Divorcing Real Estate Commissions, Redux

AvatarThis afternoon I was accused by the Bloodhound both of being a romantic (a claim my wife easily, if not happily, could debunk) and also of furthering the notion that divorcing real restate commissions – in other words, forcing a buyer to pay for his or her own representation – would place an undue burden on said buyer.

Reviewing this morning’s post, I never made such an argument. (I have in the past, but if past posts are the inspiration for a new argument, then reference said past posts.) What I did say is that the vast majority of buyers will be unwilling to pay out of pocket for representation unless we either as individual real estate professionals or as an industry prove the value inherent in independent representation.

Debating whose paying what is little more than a battle over syntax. Yes, it can be argued that the buyer truly pays because they’re the ones bringing money to the table to close the transaction. And if their lender doesn’t sign off on the commissions, along with the rest of the loan, no one gets paid.

But that argument falls apart when a seller has to bring funds to the table, particularly if the amount the seller has to bring in resembles the percentage being paid to the listing agent (and by extension the buyers’ agent.) If both buyer and seller and bringing money to the table, how does one decide the buyer is paying their agent’s commission with the loan versus the seller paying the agents with the money delivered to close?

Much credit is given to the buyer for paying the commissions because they’re the ones who are obtaining the loan. For some reason, far less credit is given to the seller who has to bring the house itself (or the deed) and possibly cash to the table to close the same deal.

Why? Without both sides, nothing will happen.

To say having to find an additional several thousand dollars to pay a buyers’ agent is not a financial burden on the buyer is pure folly. The only way – the ONLY way – it would not be any more of a financial burden is if the commissions were rolled into the buyers’ mortgage as they are under the current setup.

But that hasn’t happened yet, relegating the scenario to fantasy. Call me if and when the mortgage underwriters make that change.

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