The first week after the realtor-lawsuit verdict went as expected – chaos, doom, and no sexy alternatives. It will take years to appeal, but it won’t matter how it turns out. Buyers are going to be paying their agents.
If sellers aren’t obligated to pay any commission to the buyer-agents, will they appreciate the benefit of incentivizing buyer-agents with a bounty, or reward? Probably not, unless their listing agent makes it very clear, and insists on it.
It is more likely that listing agents won’t push it, and because sellers naturally will want to pay less commission and not more, they will list for 2.5% or 3% and hope for the best. Both will shrug it off, and joke about how it’s about time commissions came down!
It will be a grave mistake.
Why? Because the buyer-broker agreement is a disaster:
- Buyers won’t like it.
- Agents won’t like it.
- The market won’t like it.
Today’s buyers are picky, and you can’t blame them. They’ve had to endure +40% on prices, +200% on interest rates, and -50% on inventory…..talk about challenging!
The buyer-broker agreement will be a disaster because both agents and buyers will sign a short-term arrangement and hope the seller might kick in some of the commission. But then everyone will go back to doing it the same way we always have – refreshing your feed every hour and praying!
The real opportunity will be for buyers to hire an aggressive buyer-agent who does more than just watch the MLS. When a seller hires a listing agent, they get a thorough marketing campaign to source every potential buyer in the market. Buyer-agents can do the same, in reverse!
The buyer-agents who offer a rifle-shot soliciting of specific homes that fit the needs perfectly of their buyers will eventually find one. If an aggressive buyer-agent brings the complete package to the seller’s table without having to mess with a full listing, they will likely get an audience. It could even take the place of listing agents!
Because auctions aren’t close yet, this could be what changes the world of residential resales!
It will mean more off-market sales, which means more fuzzy comps because not much if anything is known about the home’s condition. But if it catches fire and the MLS or a rogue search portal insists on buyer-agents reporting everything about their sales including photos, we could still have a database full of accurate market data. But if we don’t, we don’t – good luck everybody!
How much is the commission on a buyer listing? It’s negotiable, but higher than 2.5%. The seller would be encouraged to pay some, half, or all.
Apparently, this blog post doesn’t state clearly what the opportunity is – or realtors reading it are stuck in their ways.
Just go have your buyers sign a buyer-broker agreement and plow ahead. Many times it will work out fine.
There is a bigger game to play.
Lots of things to work out Jim. Will California eliminate dual agency? They love their licensing fees. Will North County sellers actually decline paying 2% to a buyers agent when they want multiple offers and a bidding war? I agree buyer broker agreements will turn off buyers and there is a question on whether they are enforceable. The judge in the Sitzer case can’t rule that sellers can’t pay buyers agents but he could force the MLS to eliminate the compensation on the listing. Good agents will always find a way to provide value and be fairly compensated.
I’ve decided that any broker offer to represent me on the sell side has to pay me a percentage.
What do I have this wrong?
I charge the buyer 5%, and then pay you one? I can see that being an option!
Auctions charge the buyer 10% and they like it. They all like it, because they get what they want.
Lots of things to work out Jim. Will California eliminate dual agency? They love their licensing fees. Will North County sellers actually decline paying 2% to a buyers agent when they want multiple offers and a bidding war? I agree buyer broker agreements will turn off buyers and there is a question on whether they are enforceable. The judge in the Sitzer case can’t rule that sellers can’t pay buyers agents but he could force the MLS to eliminate the compensation on the listing. Good agents will always find a way to provide value and be fairly compensated.
I love when Jim Green comments AND identfies myself and in this era of turmoil. I beg of other agents to chime in – no charge!
His wife Amy – one of my best friends in the business – filmed me the other day with my prognostication of the future. Hey Jim and Amy, could you send me a copy so I can play it here?
My dual agency post is half written but you beat me to it! It’s coming up next.
I think the allure of a bidding war is so intoxicating that sellers give it all priority when given the choice.
Bidding wars are just rigged auctions. Give me a real auction any day.
Bidding wars are just rigged auctions. Give me a real auction any day.
The way most listing agents do bidding wars, they aren’t even rigged auctions.
They are blind bids and then the listing agent gets to play God and decide the winner based on their superior knowledge, not by open bidding.
Never bought a house at auction, but have picked up a few bits of art and antiques that way. Buyer commisions in those auctions vary, with the lowest I’ve seen around 5% and the highest over 20%. Most auction houses charge sellers commisions as well, some fixed, some variable depending on the amount sold and whether the final sale price was higher or lower than the house estimate. There’s enough variability in both buyer and seller commissions that nobody could ever credibly argue that the auction houses are conspiring to fix their percentages.