal suggests my commission not be included in the contract. My radar is now far more acute with other brokers: I’ve had my offers shopped, had my counterpart fail to disclose I wasn’t getting half of the brokerage fee, had agents sign my CA agreement only to immediately call my client directly to solicit business…As long as fees are being paid, some jackass will rationalize screwing someone over.”

This old friend also reminded me of a call I had received years ago from a young agent one Monday morning in which he crowed about his exhaustion from writing offers all weekend. I asked him how many.

“Oh, about 25,” he said.

“No way. How could you possibly write 25 offers? You and your clients can’t have seen all those properties,” I replied.

“Dude, my clients haven’t even heard of these deals yet, I just put their names in the offer, and if I get a seller to bite, I let the client know we’ve got something going.”

Although I told him that his was probably the most unethical practice I’d ever heard of and that I would never take another call from him (I haven’t), I would wager this particular agent still sees nothing wrong with phishing for deals.

Another wrote:

“I only had one instance where a client skipped on a commission covered by a listing agreement. He tried to sell a property before paying my leasing commissions. After finding out, I gave him fair warning (he replied “f-off”) and then filed a lien on his property. Because he needed to remove the lien in order to close, he paid me and then immediately followed up with a voice message calling me every name in the book.

“I was screwed a couple other times when I trusted someone without a listing agreement, investing a lot of front-end work only to have the principal decide to finish the lease or sell the property himself. My thoughts on those were ‘shame on me’ and ‘lessons learned’…There are a few bad actors (and now their sons) whose names consistently come up. The sad thing is that brokers continually try for ‘fresh starts’ with these guys, hoping things will be different this time, or that maybe these guys are just misunderstood. But it always ends the same. Snakes are snakes.”

And so they are. A third wrote:

“Fewer than 10 percent of my developers have attempted to completely jack me, but that increases to about 25 percent when I throw in the guys who try to chisel on my commission.”

And finally from several younger brokers:

“I’ve had a few bad experiences with both principals and other agents that either tried to cut me out of deals or change verbal agreements.

“The bad experiences I’ve had have been with either clients I didn’t know or that had a short-term single transaction outlook. My goal is to put myself in the position of being able to choose my clients.”

And this:

“I haven’t seen it get worse or better, it’s stayed constant for me. I’ve closed a lot of deals on a handshake and choose to do business with people that operate the same way. This could change, but I’ve only had positive experiences so far. I can usually tell who will be stand-up and who won’t.”

“I will work on a handshake basis with almost anyone. But if you screw me once, we’re done. As I age, I drop clients that I have to “watch out for”…On the brighter side, I will share that 40-50 percent of my income comes from “handshake” type relationships and guys doing the right thing.”

A theme emerges from these comments: Business is the polar opposite of a high school dance — you can always find someone to screw you. While there are many definitions of success, most are too vague — or too precise (e.g. $200,000 a year) — to be of any use.

Perhaps the best is among the simplest: Success means being able to choose with whom you work. And greater success means choosing wisely. By John E. McNellis, author of Making It in Real Estate: Starting Out as a Developer. The article was first published on The Registry.

The CEO of WeWork is selling that $20 billion valuation to a lot of smart, rich guys. But WeWork’s entities are known as SPE’s (“Screwing Probably Expected”), and landlords will be the first to go down. Read…  Does WeWork at All?

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  43 comments for “Screwed: Real Estate Brokers Tell All

  1. William Smith says:

    When I read “brokers” I immediately thought of stock brokers and the way they screw their clients: “front running” etc (maybe the subject of another item). Seems all sorts of “brokers” are at it. If they are doing this in business, their personal life must also be a sea of turmoil. It must take an awful lot of effort trying to think up new swindles, not to mention constantly trying to avoid everyone one has ever defrauded through a whole career. In an instant, it can all go due to a sudden medical emergency or accident. It is quite possible for *anyone* to suddenly end up in intensive care, especially as one ages. Stress of constantly looking over one’s shoulder is an added medical risk factor. Then the realization of a completely wasted life on the constant treadmill of Mammon will top the final tragedy off (like a cherry). Still, in the West, the dollar is god and “the end justifies the means.”

