Many many years ago when I got into the Real Estate business every Realtor represented the seller. Consumers did not have the luxury of having a Real Estate agent in their corner to represent their best interests.
Consumer law in Massachusetts however, changed in the 1990’s. Buyers are now afforded the opportunity to have a buyers agent represent them in the purchase of a home or other property.
Frankly, the opportunity for both a buyer and seller to have representation makes far more sense. It is a level playing field where both parties should be getting good solid advice. Does this always happen? You would love to think so but in the real world this is not always the case.
Like many industries there is a word that gets in the way of people doing the right thing. It is called GREED!
Real Estate is a commission based business and when a Realtor makes a sale this is how they get compensated. Talking about Real Estate commissions is always a highly debated topic. It brings a lot of passion from both those inside as well as outside the industry.
Back when every Realtor represented the seller there were far fewer consequences regarding commissions and agency relationships.
How you wonder? In Massachusetts and I assume most other states an offer of compensation is made from one Real Estate brokerage to another when a home is added to the Multiple Listing Service (MLS). The offer of compensation is some percentage of the total commission offered by the seller to get their property sold. The MLS lets every Real Estate agent know when a property has been put up for sale. The MLS system that is the back bone of how Real Estate sales work across the country.
The problem that arises with Real Estate commissions and buyers agency is the amount of compensation that is offered. Real Estate commission are negotiable and as such the compensation offered a buyers agent is not always the same.
In any city or town it is quite possible that the majority of homes could have a compensation offered at X and a far smaller percentage of homes that are offering Y. To be clear on this Y is a smaller amount than X.
Here is where the problem comes in. If you are an advocate for a buyer, the commission that is offered should have no bearing what so ever in regards to whether the agent shows you a home or the advice they give you surrounding that particular property!
A buyers agent owes the buyer undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability.
The agent must put the buyers interests before their own and negotiate the best price and terms for their client.
Have you ever wondered why the agent you were working with did not mention taking a look at a specific home even though it matched the description perfectly of what you were looking for? Have you ever felt like you were being talked out of a property without good cause and were not sure why?
More than likely you have met one of the bad eggs in our industry. This type of agent probably does not do much business and every last dollar is important to them. Obviously this type of Realtor is not ethical and certainly not someone you want in your corner.
A good buyers agent will not give advice based on how much money they are going to make!
The other sales tool that tends to rear it’s ugly head when the market is weak and it just as bad is an agent bonus. Agent bonuses can be given for a number of things but the ones you see most often in the MLS read like this:
- $1000 agent bonus is under agreement by “X” date.
- $1000 agent bonus if full price offer.
Sometimes the bonus is just there if you sell the home with no other stipulations. Any Realtor that is influenced by this is just selling their sole to the devil.
Hmmm if I get the seller (who I do not represent) the terms they want from my buyers (who I do represent) I get a nice bonus. This works well if you have no integrity!!
Going back to the days before buyers agency existed there was no issue with getting a bonus to sell a particular home because every Realtor represented the seller. As a seller giving those extra dollars made sense. Today it does not unless you are specifically targeting the crud of the industry.
The sad thing is buyers will never know if there is an agent bonus unless your Realtor tells you. Almost always the agent bonus is put in a field within the MLS that consumers do not see. In my opinion it should be mandatory for a buyer to know if there is a bonus. No such rule exists however.
Let me make one thing clear about commissions and what is offered as compensation when selling a home. There are times when the commission being offered could be far lower than what would be considered reasonable. Every buyers agent who establishes a buyers agency relationship with a client should have a conversation right up front about their commission policy.
If an agent has certain compensation parameters that they feel need to met they should be explained to you when you hire them. This discussion avoids the problems outlined above and allows the Realtor to be paid fairly. If a client knows going in that the Realtor is going to make X percentage of the sale price and they would have to make up the difference if the seller is only offering Y, everyone is on a level playing field right from the get go. This should also head off any potential for shenanigans going on behind your back.
It always makes sense to check on a Realtors credentials and track record before committing to use their services.
About the author: The above Real Estate information on Real Estate commissions, agent bonuses and unethical Realtors was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at firstname.lastname@example.org or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 24+ Years.
Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service the following towns in Metrowest MA: Hopkinton, Milford, Southboro, Westboro, Ashland, Holliston, Upton, Mendon, Hopedale, Medway, Franklin, Framingham, Grafton, Northbridge, Shrewsbury, Northboro, Bellingham, Uxbridge, and Douglas.