Buyer Broker Fees In the Lab and Now Under the Microscope

To all my industry friends this is going to be a "hot blog", so grab a coffee or two and hold on.

See this article.

This issue seems so simple to me, but then again, all things simple in the real world that are simple have been made extremely complicated in the world of residential real estate.

So here we go.

Let’s begin with an overall observation about business.  If the services of any professional are needed by the consumer to accomplish something, if follows that the consumer that deems the service necessary contracts and agrees to compensate that party. But that's not how it works in residential real estate.

Nope. It's way more complicated and confusing. Almost by design and all seemingly done to insulate against possible change.

So here’s the issue with the Buyer Broker / agent involvement in the transaction today.

Instead of relying upon the consumer to engage their own services representative, we burden the Seller with the cost of the services rendered by the buyer's broker in the transaction. First of all, this is clearly establishes a conflict of interest with regard to  representation and secondly, it immediately causes the price of the property to be increased to allow for this added services payment by the Seller.

Yes, the price goes up for the buyer and the net goes down for the seller when a buyer’s broker is involved.

Today, every Seller's net sheet is rightfully debited for the total real estate services fees as a cost and those fees now include an industry "customary" buyer's broker fee as designated in the MLS listing. Even though the buyer broker technically "works for the buyer and represents the buyer", the seller pays their services fee.  This is wrong.  And legally speaking, freaking crazy. Without such a fee a Seller would be free to discount the price of the property for the buyer if the buyer would simply acquire the property directly from the listing broker.  
Works for the seller, works fo the buyer - doesn’t work for the industry.

If this were done more often, the 5 million or so properties sold each year would have far less than 10 million sides represented by 10 million different Realtors and many unproductive Realtors who lacked listings would be essentially eliminated from this industry. 

But therein lies the problem for all of organized real estate.  This is the last thing they want to see happen.  They love dues paying members that do no business.  Because doing business has nothing to do with their volume-based dues ecosystem.  And this, I submit, is the real issue at the core of this debate.

Doing what is right and leaving the decision up to the consumer to hire a buyer broker - or not - would cause there to be about 400,000 to 500,000 or more less dues paying members in a timeframe of less than two years. Not a bad thing in my opinion, actually a very good thing, but nothing the NAR, the State Associations, the local Boards or the MLS want to see happen.  For the same very obvious “dues paying” reasons.

Why pay dues if the entities you pay the dues to can no longer force you into the transactions of productive brokers and agents by applying the antiquated policies and rules of mandated cooperation and compensation?

Something to think about as this industry is facing one of the most serious attacks from the consumer in its history.  So here's a truth I have learned over the years in all businesses.

When there is confusion created for the consumer there is always friction.  And where there is friction there is eventually smoke caused by irritation.  And where their is smoke there is always eventually fire.  So right now, as in today, I smell smoke.

As I have said repeatedly for the past 5 years, as it relates to the antiquated MLS and the outdated policies and rules of the entire MLS industry, it was only a matter of time before the consumer weighed-in if we as an industry did not.  And it’s happening now.

And now my friends it gets interesting. Very, very interesting.

Have a great day.