    • raxadian says:

      Stock brokers screwing up customers is like the sky being blue, is expected to be true.

      That having being said, it seems they are always gonna be people who thinks that just because they can get away with it without jail time it means they should keep doing it.

      When it comes to money never give second chances when is people who screwed you.

    • Don says:

      As a 20 year former stock broker in NYC, I immediately thought that was what the article was going to be about!

  2. Justme says:

    What kind of broker and what kind of business are we talking about here? I get the feeling I’m not the only one that did not understand half of what is said in this article, and missing context does is not helping.

    • John Taylor says:

      Real estate brokers. They do a lot of up-front work and get paid only when a deal is closed.
      On the sell side you list someone’s house, stage it, set up open houses and show people around, find a buyer over a period of months, and then have the homeowner sidestep you to do the paperwork themselves or have a friend do it.
      End result, the broker does months of work which is supposed to lead to a commission of $15,000 or so only to have the deal snatched by someone who does a day’s worth of paperwork and gets all or part of that money.
      For the broker doing all the work it can be difficult because they don’t have regular incomes, so it means they did a lot of unpaid labor, they lose out on their work expenses (gas, staging furniture, cleaning crews, brochures, etc), and they still have to come up with the money to pay rent and bills.

      • Rob says:

        Dont US brokers charge like 6% or something absurd like that?

        • Yeah, that’s the problem right there. 6% of a $1 million property is $60,000. In the age of the internet, why does the real estate business have to operate on a % commission basis? Real Estate brokers don’t sell properties, they sell access to information. The NAR vociferously defends it’s MLS database(s). The disinter-mediation of the real estate business can’t come soon enough.

      • Frederick says:

        Yeah sure Whatever you say but in my opinion brokers are mostly thieves and little more beneficial to society than investment bankers Hopefully we will be able to replace all of them with robots soon They will NOT be missed

        • juanfo says:

          Like everything they are not all bad. The company I work for “comercial real-estate” has several brokers that have helped us out of some very complicated properties.

      • robt says:

        Ha, I can remember doing weeks or even months of prep work and hand-holding with the client who promised me the listing only to drive by and suddenly see someone else’s sign on the lawn. The someone-elses usually get the listing by listing at the higher, often unrealistic, price that the seller thinks they want and ask for reductions later.
        There are two kinds of RE salespeople, listing and selling, and in a hot market, or in any market where a salesperson has a long and successful career, a combination of the both. The ‘both’ are few and far between. The old rule in any sales commission business is that 10 to 20% of the people make 80 to 90% of the money.
        Otherwise, the selling salesman sells other salespeoples’ listings on MLS, the listing specialist (the hardest job is getting listings) has other people sell his listings. Both make half the commission, but volume matters.
        It’s a tough business except in super-hot markets, but even in a hot market the business is flooded with eager newcomers and part timers, an important source of training and licence fees (but that’s a whole other business too), who quickly fade away when the market approaches normality.
        When I was in the business (not for that long!), there were 5,000 sales people in our area, now there are 20,000 …

        • d says:

          When Markets crash, or correct, is when the men get sorted from the boys.

          As suddenly stock no longer sells itself, which is almost what happens in an appreciating market.

      • Begbie says:

        Ya, the house across the street just sold after 1 hr on the market and multiple, above ask offers. The Real Estate Professional, aka Tennis Mom/Used House Salesman didn’t even have time to use her mad skills (tying some balloons to the mailbox) before the place went U/C

        The government has created a bubble in real estate-Education-etc.etc. with easy money and the low hanging fruit amongst us is taking full advantage

      • Jon says:

        With the opening of knowledge base and all the being being open and free I don’t really see a lot of value for real estate broker except for big deals

        In CA.. you end up paying 5 percent to brokers and this is 50k for a million dollar home

        Too much to pay..for few hours of work

    • Wolf Richter says:

      Real estate. You’re right, this wasn’t very clear from the text. The author John McNellis is a real estate developer and landlord, and I have been posting his articles for a while. So from this context, it seemed clear to me, but if you don’t know that, it wasn’t so clear.

