Commission battles in Real Estate sales mirror structures.

We take a break in what has by default become almost wall to wall coverage of Vioxx and Mass Torts to bring you back into the financial realm, an area which I am actually better suited to comment on.

I got a kick out of yesterdays' Wall Street Journal article on the disputes that go on in the real estate industry over commissions.

The image of a real estate broker carrying a client on his back through a tangle of poison ivy, just so the client could get a better view of the ocean front property on Nantucket they were considering, is comical to say the least. However, it's indicative of the lengths agents and brokers will go to in trying to please clients and prospects now that residential real estate transactions have become huge money, with commission rates of between 4% and 6%, on properties well into the the millions.

It mirrors the single ugliest issue in the structured settlement and trust fund world that I work in, where you have brokers from both sides of a transaction fighting over the 4% commission paid on structured annuities, or wrangling for better terms on trust fund accounts upon which they are paid a finders or management fee. In my informal survey of attorneys, both defense and plaintiff, I asked one key question: "What is the single biggest negative you personally perceive in dealing with structured annuity brokers?"

The answer comes back loud and clear each and every time. The commission disputes and turf battles that are fought over cases are ugly, unprofessional and force attorney's into an ethically uncomfortable position when it comes to "protecting" their broker and seeing to it that whoever places the annuity, in fact gets paid and that agreements are honored. The settlement industry has made some strides in working out commission splits, production agreements and in general keeping the issue out of the limelight in the last few years, but as more and more big cases and mass torts loom on the horizon, the scramble for the money and maneuvering for commission income is going to be ugly unless the industry trade association begins to address the issue in advance.

The image of an agent hiking a client on his back and wading through poison ivy to get a $400,000 commission on a property sale will pale in comparison to the things settlement brokers will do to get large chunks of the asbestos fund, Vioxx settlement, etc.

Comments

[Michael Kaplen, Esq.]

Their are bulls, their are bears and their are pigs. Unfortunately the structured settlement business these days has many pigs.

When I encounter these fights among pigs in the settlement of my cases, I tend to send the pigs to slaughter. I simply ask the Judge for an Order stating that my broker is the agent for the structure and entitled to the FULL commission!

That should teach the defense brokers not to play PIG with me.

Happy Holidays

Michael V. Kaplen, Esq.
De Caro & Kaplen, LLP
20 Vesey Street
New York, NY 10007
212 732 2262
President, Brain Injury Association, NYS
Chair, Motor Vehicle Collision, Highway & Premises Liability Section
Association of Trial Lawyers of America
Co Chair, Tort Section, New York County Lawyers Association
Member, New York State Traumatic Brain Injury Services Coordinating Council
www.brainlaw.com
www.braininjury.blogs.com

[John Darer]

I do business all over the country and in my experience the number of these disputes have waned. Yes there are still a few porky pigs out there. Perhaps it's me and the value that I provide and my ethics but I see less and less of it.

[Will Shapiro]

Down here in TX we say Hogs get Fat and pigs get slaughtered. I occasionally encounter a broker that will not attempt to work out a fair and amicable split, only sometimes do I find defense brokers that actually try to 'steal' deals. I am still aware and leary, but fortunately most brokers have smelled the roses....

[Business for sale]

I agree with John, the number of these disputes have waned.

[The Settlement Channel]

I was of the opinion they had waned as well, but i've had three recent cases, one which was really disgusting in which it became this really ugly dispute. Maybe it's just me, and clearly there is more cooperation, but I think the economics of the business are forcing some people to take a harder line to preserve their franchise.

[Will Shapiro]

Agreed. I was involved in a case recently where the primary and excess carrier were represented by different reps of the same firm. They went to war over the defense commission. There has to be an answer out there that is not only fair, but adds value to the industry.

[John Darer]

It's gotta be tough for those people working for the jumbo sized structure companies with high overhead to the house. Light,nimble and technologically efficent is the way to be in 2006+