Koenig & Strey’s new fee system could set a precedent – Chicago Tribune
House-hunting fee to debutKoenig & Strey’s agents’ bill for help may set precedentMarch 30, 2012|Mary Ellen Podmolik | The Home Front
Beginning Monday, Koenig & Strey Real Living will begin charging potential buyers a fee to have its real estate agents work with them.
Renters, meanwhile, will be charged extra costs if an agent helps them find a rental unit that they later purchase.
Though common in other parts of the country, such fees are virtually unheard of among the larger realty brokerages in the Chicago market.
But that may change, depending on whether Koenig’s plan takes off or goes over like a lead balloon.
Competitors are eagerly watching to see if the fee structure sticks, as one did in the airline industry for baggage, or whether consumer backlash will force it to be rescinded, as happened with the fees tied to debit card transactions.
“If it’s embraced, it’s a great idea,” said Michael Golden, co-founder of @properties. “One of two things happens: Either it’s like Bank of America charging a fee for an ATM, or everyone embraces it, and they’re leading the way for a new fee. My guess is it’s not going to go that way.”
Koenig & Strey, owned since 2009 by Warren Buffett’s HomeServices of America Inc., wants to formalize its agents’ relationship with homebuyers, not just sellers, as well as compensate them for time spent in the search process. The firm operates 17 offices with about 860 agents in the Chicago area.
Potential buyers may look at numerous properties, and although they may be prequalified for a mortgage loan, contract fallout is still frequent. Other prospective buyers simply abandon their search because of a lack of desirable properties listed for sale. And if a deal does close, declining home prices means smaller commissions.
“Brokerages are under a lot of pressure at all levels,” said Chris Eigel, CEO of Prudential Rubloff Properties. “Agents invest a lot of time and money working with buyers and sellers and frequently don’t get paid at all.”
Nancy Nagy, Koenig CEO and president, said the firm had considered the fee structure for some time as a way to create a more structured, professional experience for buyers.
“The buyer today realizes what a complicated world it is,” Nagy added. “The thought of just throwing a buyer in the back of your car today and saying, ‘Let’s go,’ that isn’t the way to handle a buyer in today’s market.”
Consumers who use a Koenig & Strey agent as their buyer representative will pay, at the agent’s choosing, an upfront retainer in an amount set by the agent.
If a purchase is made and the agent receives a share of the commission, the retainer will be returned to the buyer as a credit at closing.
But even if the agent decides not to charge a retainer, at closing the buyer still will pay Koenig & Strey a flat commission of $250 plus 2.5 percent of the purchase price. In most circumstances that 2.5 percent will be paid by the listing agent’s co-op commission agreement, according to the company.
If an agent works with a buyer and no purchase is made by the end of the agreement, or if the buyer makes a purchase without the agent’s help, the agent will keep the retainer.
Because a large percentage of agents now also handle rental properties, they are included in the new policy too. If a tenant purchases the rental property within a year of renting, the new compensation structure also will apply.
Other HomeServices’ companies elsewhere have recently adopted similar policies, and Koenig tested the fee arrangement with more than a dozen buyer clients before instituting it throughout the company.
“There wasn’t any pushback about it,” Nagy said. “This did not seem like a change to them.”
Steve Murray, editor of Real Trends, a Denver-area real estate consulting company, doesn’t expect Koenig’s competitors to actively market against its new policy.
“They won’t pounce on them, they won’t help them, they’ll just see how the market reacts,” Murray said. “I’m not aware of any brokeragecompany out there that lost market share because of (similar fees). I think Koenig will be fine.”