      I added “real estate” to the title. This should make it clearer. Thanks for pointing it out.

  3. Top-GUN says:

    I’m under the impression this happens in the Commercial Real Estate world more than Residential single family home world.

  4. blindfaith says:

    Funny, I have seen more brokers screw clients, than the other way around.

    Dishonest dealing, breaking fiduciary trusts, lying, making false statements…I could not stand being in the business, and could not understand how many sold their integrity for so little.

    • Frederick says:

      Absolutely There are exceptions but most would sell their grandparents for a commission

    • Gershon says:

      A buddy of mine is a former real estate appraiser who got out of the business in disgust right before the 2007 crash when he was constantly being pressured by banks to “hit the number” they wanted, even on houses with serious flaws like cracked foundations. It is a sad consequence of a financial system set up by and for predatory sociopaths that personal and professional integrity have gone by the wayside in the relentless search to amass wealth and profits at any cost.

      • Kent says:

        A neighbor of mine listed her house for $100k higher than anyone thought it would ever sell for right before the crash. $100k means something in these parts. I told her that someone would have to be crazy to pay that. She said crazy people was the market she was going for.

        Before long she got the exact number she was looking for. I talked to the appraiser about why he thought it was worth that kind of money, and he said his job was to right down the number the bank wanted while standing in front of the house.

        The new owner moved in, the market crashed, the new owner left to parts unknown, and the bank sat on the empty house for 6 years. What a great country.

        • Harrold says:

          The bank sold that loan. No way they held on to it.

        • Max Power says:

          Before the 2007 housing crash the rules related to real estate appraisal were pretty much like the Wild West. “Writing down what the bank wanted” was pretty much par for the course back then. However, those rules been significantly tightened since then.

    • Gibbon1 says:

      I was going to put a bid on a house, offers due Tuesday morning at 8am. Monday night at 11:30 the broker puts out another set of disclosures detailing an ass load of hidden problems with the house. House doesn’t need 20k worth of misc work, needs $200k

      Of course being a hot market most of the bids already submitted before the updated disclosures. Sellers using the updated disclosures to try and short circuit the buyers negotiating position after the offer was accepted.

      Scummy scummy.

  5. David says:

    This is an article about real estate brokers and real estate commissions though I was confused as much as all of you were. I happen to be an attorney who owns a real estate firm so I know what the topic.
    In thirty two years, I had three clients attempt to renege on listing agreements. Two of them were oral because I had worked with the clients multiple times before the incident. The third was a written listing agreement where the women didn’t think the rules applied to her because her husband was an attorney. Bottom line is I sued and won in each case. It doesn’t matter what kind of business you are in, there are going to be some bad actors and you just have to deal with them and protect yourself. Here in Virginia they changed the rules. Oral contracts for the sale or lease of real estate used to be legal. Now they all have to be in writing. That has cut down on most of the problems.
    As I mentioned, I’m a practicing attorney specializing in litigation. I always have a written retainer agreement in those instances and I have had to sue about six clients for nonpayment over the years. I won all those cases and collected. There are bad clients in every field. You simply have to decide how you are going to deal with them.
    Most states have small claims courts that allow you to represent yourself and ceilings of 15,000-25,000. All these claims should have been litigated and if there weren’t, then these individuals were not very smart people.

    • David says:

      Honest question. Do you enjoy your work?

      I’m an engineer and there are some real arse clowns even in that field (especially tech) but I know I couldn’t enjoy working the way things are described here.

      But that’s just me everyone’s different.

  6. james r standley says:

    spot on, Blindfaith, slimy biz, FULL of slimy people

  7. Dick says:

    @David

    It’s easy for you to say ‘all these claims should have been litigated’ because you are a lawyer and can do this yourself. For most people the cost (time and/or money) of hiring a lawyer for an unknown outcome is very high.

    I am a software developer and I’m sure there are huge efficiencies to be gained in your firm by installing automated systems. But you may choose not to do this because you would have to hire expensive software professionals for an unknown outcome (projects take longer, cost more than expected, and sometimes fail). If you decide not to take that risk does does that make you one of the ‘not very smart people’?

