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How do agents get paid 💰?

Seems like a simple question, really. We get paid from the proceeds of the real estate transaction. The driving question these days is who pays the agent? In particular, who pays the buyer’s agent?

Traditionally, the buyer’s agent is paid through a cooperative agreement with the listing agent (seller’s side). The listing agent (or brokerage) agrees to split a portion (usually 50-50%) of their commission with the buyer’s side. Commissions have fallen in recent years and are now right around 5%. As mentioned above, the commission comes out of the proceeds of the sale of the property, so agents and Realtors® (there is a difference) like to say that the seller pays the commission. This is only nominally true.

Currently, the Department of Justice has an antitrust suit against the National Association of Realtors® (a trade group of which I am a member) arguing – among many other things – that the current commission set up is unfair to the buyer. I am not a lawyer, so a lot of the technical aspects of the case elude me 🤔 As I understand it, however, the crux of the frustration of the DOJ and other off-the-radar brokerages (i.e. discount) is that the cooperation between selling and buying side provides an unequal playing field. I think that the concern is that if brokerages are colluding with each other, won’t the consumer lose out in the end?

Like the overwhelming majority of agents that I work with, the most important thing to me is to make sure that our clients are supported. Those of us who are professionals always work to make sure that we are acting in our clients’ best interest. So, I’m not sure that NAR is in the right to defend current policies here.

I believe that it is possible to have clear cooperation guidelines between the buying and selling side without the seller being responsible (more or less) for disbursing the commissions. I think that it is perfectly acceptable for buyers agents to start negotiating their commissions directly with buyers. Why shouldn’t we be required to earn our negotiating our chops with our prospective client prior to having to negotiate on their behalf.

I am absolutely 100% for transparency – I don’t care whether or not the commissions are posted on the MLS. If that’s how a consumer is making the decision, than we’re not going to be a good fit. I provide significant value and superior service to most of my clients. I have no doubt that they would agree…if I ever got good at asking them 🤪

Here’s where the detractors of clear cooperation are wrong. In the long run, it won’t save the buyer a dime unless they’re able to out-negotiate their agent…in which case, they’re probably using the wrong agent to begin with. The buyer’s agent and the listing agent are still being paid out of the proceeds of the sale of the house (i.e. the purchase price). If you think that a seller – especially in a crazy market like this – is going to bring down their sales price because they now no longer have to pay for the buyer’s commission…I have a 🌉 to sell you in the Bay Area.

One thought on “How do agents get paid 💰?

  1. Pingback: Friday’s 1/7/22 Bon mots, deep thoughts, & pot shots | Richard Peterson, Realtor

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