An upstart, low-fee Colorado brokerage that is trying to blow up the way agents get paid has announced it’ll support traditional commissions — as it also offers incentives for buyers to ditch their agents altogether.
The brokerage is known for encouraging buyers to chat directly with its seller clients through its website and has published the compensation offered to buyer’s agents by listing brokers.
Trelora announced this week that it will begin encouraging its sellers to offer 2.8 percent commissions to buyers’ agents. Though sellers working with the brokerage have the ability to offer whatever incentives they want, in the past, Trelora had urged them to offer buyers agents just $3,000, or the same sum Trelora gets.
However, the company also will be making a provocative pitch to would-be buyers: ditch your agent, work with us, and keep the cash for yourself. And that is likely to ruffle industry feathers, according to Trelora CEO Joshua Hunt.
“Agents are going to shit themselves,” Hunt told Inman. “They’re going to be pissed.”
Trelora, which currently has about 400 listings, explicitly wants to disrupt the industry and reduce fees across the board. Sellers in Colorado pay $500 up front to use the brokerage, then another $2,500 when the sale closes. If they offer similar payments to the buyer’s agents, they’re out about $6,000 total.
On most sales, that’s vastly less than the traditional 6 percent commission, which is usually split between agents representing the buyer and the seller. On a $500,000 sale, for example, 6 percent is $30,000, or five times what sellers using Trelora would pay.
(The company also operates in Washington, where it charges $4,000 for its services.)
Needless to say, this approach has not been popular among some in the industry.
Hunt said that agents have refused to show Trelora listings to their clients, sometimes coming up with excuses such as falsely claiming properties are under contract, having title issues or suffering from problems with mold. Hunt blasted the agents who have eschewed Trelora listings.
“Agents don’t give a shit about buyers and sellers,” Hunt said. “All they care about is their commission.”
The new strategy of encouraging sellers to offer roughly 3 percent commissions to buyer’s agents could potentially solve some of that friction by removing the financial incentive to steer clear of Trelora listings.
Or, it may throw fuel on the fire.
That’s because Trelora is also going to include language in its listings encouraging buyers to ask about “cash incentives.” The cash incentive is merely the money that would have gone to the buyer’s agent, which the buyers themselves can pocket if they work directly with Trelora.
Hunt said that Trelora started including “cash incentive” language in listings Friday. It will appear on Zillow, either at the beginning or the end of the paragraph describing the property, as well as in brochures placed inside homes that are on the market.
Though some buyers may be locked into contracts with their agents, Hunt said that most “are not bound by a contract prior to showing homes.” That means they’re theoretically free to ditch their representatives and keep the cash for themselves.
“It’s a new way to say, ‘here’s how we can get consumers to start asking about money on a deal that they can’t normally see,'” Hunt said of the plan.
The cash incentive strategy is part of a pattern for Trelora, which previously made headlines for encouraging buyers to chat directly with sellers via the company’s website. Trelora has also rankled some in the industry after repeatedly publishing information about agent compensation.
Hunt described the company’s overarching strategy as trying to “raise transparency levels.”
“We’re going to create a superior experience,” he added. “I’m not trying to piss agents off. It’s just my nature of trying to talk about commissions.”
Hunt expects pushback and complaints to the cash incentive plan, but described the traditional 3 percent commissions buyers’ agents make as a “rip off.” He said it will hopefully force agents to begin negotiating their fees for the first time in more than a century.
He also said that Trelora has other transaction costs in its sights — fees related to insurance, inspections,\ and appraisals, for example, and that it has plans to disrupt in the near future.
“This industry is flooded with obscene margins,” Hunt added, “and I’m going to fix it.”