The missing word in the title above is, “completely”. Top Buyer Agents Unite to Put Themselves Completely Out of Business. Also, based on my schedule 
and the (so far, at least) almost total unwillingness of Top Buyer Agents to even listen to this vital message, there may not be much reason to keep saying it. These Top Buyer Agents don’t seem to understand that they are not like most buyer agents. They are quite different. These Top Buyer Agents take their duties to their clients so seriously that they actually DO put the client’s interests above their own. Every time, in every way. These Top Buyer Agents have figured out that the current system of the listing agent paying them, with the seller’s money (of all possible pay plans in the universe) isn’t the most optimum pay plan possible.
But it IS a pay plan. You do get paid. Your buyers do get real representation.
In many well written, thoughtful and sincere posts here on BloodhoundBlog there has been a strong case made for divorcing the buyer agent commissions completely from the seller and the listing agent. Most of the points made are valid. There has been even more to think about in the back and forth in the comments section of those posts. Some very bright people saying some very bright things.
I won’t try to appeal to your self interests here, but to your interest in caring for your future clients. The current “system” offers you the best opportunity you will ever have to help the most people with your counsel. Should the commissions become “divorced” (and yes, this could happen due to some decision in a federal court room or even the Supreme Court) you will be out of business. O – U – T, out. The perfect transaction (each side having splendid and fabulous representation) will occur so rarely that anyone who worked on bringing it about will have lots of time to reflect on how great it could have been. The funny part is that you already know what will bring about your demise. It has been commented on as the “how do we get around THAT” issue. You don’t. With IDX feeds freely available and buyers being told they now can “hire their own agent” (with the complete right to also pay that agent) most buyers will become “listing agent shoppers”.
Me? I will continue to take listings and do what is necessary to get them sold. If offering them directly to buyers by promoting “buy direct, pay no commission” was the most effective way to get them sold, then that is what I would do. It is also what Re/Max, Prudential, Coldwell Banker, Century 21, Keller Williams and all other companies who will stay in business will do. It is also what you will do, should you decide to stay in real estate.
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Tristan Celayeta says:
You’re absolutely dead right Russell. As long as dual agency exists the divorcing of commission can only fail, is in fact irrational. I’ve said in other venues that dual agency is the demon of out industry and hold to that. The historical genesis is from only sellers agency to the facade of dual agency. I say facade because successful dual agency depends on the “scout’s honor” of agents.
Unless it becomes clear in the minds of the mass of brokers that turning sides is more important than double siding and that client service leads to success thoughts of divorcing commissions are interesting but irrelevant. Business changes, who knows, it can evolve, it can devolve. Perhaps someday the industry will structure itself for service rather than short term profit.
July 22, 2007 — 1:49 pm
Jeff Brown says:
“….and the 2-2 pitch to Russell Shaw – it’s a long fly ball to deep center field….Divorced Commission is back to the track…..to the wall…..it’s gone. Man, that ball was crushed Biff. Looked like it went into the upper deck.”
“Well Jeff, that’s what Shaw’s paid to do – batting in the clean-up spot.” 🙂
July 22, 2007 — 2:19 pm
Phil Hoover says:
I already get people coming directly to me to buy my listings.
First question out of their mouth is “what will you charge if we don’t have our own agent?”
I usually represent only my seller in such situations to avoid providing fodder to the lawyers who bottom feed on Realtors engaging in dual agency.
The truth is that most buyers don’t understand agency law and don’t want to hear about it ~ they just want to buy the house!
WE in real estate are the ones who are yakking endlessly about why buyers need their own agent.
You are absolutely right, Russell ~ divorce the commissions and we will morph into non-agents handling both sides of the deal for less than what we charge now.
Gee, there goes all the litigation over dual-agency!
Perhaps that’s the way it should work anyway?
July 22, 2007 — 2:41 pm
Michael Cook says:
Perhaps I may be the only buyer who has the common sense to perfer my own agent, but I have to believe there are others out there. Even if what Russell says is true, wouldn’t that situation still get rid the lower tier agents out there?
Additionally, there must be some kind of data out there to show the price difference between dual agency and separate agency. I have to think buyers do better separately. I am hard pressed to believe if the commission system was divorced that there would not be added legislation around agency.
July 22, 2007 — 3:53 pm
Jeff Kempe says:
But that’s the point, Russell! An unhealthy percentage of TOP Buyer Agents already ARE out of business, resurrected under the rubric Listing Agents. Absent any incentive for buyers to hire Top Agents, there’s diminished reason to BE one.
Incidentally, I agree with Michael, Tristan, Phil and others: Dual Agency isn’t only detrimental to the principals, but, no matter how huggy the parties, is always a lawsuit waiting to happen. Its demise will likely precede divorced commissions, but, if not, will certainly go immediately after…
July 22, 2007 — 5:13 pm
Jeff Brown says:
Dual agency’s from Satan, blah blah blah. It’ll be gone soon, blah blah blah.
I’ve been hearing this stuff since Carter was in office. Is there some secret Realtor’s subject matter that rotates every few years? Full service brokerage is on it’s way out – since 1975. 🙂
This reminds me of interior designers arguing the artistic difference between this paint brand’s eggshell and that brand’s eggshell. Once it hits the public it makes the same ripple a one pound stone does in Lake Michigan.
As a group we’re reminding folks of the two so-called scientists who authored the best seller in the late ’70’s about the coming New Ice Age. They’re now earning a living promoting the whole global warming rage.
