Pulse is a recurring column where we ask for readers’ takes on varying topics in a weekly survey and report back with our findings.
After the verdict in favor of the plaintiffs in Sitzer | Burnett came down last week, along with a massive $5 billion monetary penalty, social media was filled with hand-wringing posts about the end of real estate as we know it. At the same time, many long-time mainstays of the industry were calling for calm; existential crises are nothing new to agents and brokers.
So, as always, we’ve turned to you to help us take the temperature of the industry. Now that the first of the bombshell commission suits is in the rearview mirror, what’s next?
Here’s what we asked: What changes are you seeing, and what changes are you making? Will this change the way you do buyer business, or will there be a new way to pay commissions? Are you looking for a class to take or seeking out coaching? Are you thinking about an exit strategy?
Here’s what you said:
- Mass exodus of part-timers and those close to retirement age. I expect buyer agent companies to pop up offering tiers of representation from, say, $500.00 to provide no advice and help with contracts to maybe $1,000 to provide a minimum of services. I can’t see buyers paying more. We already have agents doing this in the Austin, Texas, area and they will be pleased with this.
- Agents actively using the Buyer Representation agreements, learning to articulate their value and doubling down on ensuring they are actually and truly delivering value. Gone are the days when you show a couple of houses and pass the transaction off to a transaction coordinator. Customer service and value need to be equally as important as lead generation.
- Managers and brokers: Train, train, train your agents now more than ever on this unprecedented time in the real estate industry and the importance of understanding how you can protect your business and thrive in this new environment. Agents must pay attention. Plug in. Protect their commissions. What is a buyer’s agent agreement/contract? What you need to know: How, when, why to discuss? What will your seller’s listing presentation now look like? Are you a good communicator and negotiator of these changes? I have been having these Zoom classes on the lawsuit, the verdict, role-play of what they need to know, and guest speakers for weeks now and into the beginning of the new year.
- Seems pretty clear to me that as a listing agent I do not offer co-op commission to the buyer’s agent. The buyer can negotiate directly with their agent and then add it on as a closing cost just like any other closing cost. The buyer can ask the seller for closing costs as is done now and if the seller agrees then the buyer can decide how they want that distributed. Commissions currently are a “closing cost” expense for the seller, so we just move the buyer side over to buyer’s column. The concern is that If I were to offer a co-op the buyer and/or seller could sue me after the transaction closed, just like what has happened in Sitzer-Burnett and is happening in the other lawsuits (notice lawsuits is plural) that have been filed. I’m not willing to test my E&O insurance (will they be changing their coverage terms?). I doubt KAAR/TAR/NAR would be willing to pay for my separate attorney fees. Worst of all would be the time that it would take to deal with the lawsuit. I don’t have the willingness nor patience for that, particularly since it can easily be avoided upfront.
- Decoupling and downward pressure on commissions
- Dusting off the buyer representation agreement and polishing my buyer presentation
- Short term, very little will change except that we will ensure that we have our buyers sign a buyer agency agreement consistently before we show them any properties. It’s critical for them to know what we expect in terms of a commission and the fact that sellers may or may not be willing to pay that commission. It could vary from property to property. It will be more important than ever to prove our worth to our buyers.
- Continue to grow my skills and add value to clients whichever side of the relationship I’m on
- I plan after 40 years to keep representing my sellers and buyers with the same service I have always given, both with signed agreements and thorough explanations of how the process works
- Right-size of industry
- Marginal agents and brokerages with thin margins will leave … buyers will happily pay for representation, albeit for less commission at certain price points
- Somewhat minor changes in the way that we present the brokerage arrangement to buyers, the possibility of NAR going away or having much less control, and concern about where it goes next. The biggest issue is where attorneys turn to after this is closed. State associations? MLS? Smaller brokerages?
- Full disclosure, full fiduciary
- More disclosure, more transparency. In the end, most sellers will still use a listing agent who splits their commission with a buyer agent, especially when the market shifts and a qualified buyer becomes more valuable to a seller who wants to know they are going to close
- I feel like it would be nice to get very detailed information on “what this means for you, the agent”
- We sue the lawyers for defamation
- We will need to be able to present our value better to sellers. I believe the educated ones will understand how it is in their best interests to allow a continuation of them paying the listing broker a fair fee according to services provided and allow us to compensate the agent who brings the buyer out of our commission. To do otherwise would have many repercussions. Either we go backward 30 years to when buyers had no representation, or worse, to the days when the MLS was not online. There would be no need to syndicate if a buyer’s only choice was to go to the listing broker. Say goodbye to IDX. Lots of agents would be gone. Zillow and the other sites that make their money selling buyer leads would go broke. What I HOPE is the next wave would be new attorneys for the defense. Ones that understand how we work and how we are compensated so they can explain it to the jury. As long as consumers believe that we are salaried with benefits, a company car, and an expense account, and each get a huge amount in commission at closing, we won’t win. I can’t tell you how many people I have helped get out of a tangled transaction. A good Realtor is worth his weight in gold. (Notice I did not say “real estate agent.”)
- Buyer agents will need to be under a buyer brokerage agreement that will be negotiated with the buyer. The seller will negotiate a buyer’s brokerage fee and then if there is a difference between the contracted buyer’s brokerage agreement and the seller’s “finder’s fee,” the buyer will have to make up the difference with the buyer’s brokerage. Of course, the buyer’s agent could go to the seller’s agent, at the request of his/her buyer and and request that the seller pay the entire buyer’s brokerage fee. The buyer could tell the buyer’s agent that they do not want to view houses that have a seller who will not be paying the entire fee they negotiated with the brokerage … And then this would eventually evolve into a system where the seller’s brokerage offers the buyer’s brokerage a fee that is commensurate with what most buyer’s agents are asking for.
- Actually, it is not a big change here in North Carolina. We use a detailed Buyer Agency Agreement that explains to our buyers the commission we expect to receive at the closing. We tell them that if the commission offered by the sellers, if any, is less than this amount, then they are responsible for the difference. I have this discussion with all of my buyer clients before I show them the first listing.
- More of the same. It’s going to take a while for things to change
- The courts haven’t ruled on that yet. It seems silly to expend energy on plans based on speculation
- The structure for how agents are paid their commissions will change. Commission levels may fall as a result, and some agents who cannot articulate their value will leave the industry. But there will still be commissions paid to agents for services rendered. It will be a structural change. The industry will adapt. It will not be the end for agents and brokers.
What did we miss? Please share your thoughts in the comments section below.