Separating Commissions For Buyers And Sellers
Why must a buyer’s agent be paid by a seller when they represent a buyer?
Doesn’t make much sense, does it?
But, that the way it’s almost always done in residential real estate.
You don’t have to be a rocket surgeon to figure out that this creates all sorts of questions, including:
- How can a buyer’s agent represent the best interests of a buyer when they must please the seller to get paid?
- Why should the seller dictate the amount of compensation to be paid to the buyer’s agent?
- Why can’t a buyer negotiate with their own agent to establish how much the agent will be paid?
- How can a buyer’s agent avoid the perception of a conflict of interest when they receive more commission with a higher sales price?
What if “the system” were changed to allow a buyer’s agent to be compensated directly by their buyer?
And, what if that compensation could be included in the buyer’s financing? (federal lending guidelines currently do not allow buyer-paid compensation to be included in financing).
That would allow buyer’s agents to structure their fees commensurate with the level of service provided.
Buyer’s agents could then offer ala carte pricing based upon the services they provide, such as finding suitable properties, previewing homes, showing homes, advising about value, arranging financing, preparing contractual paperwork, dealing with home inspection issues, negotiating, coordinating escrow details, attending closings, etc.
And, they could even get paid at the time they render specific services and eliminate contingent compensation (getting paid only if escrow closes).
Buyer agent compensation, directly-paid by the buyer, would allow true buyer representation while eliminating the above-stated conflicts.
Another challenge is buyers’ perception that they aren’t paying the commission.
But, buyers need to understand that they are paying it because it is built into the price of the home.
Will any of this ever happen?
Probably not in my lifetime.
But, I can dream
July 15th, 2008 Posted in Inside Real Estate
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