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Agents and brokers are continuing to share commissions across the country, even though that’s what the National Association of Realtors’ commission lawsuits settlement was largely intended to put an end to — and it’s making agents and brokers vulnerable to lawsuits all over again.
That’s what Ed Zorn, general counsel of the California Regional Multiple Listing Service (CRMLS), told attendees at Inman on Tour Nashville on Tuesday. Zorn was speaking from firsthand experience regarding a deal he’s currently serving as buyer’s agent for — representing his daughter for her home purchase in Tennessee, he said.
Ed Zorn
“In the transaction I had to do here in Tennessee is something that does not happen in California,” Zorn said, “because here in Tennessee, Tennessee Realtors’ form is still based entirely on commission sharing.”
Zorn said he was ultimately forced to write into the offer that the seller would pay him a set amount for the buyer’s agent commission that was lower than what the proposed shared commission would have been with the seller’s agent. Zorn said he did this because he is part of a company that does not engage in commission sharing — and because he wanted his daughter to benefit from him handling the transaction, so that the seller would lower the asking price by the amount that Zorn was willing to take off of his own commission.
“Why am I having to do all of this contract renegotiation because our forms can’t handle a simple thing like a buyer agent being paid less than what a seller and listing agreement agreed to?” Zorn asked the audience. “That’s a problem, guys. And this, by the way, will be our future lawsuit in about two or three years because what happened to me happens 100 times per week. And it’s not covered by the current settlement, and we’re going to go through this all again because people are still sharing commissions.”
Phillip Cantrell, founder of Tennessee- and Kentucky-based Benchmark Realty and another speaker on that morning’s panel on “The Real Estate Revolution,” agreed that the current model of compensation was problematic for the industry.
Phillip Cantrell
“That’s the problem, if you want to break it down into a nutshell, is that our industry is still broker-centered and we have to move to the model of consumer-centered and get the hell out of the middle of the transaction,” Cantrell said. “We are transaction coordinators, communicators, messengers, we are not controlling the transactions … the broker-shared compensation model is dead. Embrace it; stop doing business the old way.”
The commission, rather, should be placed directly into the transaction and negotiated between the consumers, Cantrell added, instead of the agents negotiating it between themselves.
The California Association of Realtors addressed this problem by removing all language regarding commission sharing from their contract forms and got rid of their old form that addressed commission sharing between brokers specifically, Zorn said. And Zorn said that when he asked around at a recent meeting of the California Association of Realtors, agents were not having any trouble getting paid in the wake of these changes. In fact, as of December 2024, 75 percent of all closings tracked through CRMLS had the seller paying the buyer’s agent, Zorn said.
The key with all this is total transparency, Cantrell added, and avoiding any broker-to-broker negotiation, which ultimately boils down to a “side deal.”
“Put it in the transaction, let the two consumers work it out,” Cantrell said. “Everybody knows exactly what’s going on, and it’s 100 percent transparent.”
The new way of negotiating commissions has actually allowed some buyer’s agents to increase their commission rates, showing that savvy agents can actually work the new landscape to their advantage, the panelists and moderator and Inman Special Projects Editor Jim Dalrymple II noted.
“That’s exactly what’s happening, is those who are more experienced, they bring more to the table, they have more negotiation skill, they can charge a premium versus the newbie, the person who’s a part-timer,” Zorn said. “Those guys are still getting paid, but they have a bigger challenge justifying the rate.”
Zorn also noted that the Department of Justice and consumer advocates wanted to see exactly that kind of competition result from the settlement.
“They don’t have a problem with us making money,” Zorn added. “Their problem was someone like me who’s been a lawyer for 30 years, a broker for 20 years, getting paid exactly the same as a new licensee who’s worked for two months. Why should we both get paid the same? That was their criticism.”
Agents can get to that tier of higher-earned commissions first by being transparent and explaining exactly what they’re doing to earn their commission, Cantrell said. That includes preparing a buyer’s agent presentation, just like any agent would prepare their listing presentation, Zorn added, and specifying how many hours an agent spends on each transaction.
These changes, as well as a downturn in the market, are also thinning out the ranks of agents in the industry, the panelists said.
“You have to invest in your career,” Cantrell said, adding that agents need to prepare as seriously for working with a buyer as they would in working with a seller.
At the end of the panel, the discussion turned toward the much-contested Clear Cooperation Policy and how it should be handled in the future. After expressing his support for competition among agents for clients and listings, Zorn stressed the importance of industry cooperation in all dealings after winning a client, suggesting that the CCP should not be abolished, but amended.
“So compete viciously and hard on getting clients, and the minute you get a client, you better be cooperating and not using the client’s listing as a billboard to get you more business and that’s really what the attacks on Clear Cooperation Policy are about,” Zorn said. “It’s from people who want to not sell the home, they don’t want it sold. They want to use it as a billboard to get more buyers and to recruit more agents to their exclusive programs than they do helping the seller get the property sold.”
Zorn specified that the office exclusive policy should be changed to a non-exclusive policy, whereby if an agent has an exclusive listing agreement, the property is put in the MLS, and if not, the property does not really need to be put up in the MLS (as might be the case with a home in the upper tier of the market).
Cantrell added that he saw both sides of the argument, but thought the industry needed to work harder to find a compromise in the middle.
In closing, both panelists said that in order to win in this landscape, agents need to stop sharing commissions.
“Let the two parties negotiate it, prove your value, you’ll be fine,” Cantrell said. “You’ll wind up making more money in the end because you eliminated competition. It’s all about free trade and transparency.”
