BUYER BROKERS

In response to consumer pressures, the real estate brokerage industry has lately tried to develop a system whereby real estate BUYERS may be represented by their own agents or brokers who supposedly will not share any “divided” loyalties with the Sellers.

Yet, the created system that seems rigidly in place continues to compensate those “buyer agents/brokers” with them sharing a percentage (commission) with the listing agent/broker based on how MUCH the Buyer is paying for the property! That is a blatant conflict of interest, yet none with whom I have spoken about that issue is willing to back down from it. If an agent or broker creates a fiduciary relationship with a Buyer, and that agent or broker is going to be compensated with a commission that is a percentage of the selling price, then where is the incentive for the buyer agent to try to push the selling price DOWN?

The Seller of a piece of property intends to get AS MUCH money as possible for the sale. The Buyer, on the other hand, seeks to pay AS LITTLE as possible for the property. Is that not obvious? If so, then why should not a Buyer’s agent or broker be compensated on the basis of how LITTLE the Buyer pays? There is a fairly simple way to do exactly that!

Consider, first, that MOST residential real estate is listed with a broker under a listing agreement, so these provisions ought to be contained therein. A listing agreement is a legally enforceable contract, so prospective Sellers OUGHT to get competent legal advice from a lawyer before they sign ANYTHING! Most listing agreements traditionally provide that a Seller will pay a sales commission of six percent of the SELLING price, even though the listing (“asking”) price might be higher. And, if an “outside” agent or broker is involved, most listing agreements provide that the specified sales commission will be evenly split with the “selling” agent or broker.

I have proposed the following compensation structure instead: that the “buyer” agent or broker be compensated, first, by getting THREE percent (“half”) of the initial LISTING price, so that the “buyer” agent or broker is not penalized at all by how “low” the actual sales price might go. THEN, I would add on top of that a further provision that the buyer agent or broker be paid, ADDITIONALLY, TEN PERCENT of all dollars by which the actual selling price is UNDER the listing price! That would build in a positive incentive for the buyer agent or broker to try to PUSH the actual selling price DOWN!

AND, I would add to that a further provision that the buyer agent or broker be compensated at a fixed rate of $25 per hour (to be credited against the final commission due) for all time spent “searching” for desirable properties and viewing them, so that there is minimal DISincentive for the agent or broker to slight the Buyer’s needs in that regard. And, if the Buyer walks away, his/her agent is still compensated for all the time spent without needing to put any pressure on the Buyer to accept something less desirable.

And, it should be worth it to prospective Buyers to know that the “buyer” agent or broker is totally in one’s corner.

By now, the reader knows that I have spent a lot of my time thinking about ways to avoid Conventional Wisdom. Doing something because it’s always been done that way is absolutely the WRONG reason to do something! In my discussions with most agents and brokers, I get the feeling that they resent my implications and that their “good intentions” should be sufficient to allay such concerns. Yet, the rancid conflict of interest under the conventional system is still present and most agents and brokers just can’t see it. Why tolerate any of that?