    • Wisdom Seeker says:

      In an economy where the vast majority of the population cannot even put their hands on $500 for an emergency expense without tapping a credit line, very few people can afford the legal system or its facsimile of “justice”.

    • Javert Chip says:

      Dick

      David (the lawyer) gave you free & valuable legal advice: small claims court.

      You don’t have to hire a lawyer (in most small claims courts, you cannot have a lawyer represent you in court; you have to represent yourself).

      In return, you gave David some software advice that appeared way off target. I’m assuming you’re rejecting David’s free & valuable advice.

  8. Tom Stone says:

    I deal mostly with country properties in Sonoma County, and most of the people I deal with are fine.
    Not all, there are some people I simply won’t do business with.
    When it comes to verbal agreements Sam Goldwyn had it right “They aren’t worth the paper they are written on”.

  9. Michael Fiorillo says:

    “… because he needed to remove the lien in order to close he paid me, and then immediately followed up with a voice message calling me every name in the book.”

    There’s a useful life lesson I learned at too young of an age: act affirmatively to defend yourself against a crook or sociopath, and suddenly you become the s.o.b. !

  10. RangerOne says:

    Still don’t know what it will take but it will be a golden day if we ever stop paying commission based on the value of homes sold.

    Just sign contracts for up front fees and pay for the Realtors time as you go. Pay for listing, paperwork and maybe a bonus upon a successful closing.

    • LessonIsNeverTry says:

      I sense this is starting to change. The online tools (like RedFin, for example) are excellent. Not this cycle, but the next one, and I suspect we’ll see the shift to a flat negotiated fee.

  11. nick kelly says:

    Here is one for you. Years ago a was a realtor and also had a reno flip of my own for sale (not being a high roller I was living there)

    It was listed at 159 K. It had a hundred K mortgage.

    A offer comes in with 50 K down and subject to a NEW mortgage.
    I get on the line to the gal agent and trying to be helpful suggest assuming the existing mortgage. (The Scotia bank’s mortgages were assumable WO qualification.)

    She grew very cold and said: if you don’t like this offer we’ll just take it elsewhere.
    Needless to say, I went into reverse ( I needed to sell)
    ‘No problem you just proceed however you like”

    Because I stayed in the suite I had added for a few months after the sale I got to know the buyer. She had the cash but not much income, so she might have had a prob qualifying.

    So her friendly realtor who she’d been going for coffee with etc. ran her through a mortgage broker for a cut of the 4 grand fee.
    When the assumable mortgage was just sitting there.

  12. Paulo says:

    My Dad sold RE for a few years…late ’60s and early ’70s. That was when an agent might make a liveable wage and there were only a few firms in every town. It changed in the ’70s and he got out, right about the time the industry filled with 2nd incomers and hot shot speculators. Those were also the first years of rapid inflation and upheaval. The Industry has never been the same, since.

    My Dad was one of those old-fashioned honest types and picked his clients carefully. He felt great joy helping young clients buy their first homes and often followed their life paths regardless of whether or not they ever used his services. He was only screwed once, and that was by a local contractor (who was also the dad of one of my good school friends). Anyway, he diligently worked for the builder and the guy went around his back and sod the home to the client, directly, bypassing the agreement and most likely pocketed some extra cash. That night, the contractor came by with a case of scotch in lieu of the commission. I remember my Dad, (who never ever swore), told him to go Fu*$ himself, (and never worked for him again.)

    My daughter was dealing with an unscrupulous agent/broker down in Ladysmith and asked me to inspect a home prior to finalizing the sale. (I am a carpenter). I, and my brother (another carpenter), went through the home and we were both horrified at what we saw. We nixed the deal and that night I phoned the agent at home and told her that if she had brokered the sale it would have ruined my daughters life. She disputed my claims and said the property was a normal offering and very sellable in ‘that market’. I told her she should be ashamed of herself and that she needs to see her clients as people, and not as part of her deals. (My daughter was pissed :-) It was a mess, frankly. The agent was either ignorant, or unscrupulous. Either way, it would have been bad.

