Above, Leo Pareja, CEO, eXp Realty
In the aftermath of recent lawsuits, the next major legal battleground in real estate is going to be steering. It’s not a matter of if, but when.
During the litigation over cooperative compensation in MLSs, one of the central claims by plaintiffs’ attorneys was that real estate agents were steering buyers toward properties offering the highest commissions. They alleged that agents were motivated by compensation rather than client needs. However, this accusation was quickly debunked by research conducted by Bright MLS that found that agents do not “steer” buyers to homes with higher buyer agent commission. In their analysis of over one million home sales transactions, properties with higher offers of compensation did not sell more quickly than properties with lower offers.
As someone who spends time with agents daily—whether in large group settings or one-on-one conversations—I value the feedback loop that helps improve the agent experience. Lately, however, I’ve been hearing troubling stories about a disturbing trend.
Calling a listing office in advance of showing is not a negative. However the slippery slope becomes if a buyer agent fails to show based on upfront compensation offering. Most sellers appear to be opting for buyers to put any compensation requests (as) part of the offer, not upfront prior to showing. This has allowed the seller a path to negotiate everything from price, concessions, compensation and contingencies. There are instances where a buyer’s agent has made an appointment, called for compensation and then declined the appointment based on upfront offering.
Let’s be perfectly clear: this is the very definition of steering.
Real estate agents and brokers should be fully prepared for the reality that regulators and attorneys are likely secret-shopping you and recording your interactions. How you present options to consumers and how you explain your fiduciary responsibilities will be scrutinized in any future litigation. If your communication doesn’t align with your duty to represent your clients’ best interests, you could be held accountable.
After all, as a licensed professional, your obligation is to prioritize your client’s interests above your own. This has always been the expectation, and it remains so even after the changes to compensation rules that went into effect on August 17th.
The correct process should look like this: Meet with buyers, conduct a thorough buyer presentation, execute a Buyer Representation Agreement, and show them all available properties in the market—regardless of any compensation agreements between brokers.
Once the buyer identifies a property, they can make an offer that works for them, based on their financial qualifications. As part of that negotiation process, the buyer and seller will negotiate all terms, including whether the seller contributes to the buyer’s agent compensation. The terms can vary—part, all, or none of the compensation may be covered.
If you, as an agent, are not showing certain properties to your buyer because of commission concerns, you are engaging in steering. And it’s only a matter of when, not if, you’ll face legal liability for doing so.
Steering is when the agent fails to show, or allows to be shown, based on compensation and solely on the agent’s input without communicating all known and relevant information to the buyer client which includes that commission offering, if any, and allowing the buyer to choose the path forward. Steering is NOT communicating to the buyer upfront what the seller side compensation is to their buyer’s broker based on upfront agent contact with listing agent – and then the buyer chooses on their own not to see or pursue a property because that disclosed commission offering leaves them with an already agreed upon and signed contractual commission obligation to their buyer’s broker. If the seller is not offering compensation, but the buyer is contractually obligated to, then that propoerty may not work for the buyer in most financial scenarios, and thus knowing that upfront and not touring that property IS NOT steering. This is not pointed out enough.
Yes, this. Thank you.
I guess since Johnny Carson retired you are now the Magnificent Canac. You can read all minds including the seller’s mind and the listing agent’s mind. Do you also know how much the seller will come down off the listing price? Do you know how they will respond to a request to pay the buyer agent commission if the offer is full price (or better)? There is no way to know if a property will work without showing it and writing up an offer. Quit thinking the old way and assuming a buyer agent commission is set based on the charity of the listing agent. The seller just wants their bottom line. They could care less about how they get there…
You need to read the post again. What you’re saying isn’t relevant to my response. Buyers make decisions on many things and points upfront without first seeing homes. If we use your logic, then if a seller and listing states they do not accept FHA loans, then you’re saying the FHA approved Buyer should still request we view that property and make an offer regardless just to see what happens. If a listing states it’s a cash only property, your logic is for the buyer to still see that property and make an offer to just see if the seller will accept a financed offer. Your logic falls apart because you could apply that statement to everything – market conditions, multiple offer situations in which the Buyer could waste their time and lose better options, all fly in the face of your response. What if a $650K home is $200K over the buyer’s budget, by your logic and advice we should still tour the property and make an offer just to see if we can bring it down that far, since we aren’t the “Magnificent Canac” and cannot read the seller’s mind. Buyers make decisions to see or not see properties for a myriad of reasons, and the point of my post is the Buyer’s in the driver’s seat and they are the ones to make the decision to see or pursue a property, and we provide clients with the full scope of information upfront for them to do so, including any potential financial obligations like commissions, along with everything else that might affect them. This is the new way and not any “old way of thinking”. There is no common sense logic or practicality in your statement. You need more education.
Barry, this subject is about steering, which would be an accusation against an agent/licensee. It is about the Buyer making decisions to see or pursue with all relevant and known information and Agents not withholding information, giving false information, or making decisions for them or “steering” them away due to a commission offering or lack thereof. This is not about hypothetical and theoretical offer and contract outcomes.
I just don’t believe that any colleagues of mine are steering in the way of compensation.
Because of CCP, we can see ALL homes ALL the time and buyers can chose what homes they want to see. We aren’t steering them as much as they are telling us what they want to look at.
If a Buyer prospect has instructed their agent to find out if compensation is being offered, and then upon notifying that Buyer prospect, there is none, is it not the Buyer Prospect’s right to choose not see that property? I agree it is not the agent’s duty or even right to make decisions for their client, but the client has every right to pursue a property based on ALL of the facts.
I agree 100%. This is one of the several unintended consequences of these lawsuit settlements. Consumer and agent education will take time. First time homebuyers will also be hurt. They, more than anyone else, need representation and they also generally can’t afford a down payment much less an agent commission. So they are searching for lower prices and fees. Entry level home sellers will likely be the ones trying to squeeze every dollar from the transaction. Those two divergent objectives will lead to problems and ultimately, more issues than the intended solution.
I am just not seeing this happen. I have not heard of it happening where I am and I am not experiencing it happening. IMHO all I saw was a shakedown of the NAR. While isolated incidences may exist, manufacturing problems where they do not exist undermines confidence in the whole industry. Maybe someone can explain how the NAR really helped Brokers/Agents in this last go around. Aren’t we who they represent?
I have not felt the need to call and ask prior to showing. I presented my BBA to the buyer that signed. Closings since August 17 2024 have met the BBA ask . CONSUMER first NOT my paycheck and I am clear I do NOT work for FREE. It is a clear expectation of my compensation and it is in writing.
In a recent case I made an offer in which we entered my expected compensation on the contract. The percentage was typical of this area. The Seller, and his agent, responded with an offer for a small fraction of that amount by a flat fee. Later he upped his compensation to half our desired compensation. My long-term clients are intensely loyal to me. They were prepared to walk away if I wasn’t properly compensated. They told me they would pay part of my compensation if the Seller would not. There were no other offers, so we held firm. The Seller finally agreed to my original compensation percentage. I was lucky in this case to have loyal clients.
I didn’t contact the listing agent about compensation, before we made the offer, because I haven’t heard of Sellers recently fighting against compensation, in this area.
In the future I will always contact the listing agent to ask about compensation. That doesn’t mean I’ll refuse to show the property, if my clients want to see it. It is useful information to have before going through the laborious process of showing and preparing an offer. Compensation should be fully discussed with the client before showing any property. We can’t work for nothing. The cases where a buyer can, or is willing to, pay my compensation are a minority.
How can anyone prove an agent didn’t show a property because of buyer agent compensation? There can be hundreds of other reasons to prefer some properties over others. Is asking about compensation a criminal act. Is there some mind reading technology I’ve never heard about? This NAR settlement is easily the dumbest thing I have seen in the real estate business. I hope to find how our area can withdraw from the mandatory NAR membership that is currently imposed on us. If it wasn’t mandatory how many would pay the yearly fee to NAR. Goodbye NAR.