The public has been read correctly by Russell – when these kinds of topics are discussed, all they hear is what Charlie Brown heard whenever his teach was talking. 🙂
July 22, 2007 — 6:13 pm
Greg Swann says:
I’m reading this as your tepid, reluctant agreement that the current system of compensating buyer’s agents is morally wrong. By that point, I’m already done. The consequentialist argument means nothing to me, insofar as I don’t want to do the wrong thing no matter what dire consequences you might predict.
This seems unlikely to me, insofar as buyers always want to see a selection of homes. In other words, if they land on your doorstep, intent on buying that one house, they need quite a bit less help than most buyers. In the present circumstance, many Realtors would take a double-dip, with or without a dual agency. If the commissions were divorced, you say, listers would waive the fee from the buyer. From the buyer’s point of view, how are they worse off then than now?
“If you buy one of our listings directly from us, we’ll pay your closing costs.” Why can’t you say that right now? Why would you expect most buyers to prefer your limited inventory over everything a buyer’s agent might scare up?
Can you produce a quote from someone who has written seriously on this topic saying anything like that? For my own part, I know I have said nothing of the sort, nor have I let the side issue of dual agency muddy the waters.
My belief — correct me if I’m wrong — is that so far you have made two consequentialist arguments against divorcing the commissions:
I don’t think you have any basis for making either of these claims. Both would seem to insist that what is now a very rare type of transaction would be ubiquitous apr&232;s le d&233;luge. This seems unlikely. But even stipulating these two tenuous points, it remains that the current scheme of compensating buyer’s agents is morally suspect. It not only violates the idea of buyer agency, it is in fact a vestigial form of sub-agency — which I think we all can agree is immoral.
With every possible respect, Russell, I don’t think you have a leg to stand on. I don’t think you have any way of arguing against the fundamental justice of divorcing the commissions.
July 22, 2007 — 6:47 pm
Robert Kerr says:
Perhaps I may be the only buyer who has the common sense to prefer my own agent, but I have to believe there are others out there.
You’re not alone.
I’ve always had my own dedicated agent and representation, as either buyer and seller. I insist on it. And I wouldn’t dream of any other way.
But many people simply don’t get it and they’d rather go in without dedicated representation, riding on the coattails of the seller’s people to save $1,000 or $2,000 on a $300K-$400K transaction.
Making dual agency illegal or strongly discouraging the practice should help fix the problem of buyer underrepresentation.
In this market, with so many problems being blamed on underrepresented, poorly or misinformed buyers, I expect we’ll see some changes in HUD policy or law.
July 22, 2007 — 7:19 pm
Laurie Manny says:
This is a ludicrous conversation. I am a listing agent. Take away the buyers commission? Cool, more for me to split up between the seller the buyer and myself. The clear majority of buyers agents don’t even know how to write a proper contract. If you believe that having a buyers agent affords you more protection then let me clue you in. 98% of the purchase contracts that have been presented to me do not protect the buyers because the agents do not have a clue how to do that. The other 2% are countered out in a heartbeat, without an argument or a counter. So how did that agent protect their buyer. It’s a joke!
No buyers agent could possibly represent a buyer better than an experienced listing agent. 98% of the buyers agents do not know their contracts or are new agents.
Do any of you actually sell real estate? I would handle a dual agency any day of the week. Don’t you get it? Everybody wins. You don’t think the buyer gets adequate representation? Then I agree, you should NEVER practice dual agency, because if you cannot see how it can be done in a fair and equitable manner then you are not qualified to practice it.
July 23, 2007 — 2:02 am
derherold says:
I’m a broker in Germany. Splitting the commission between two agents/brokerages is possible but every agent supply “full service”.
Our business was harder because of important listing services which could (and can) be used by fsbos.
If people are used to chose the direct contact to the seller or the seller agent, the “buyers agent” will “die”.
July 23, 2007 — 3:11 pm
Mike Jaquish says:
Another post confusing “information” with “knowledge” and “skill.”
So, if I read an online guide to auto mechanics, you will let me overhaul your BMW?
Probably not, since you will prefer to have some skill and knowledge along with that information I may or may not have comprehended…
If an internet information dump is all that is required for wisdom, what excuse do we have for the level of ineptness we see daily in many walks of life?
July 24, 2007 — 6:00 am
John Kalinowski says:
Russell commented: “If offering them directly to buyers by promoting “buy direct, pay no commission” was the most effective way to get them sold, then that is what I would do. It is also what Re/Max, Prudential, Coldwell Banker, Century 21, Keller Williams and all other companies who will stay in business will do.”
If the buyer agent’s commission effectively goes away, will the big, traditional companies really be able to survive? I’m not sure they could. I know the big companies in our area (Cleveland), including my own, are still clinging to high-overhead business structures that depend on 5%+ listing commissions and being able to generate profits off 2.5% to 3% buy-side payouts. If those go away, so do half their profits. Will they still be able to keep their expensive, flashy, store-front offices?
The listing-side commissions are still kept at the 5% to 7% levels because of the necessary buy-side payouts offered in the MLS. If those go away, won’t the listing-side commission also drop substantially?
Not sure where this will all go, but it’s probably going to be a time for creative, smaller brokerages, such as Bloodhound, who can be more flexible and don’t have a big corporate overhead to support.
July 24, 2007 — 8:27 am