The form of the real estate brokerage business may have changed since the advent of nationwide brokerage firms, but the substance has not. Human nature is the same today as it was when Century 21 first came on the scene back in 1974. Indeed, the same as it was in 1974 B.C.!
And when it comes to the real estate brokerage business, human nature makes it almost a certainty that the real estate agent who allows himself to be intimidated by the buyer or seller of a property (or, worse, both) is asking to be separated from his commission.
To put it more succinctly, such an agent is likely to be on the receiving end of a “commissiondectomy” — a delicate surgical procedure aimed at removing all or part of his commission from his grasp. From the aspect of pain, it would be the equivalent of a fifteen-minute digital examination by a urologist.
Sadly, far too many real estate agents practically volunteer for this excruciating operation by not taking preventive actions — e.g., binding either the buyer or seller in writing, taking firm control of the deal, and refusing to relinquish control of the situation deal until their commission check has cleared the bank.
My memory takes me back to an article some years in The Wall Street Journal that underscored the importance of these actions. Nantucket, Massachusetts — inhabited mainly by the super-rich — was the setting for the commissiondectomy described in the article.
The Nantucket saga involved a broker by the name of J. Craig Hawkins and socialite Catherine R. Clifton, daughter of Ralph Roberts, founder of Comcast Corp. Mrs. Clifton’s husband, Anthony, was also along for the ride. Ringer Rule No. 328: All other things being equal, the higher a person’s position on the high-society ladder, the more likely he/she is to shaft you in a business deal.
In Chapter 7 of To Be or Not to Be Intimidated? I tell the story of the owner of a large apartment development in St. Louis who spent a great deal of time trying to impress me with his credentials. He went to great lengths to expound on the virtues of dealing only with people like himself whose integrity and ethical standards were “beyond reproach.”
I nodded my head on cue as he doled out such clichés as, “Life is too short to deal with unethical people.” His toothy grin had the aura of a neon sign flashing the words “Trust me.”
It wasn’t until I had experienced a number of commissiondectomies that I was able to identify such talk as a sure sign that the person with whom I was dealing was either a rapist, murderer, criminal-defense attorney, or (worst of all) unethical real estate developer.
Which brings me back to the Nantucket story. When Mr. Hawkins finally got around to presenting Mrs. Clifton and her husband with an agreement to represent them, she decided she didn’t want to deal with him anymore. Her unofficial occupation is professional philanthropist, but you’d never convince Mr. Hawkins of that. Echoing the sentiments of Marie Antoinette, Mrs. Clifton’s attitude toward poor Craig Hawkins was, “Let him eat Big Macs!”
One of the properties Hawkins showed Mrs. Clifton happened to be a $15.5 million, twenty-five-acre waterfront home, which she and her husband ultimately purchased. The listing broker and another company that “helped market the property” then split a Trump-sized commission of $600,000 — without even a bone in there for poor Mr. Hawkins.
Hawkins’ company, Maury People Inc., filed a lawsuit, but not against Mrs. Clifton. After all, unless it’s in writing, a buyer has no obligation to a real estate agent. So Hawkins’ company instead filed suit against the listing broker and the estate of the owner of the property.
In an affidavit, Mrs. Clifton admitted that Hawkins had originally shown her the property clear back in 2001, then again in June 2005. She also said that Hawkins “seemed to be steering me strongly” toward two other properties.
This is a classic kind of irrelevant, gobbledygook argument spewed out by buyers and sellers who are intent on performing a commissiondectomy on a real estate agent. And, as a gobbledygook bonus, Mrs. Clifton claimed that Hawkins hadn’t shown her any “particularized information” on the property. Which is a euphemism for, “He didn’t print out a couple of multiple-listing sheets from his computer.”
So, welcome to the world, Mr. Hawkins. You may as well have trusted a member of the Crips or Bloods to hold your wallet for you while you went for a jog. Hopefully, you now recognize that your mistake was spending months showing Mrs. Clifton properties all over Nantucket Island without having a signed agreement.
Having been through many commissiondectomies when I was a real estate broker in my previous life, I am, quite naturally, sympathetic to Mr. Hawkins’ plight. So I can only hope that he has learned from his mistake. Which means not expending an ounce of energy on future deals until he has something in writing from either the buyer or seller.
So how does a real estate agent protect himself when he’s showing a prospective buyer around? He “salts the record.” I first heard this term from an attorney who was explaining to me how important it is to document your dealings in great detail.
How could Mr. Hawkins have salted the record to help his cause? For one thing, he should have been in contact with the listing broker of the house the first time he showed the property to Mrs. Clifton. When I was in the real estate brokerage business, I made it a point to inundate sellers and listing brokers with certified letters. In those letters, I registered the names of prospective buyers and kept the sellers and brokers abreast of my activities with those buyers.
To put it mildly, this made me quite unpopular with those on the receiving end of my certified mail. They deeply resented the implication that I didn’t trust them. Nevertheless, I’m proud to say that I stuck to my modus operandi, which was somewhat similar to Ronald Reagan’s philosophy in dealing with the Soviet Union: Trust, but verify.
Today, of course, it’s not necessary to irritate sellers and listing brokers with certified mail. It’s much more subtle, much easier, and much more effective not only to create a phone record via both regular telephones and cellphones, but, best of all, by sending lots of e-mails.
This operational strategy is not by any means restricted to the real estate brokerage business. Regardless of your profession, you’ll find that salting the record is always a prudent and effective strategy to employ.
And don’t be shy about erring on the side of more salt rather than less. It can be tedious work, but well worth your time. In the case of Mr. Hawkins, a heavily salted record could have made it much more likely that he and his company would been paid 25 to 50 percent of the $600,000 commission due from the sale of the property — or something in the area of $150,000 to $300,000. For that kind of money, I’m willing to salt until my hand falls off.
Of course, the best possible way to avoid these kinds of legal hassles is to make it a point to deal with people whom you know, through firsthand experience, to be ethical and honorable. Unfortunately, in the world of real estate, that eliminates the vast majority of buyers and sellers. Which is why I’m now an author instead of a real estate broker.
Come to think of it, dealing with publishers isn’t exactly a walk in the park, either. They’ve been committing genocide against authors for centuries.