    It works both ways, this business of shady possibilities, and I don’t mean shade trees. Easy money, and large numbers, bring the grafters out of the baseboards just like fleas.

  13. robt says:

    Success is also doing what you like to do, enjoying the environment you’re doing it in, and making a living at it even if you don’t achieve or even care about superstar rewards.
    Some people need to be on a war footing all the time, when every encounter is a battle for supremacy, others don’t. They just want to get along.
    In the Real Estate business, it’s sharks and chum. Someone I know in the business won’t even work in the high-population areas because of the cutthroat competition. But she does well!

  14. Ambrose Bierce says:

    The sh*t that goes on in the RE market now is amazing. Mostly agents don’t do their work, misrepresent property, ignore legal problems, which the title company sweeps under the rug. If you are going to pay 6% you might as well pay an RE attorney and make sure you hire one from out of town if you want to deal with the city planning commission.

  15. R2D2 says:

    Most real estate agents are worse than snake oil salesmen; and a few good honest men who do try to get into the industry are forced out because according to other real estate agents they are too soft to deceive clients; I will avoid any contact with real estate brokers as much as possible.

    And if you are an attractive or even average looking female real estate broker, remember to show some legs and cleavage, and stupid men will pay an extra $100K as if they are Bill Gates and Warren Buffet and $100K is pocket change to them.

    • LessonIsNeverTry says:

      Funny! We came across a young agent at a recent open house who was absolutely gorgeous. I don’t usually get suckered by the physical attraction strategy but I’ll be damned if I didn’t feel an irrational urge to impress! It is a real pressure and I wouldn’t be surprised at all to learn it works on some people.

      I’m with you on the agents…. We have met a ton these last 12 months, as we’ve been hitting up a ton of open houses to learn our new area. Not many have impressed me.

  16. Mean Chicken says:

    The Devil tells a Real Estate Agent, “Look, I can make you richer, more famous, and more successful than any Real Estate Agent alive. In fact, I can make you the greatest agent that ever lived.”

    “Well,” says the Real Estate Agent, “what do I have to do in return?”

    The Devil smiles, “Well, of course you have to give me your soul,” he says, “but you also have to give me the souls of your children, the souls of your children’s children and, as a matter of fact, you have to give me the souls of all your descendants throughout eternity.”

    “Wait a minute,” the Real Estate Agent says cautiously, “What’s the catch?

  17. Realtors suck says:

    The whole real estate business is an scam. Whether selling or renting they take all the property owner’s profits. With Zillow and other online platforms hopefully realtors will become a thing of the past. 6% to put a house in the MLS? Really, what a scam.

  18. ft says:

    I’ve engaged real estate agents five times.
    No horror stories to tell.
    The first one I would rate as very good.
    The second and third were satisfactory.
    The fourth and fifth I would rate as outstanding.
    The first three agents I sort of blundered into but went with my guts and got lucky; the last two were selected with great care.
    Interestingly, the outstanding agents, after doing an excellent job and actually earning their money, both kicked me back part of their agreed upon commission.
    A good agent is worth shopping for – and they are out there.

  19. kf6vci says:

    Once upon a time, I guess it was Fall of 2003 in CA, I discovered a nice SFH with a trailer on 2.5 landscaped acres in Flamingo Heights, Yucca Valley, CA 92284. It had falled 5 times out of escrow! $ 40-50 k was the asking price.

    I drove over, signed an agreement with the listing agent and dropped off that $ 1,000 earnest money check. Would have paid cash next day. Seller a´was a probate lawyer.

    Listing agent never submitted my offer, claiming she couldn’t reach the lawyer.

    Go figure. I was sold out… Lawyers are known to keep their contact details hidden. No one ever is using Yellow Pages!

    Had I used a 3rd party broker, she would have had to submit the all cash offer. I would have paid more – she screwed me again by saying that wasn’t necessary.

    OTOH, I’ve had an old man personally install a HWH and strap it down on a Sunday to close. There are wonderful brokers out there. Hold on to a decent one.

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