Snakes. Vultures. Con artists. Liars. These are all untrue and offensive words that come up when searching “Realtors” or “Real estate agents.” And before getting my real estate license in 2009, I had the same opinion, too.
But even with all the negative nouns used to describe some real estate agents, the majority of real estate agents are professional and valuable. The National Association of Realtors has provided these facts:
86% of buyers purchased their home through a real estate agent or broker.
89% of buyers would use their agent again or recommend their agent to others
51% of buyers found their home on the internet, while 29% of buyers found their home through an agent
FSBOs accounted for 10% of home sales in 2021 with the most difficult task listed by them was getting the right price (16%).
The recent multi-billion-dollar lawsuit outcome is both a complete game changer, yet changes nothing at all. The main takeaways from the case: (1) compensation offers will no longer be shown on the MLS. Listing agents may no longer offer co-broker commissions/compensation to buyer agents on the MLS but may still negotiate commissions/compensation between them privately and (2) written agreements for MLS participants acting for buyers.
My take on the case
First and foremost, this case may cause many real estate agents to bail from the industry, but with NAR reporting over 3 million people having a real estate license (due to an extremely low barrier to entry), is that necessarily a bad thing?
Most buyers find their homes without a real estate agent, but they still feel the need to buy their home with one because they prefer to have a professional run comps (especially in non-disclosure states), offer information to help set the home price, negotiate, have a strategy in place for getting the home (for example, in cases of a bidding war), guide them through the process of the transaction, and so on. I’ve had clients who have family members as real estate agents and still decide to work with me because they understand the value and knowledge I provide.
There will always be people who don’t see the value in a real estate agent because there are so many people with a license who don’t know anything about real estate.
“Bad real estate agents” are the people who sadly get the most recognition by their lack of knowledge and abilities and bring the industry and its reputation down as a whole. With that said, I don’t spend time arguing with those who don’t value what I do for a living, because so many people do value my expertise and guidance.
My advice to real estate agents
Don’t spend time and effort with people who don’t respect and appreciate your craft – especially when you’re great at what you do. Instead, focus on people who do want to work with you versus debating with the ones who don’t. While this seems obvious, I hear time and time again how agents are trying to “convince” people to work with them. Based on NAR’s stats, there are quite a few people who value us as long as we provide value to them.
Next, the discussion of real estate agent commissions has been longstanding. To set the record straight: There has never been a “set/standard” commission. Agents/Brokerages have fees and/or commission structures. A seller and agent/brokerage either agrees to the terms and compensation or they don’t.
When I go to listing appointments a seller asks what my commission is. I state it is “X” and the seller either agrees or disagrees. They may try to negotiate, and we either come to an agreement together or we don’t. If they do not want to pay my fee, they are entitled and open to work with anyone else, including listing it on their own.
If I want to work with a high-profile experienced lawyer, they are generally more expensive than someone just out of law school. While someone right out of school may still be great, I’d rather take my chances and pay to work with someone who has years of experience and knowledge behind them. Both lawyers will get hired; one is just more expensive than the other. How is this any different when hiring a real estate agent who handles one of the most expensive purchases the majority of people will ever make in their lifetime?
Will sellers pay less?
For sellers thinking that the lawsuit outcome will now allow them to pay less of a commission, that’s not entirely accurate. Everything in real estate is negotiable—including who is paying commissions. So even if a listing agent/seller is stating they are not paying cooperating brokers, a buyer could still make their offer contingent on a seller paying their real estate agent, which I expect to see happen.
A second layer to the listing agreement and commission structure is the compensation to a cooperating broker (aka buyer agent). It seems the consumer media is not explaining how our commission structures work and consumers are confused. When I take on a listing we agree to “x” commission. “We” includes myself as the real estate agent and the seller. We also agree that from that commission I am offering a co-broker compensation. There’s no further or additional compensation being paid by the seller to a buyer’s agent. The commission is the commission. If there’s no buyer agent, I get paid the commission and if there is a buyer agent, I pay them compensation (which again, the seller agreed on from the get go). For years, we’ve had discount brokerages, MLS flat-fee listing companies and the option to list FSBO. Plain and simple, there have always been options.
Buyer representation agreements shouldn’t scare anyone. Full transparency shouldn’t scare anyone. But working for free should.
The reality is, most buyers are aware that real estate agents are getting paid (generally from the seller). While the terms of the Buyer Agreement are still developing, this form will state what role the real estate agent is playing in the transaction, with who they are working with, how much they are getting paid, and who is paying them. The benefit is this agreement can protect real estate agents with their buyers so that another agent can’t swoop in and try to steal the deal—whether it be the listing agent themselves or another person posing as the buyer agent (sadly we all know that happens).
The negative of buyer agreements is, if a co-broker commission/compensation isn’t getting paid out, it would be assumed that a buyer would pay their real estate agent directly. Will buyers pay their real estate agents to work for them? It’s time for the good real estate agents to shine by showing value and yes, I do think buyers will—to a certain degree. The question remains—what is fair to real estate agents who’ve been assisting their buyer for months and potentially years to find them a home only to then learn a seller is not paying a commission and a Buyer is not willing to pay directly? How is it right that these hardworking real estate agents work for free and not be protected in some form?
Who will Buyer Agreements potentially hurt the most?
Those who spend money paying for buyer leads. I believe it’s become more difficult for buyers to understand who the listing agent of a property is. They search internet sites and find a real estate agent who they believe is the listing agent only to find out in the driveway of the listing that they are not. They angry when they pay a real estate agent to only meet them at a door and provide no further value. These buyers are also livid over the fact that they could have potentially saved some of that commission money themselves as their intention was always to contact and work directly with the listing agent from the beginning. These are the people googling “real estate agents are vultures” and this is understandable.
Now, with Buyer Representation forms being in the mix, there will be full transparency, making it a requirement to be extremely clear on a real estate agent’s role, how they get paid and who’s responsible for paying them. What is the solution for these agents who rely and depend entirely on paying for buyer leads to have a real estate business? Go back to old school traditions and build relationships with people. Require they sit down and meet you first before you immediately showing them a listing. Set the standard as a professional and explain how the process works including your role as representing the buyer and needing the necessary paperwork to proceed.
Some buyers may feel they could hire a real estate attorney to handle their side and be represented. This is true but can cost thousands of dollars and may not include the same knowledge and expertise a real estate agent has, which can include getting you the best price and terms for your home.
With all this said, nothing may change at all. With so many people wanting and preferring representation (based on NAR stats) things may continue as they always have with sellers still paying “x” commission and a listing agent still offering a co-broker compensation. A buyer agent will now just have documentation showing they are “officially” working with their buyer and fully disclosing their role and their compensation.
The bottom line—now is the time for great agents to show their true value and shine, and for the real estate industry as a whole to level up.
Sam DeBianchi LaViola is the founder of DeBianchi Real Estate and the first woman to star on Bravo’s hit TV show ‘Million Dollar Listing.’
