The Consumer Federation of America raised eyebrows and hackles with its advice to pay only the equivalent of a 2 percent commission for both real estate purchases and sales.
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Each week on The Download, Inman’s Christy Murdock takes a deeper look at the top-read stories of the week to give you what you’ll need to meet Monday head-on. This week: The Consumer Federation of America raised eyebrows and hackles with its advice to pay only the equivalent of a 2 percent commission for both real estate purchases and sales.
In recent years, real estate professionals have been inundated on all sides with the suggestion that they’re overpaid, underqualified and failing at their fiduciary duty to clients. Words like “collusion” and “conspiracy” have been thrown around, triggering anger, grief and disbelief throughout the industry.
Now, as the aftermath of commission lawsuits and subsequent settlements rolls on, and as we near the Aug. 17 implementation of the terms of the National Association of Realtors (NAR) settlement in particular, we’re starting to get into the nitty-gritty of the impact on agents and brokers. That means looking at what will actually happen to commissions in the days, weeks, months and years ahead.
EXTRA: Average buyer’s agent commission has fallen since NAR
When NAR’s settlement was first announced, reactions ranged from relief that the uncertainty of ongoing litigation was over to anger at the new normal that would result. One popular refrain was that with commission negotiations normalized, agents would actually make more under the changing paradigm, negotiating higher commissions to reflect their unique value proposition.
Now, that optimistic take is looking less likely.
Last week, the Consumer Federation of America (CFA) laid out advice for buyers and sellers to help them negotiate their agents’ commissions and save money throughout the transaction. They advised buyers not to agree to pay an agent just to see a home, but rather to sign a touring agreement with no financial obligation instead.
Most controversially, they advised consumers to set a goal of 2 percent or less in dollar terms for representation.
Asked how CFA arrived at that 2 percent figure, CFA Senior Fellow Stephen Brobeck told Inman’s Andrea Brambila, “The 2 percent or less is my best judgment as a realistic goal most homesellers and buyers could aspire to and attain. Already in some markets, most buyer agents are charging 2 percent (but listing agents are unfairly charging more).”
The consumer watchdog organization also offered guidelines for vetting an agent, including working with a broker instead of an agent, checking out reviews on sites like Zillow and Realtor.com, and asking for contract forms and proposed terms upfront so that they have more opportunity to review them and ask questions.
EXTRA: What’s changed since NAR struck its deal: Client Pipeline
Mad as hell at the idea of a 2 percent commission? You’re not alone (just check out the comments on that story), but it’s vital to gain a 360-degree view of what’s being said from every perspective. That allows you to understand your options and avoid being caught flat-footed at your next buyer consultation or listing interview.
To deal with the uncertainty and frustration, you have two choices: scream into the void or rethink business as usual. That may mean adding leverage with technology, a team or a virtual assistant. It almost certainly means changing the way you talk with your buyers and sellers. In addition, it will require you to rethink the way you work and reset your expectations.
Every week, Inman contributors offer an array of ideas to inform, inspire and empower you to shut out the noise and keep moving forward. Here’s the latest:
