Divorcing Real Estate Commissions III: Return of the Rhetoric

AvatarHer new green theme likely is going to send me back to the optometrist, but Lani provides a really good rundown on yesterday’s debate about divorcing real estate commissions – leaving the seller to pay only the listing agent and the buyer to pay their own agent.

I’m not diametrically opposed to the idea; I just think the current debate is so much rhetoric until the mortgage lenders make the decision to allow buyers to finance the commission paid their agent as part of their loan. Without that, the expectation is buyers already searching for enough cash to close are going to need even more if they want to be represented.

Some in the real estate industry are offering to negotiate the commission they receive when working with a buyer, with the difference between negotiated commission and the co-broke rebated to the buyer.

But that’s not a truly divorced commission. Negotiated commissions and divorced commissions are two different animals. Related, but different. (See Jim Duncan’s treatise on ending cooperative compensation for a view based on fully divorced commissions.)
With a negotiated buyers’ commission, the money being paid to the buyers’ agent still is based off what is being offered by the listing agent which, in turn, is a portion of the total commission the seller has agreed to pay. In a world where the commissions truly have been divorced, the listing agreement would specify only a commission for the listing agent and there would be no co-broke paid.

(This also would require a change to the MLS rules, which require a co-broke to be paid for a listing to be entered.)

So long as the seller is agreeing to a total commission paid in the listing agreement and the listing agent is offering a co-broke, the commissions truly will not be divorced. All you will see are derivatives of the current real estate model involving flat fee representation, a la carte representation, etc.

Claiming such business models as the beginning of the revolution looks wonderful on a computer screen (some more than others) but in fact leads us no closer to truly divorced real estate commissions. That change can come only from the lenders.

[tags]compensation for buyer representation, real estate marketing, real estate, Phoenix real estat[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

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