AgentMarkets & Economy

Will new commission models die in the next downturn?

These innovations are working right now in a seller's market, but changing market conditions could wreck the whole strategy
  • Cutting commission is a losing proposition.
  • Not all agents are worth full commission, but there are plenty of stellar agents who are.
  • In seller's markets, it's easy to put a listing under contract. But in a buyer's market, it all changes.

Alternative business models that offer new commission models, including a reduced commission in exchange for less service, typically explode in seller's markets. Do these models represent the future, or will most disappear in the next downturn? Playing the commission-cutting game is a losing proposition. As one expert observed, "It's a race to the bottom." For example, during the last red-hot seller's market, a discounter was trying to cut into a top agent's primary market area. When he started gaining traction, the top agent stopped him by cutting her commission (temporarily) to zero. She had the staying power -- he didn't. Not everyone is worth a full commission Few people would argue that every agent is worth a full commission. To illustrate this point, when we listed our house last fall, the agent we hired had just closed two sales in our neighborhood for approximately $100,000 more than the comparable sales suggested. Two other sellers who listed with less cap...