“I don’t have to offer commission to a buyer agent—why should I?”
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The Compensation Conversation: How to Avoid ‘Steering’ in a Post-Settlement World
You’re going to be talking about compensation a lot more, with clients on both sides of the transaction. What should you say, and what could get you in trouble?
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Excellent article. One problem I see is that not enough is being written here or elsewhere about the impact of this settlement agreement on buyers and their agents. For example, can a buyer tell their agent that they do not want to see homes for which the sellers are not offering a commission to the buyer’s agent? If that’s the case, can a buyer’s agent call a listing agent before showing a home to ask if the sellers are offering a commission to the buyer’s agent? Would it still be considered steering if a buyer’s agent does not show specific homes to clients based on their refusal to pay their agent’s commission?
What if an unrepresented buyer wants the selling agent to work as their agent as well, to be a dual agent. Can that agent accept commission payments from both the seller and buyer?
If a seller is offering a commission of 2.5 percent to the buyer’s agent but the buyer’s agency agreement is only for 2.0 percent, I understand that the difference of 0.5 percent is given to the buyer as a seller’s concession. Does the seller know the terms of the buyer’s agency agreement during negotiations or after the contract is signed? I imagine a seller would be highly upset to find out at closing that such a concession is being made directly to the buyer AND the seller had agreed to offer the buyer money for repairs identified during the home inspection.
We are truly entering a minefield that can hurt both sellers and buyers, not to mention some agents.
Good comments Bohdan, you bring up what I think are common questions that no one is answering. Your first comment, if a buyer states he does not want to see any property which the seller is not offering compensation, that is the buyers choice and the buyers agent duty to follow the request. How would that be “steering” on the part of the buyers agent? However, my feeling is regardless of the seller not offering compensation, where does it say a buyer cannot write the request that the seller pay a buyers agent, into an offer then let the negotiation begin. It is up to the buyer and seller.
If a buyer wants the listing agent to become a “dual or limited agent”, then, as it is now, with full disclosure and written permission from both seller and buyer, the agent can receive a fee/compensation from both parties. I can see where the total compensation may be less if the agent is a ‘dual or limited” agent.
I have also been wondering….if the seller in the listing agreement has agreed to compensate a buyers agent, up to 2.5% or 3% or whatever has been negotiated, that amount should be confidential and not disclosed to any buyers agent. The only information which should be provided is that the seller is willing to compensate or make a concession. If amount of compensation is provided through an “off-MLS” method, then steering could easily happen. The buyer must negotiate with the buyers agent the compensation the buyer is willing to pay. If that amount is 2% and the buyers agent cannot accept more than has been negotiated with the buyer, then what happens to the difference? My feeling it should be retained by the seller, for it is being paid out of the sellers home equity.
Too many unanswered questions and not alot of time remains until August 17.
It WAS against the code of ethics to show homes based on the buyer’s agent commission, this settlement has made it such that agents have to show based on commission; what they are willing to work for and what the buyer is willing to pay, if the seller isn’t offering a credit. Now, steering is how we are supposed to do the job, and it’s insane. The judge and the DOJ are destroying the buyer/agent relationship, the buyers’ power and the agents’ ability to do their job and trust in their relationship with their buyer. We should NOT have to use a buyer broker contract to show a home, or ever. Why not a Disclosure? Transparency doesn’t require a contract between buyer and agent. If a buyer wants to say ‘hey, this isn’t working, I’m out’ after a few showings, they can. We aren’t selling used cars here, we are supposed to be building a relationship. If an buyer agent needs a contract to hang onto their clients, maybe they should go sell cars.
Don’t blame the agents when it all blows up!
Excellent observations and comments in the posts above and every question should be addressed. Also, my thanks to Anthony Lamacchia for speaking out!