THOUGHTS ON SHOWING FEES

Plenty of families loaded up their steel wagons and fled the big cities during the pandemic. Remote work made it possible to live hours away from the office. Large numbers of those people wound up in Kingston.  I have it on decent authority that an agent from Toronto drove a packed minivan up twice a month and sold unbuilt west-end homes to his investor-clients.

Other big city agents, though, just sent their clients up with the instruction, “Call me if you see something great and we’ll submit an offer.”

Reception here to that tactic was mixed. Toronto agents don’t generally have much of a clue about our local market and the offers were sometimes stupidly inflated. Good for sellers, but not so much for local buyers who saw the data getting skewed, and affordable houses harder to find.

Agents here, including me, were generally miffed at having shown their listings to out-of-town buyers who appeared again days later with an agent of their own. They felt deceived and used. They’d exposed themselves to all that Covid-thick Toronto air, and for what?

The answer for some of them was to introduce “Showing Fees” and to put a note on the listing, something along the lines of  “A SHOWING FEE OF …% OF THE SELLING SIDE COMMISSION (PLUS HST) WILL BE WITHHELD BY THE LISTING BROKERAGE IF THEY INTRODUCE/SHOW CO-OPERATING BROKERAGE'S EVENTUAL BUYER, BUYER'S SPOUSE, PARTNER OR IMMEDIATE FAMILY MEMBER TO THE PROPERTY THROUGH A PRIVATE SHOWING.” The percentage charged was usually between 25% and 50%.

I think it was a reasonable move. The risks felt real. Danger pay, was what it felt like.

But times have changed. The air has cleared. And most Toronto agents know better than to spend six hours on the 401 in a cooled-off market. The need for those showing fees vanished along with all the out-of-town traffic, and most agents did away with them.

Most, but not all. And that’s a desperate shame. Sellers these days should be wary of signing off on that provision in the listing paperwork and here’s why.

Buyers don’t always hook up with a realtor before embarking on their house search. They call listing agents for the first few viewings, and that way they find out who they like and don’t like, who they think best understands their search and will best protect their interests. This makes really good sense to me. Agents should have to work for a buyer’s business.

But a few weeks back, a buyer I’d talked to, and shown through downtown property, asked me to write an offer for him on a house that he’d looked at with another agent. This was in the neighbourhood I work in most often, and the property was one I’d sold just a few years ago. I was a good fit for the job. That property, though, had a showing fee mentioned in the listing. Which meant 50% of the buying agent’s commission would be kept by the listing agent. They’d make another $6000 for an hour’s work, tops.

Here are my questions:

Shouldn’t we as agents understand and respect that some unrepresented buyers will undoubtedly want to see our listings, and if they return with an offer, whoever writes it, we should be mighty pleased, and see that as part of a job well-done, rather than as an opportunity to seriously increase our commission?

Faced with this showing fee declaration in a listing, won’t buyer agents be tempted to steer buyers to other properties instead?

The bottom line is that agreeing to a showing fee in the listing paperwork is almost never in a seller’s best interests. It may well drive away prospective buyers.

Do sellers even realize what they’re signing, I wonder?  How exactly, in this safe-ish real estate scene almost entirely free of out-of-town agents, does the listing agent justify such a provision?

The legal argument for persisting with the clause (I have discovered in researching this bit) is that that the first showing can be considered a “procuring cause” for the house sale, and the listing agent sits at the head of an unbroken chain of events leading to a firm deal.

It’s usually a ludicrous claim. The buyer decided that they preferred other representation. For whatever reason, they decided the listing agent wouldn’t serve them well. And the agent actually hired is the one who wrote the offer, negotiated terms, organized inspections and waivers etc. Their workload, and importance to the process, far outstrips the listing agent’s, who merely opened a door.

I can feel my temperature rising. These days the tactic is almost always a simple cash grab. And if an agent sits at your table and says they want to be paid several grand extra just for showing your house once, to someone who ends up working with another agent, you might want to ask yourself whose interests they’re really protecting, and whether you’re picking the right agent.