When I got into the Real Estate business many years ago, 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 1990s. Buyers can now have a buyer’s agent represent them in purchasing 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 get good, solid advice.
Does this always happen? You would love to think so, but this is not always the case in the real world.
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 inside and outside the industry.
When every Realtor represented the seller, there were far fewer consequences regarding commissions and agency relationships.
Commissions Are Displayed in The MLS
How so, you may 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 exclusive right-to-sell listing contract executed between the agent and seller will explicitly state the total commission.
The offer of compensation is some percentage of the total commission the seller offers to get their property sold. The MLS lets every Real Estate agent know when a property has been put up for sale and the commission they will earn with a sale.
The MLS system is the backbone of real estate sales across the country.
The problem that arises with Real Estate commissions and buyers’ agency is the amount of compensation that is offered.
Real Estate commissions are negotiable, and as such, the compensation offered to a buyer’s agent is not always the same.
In any city or town, it is quite possible that most homes could have compensation offered at X and a far smaller percentage of homes offering Y. To be clear, Y is a smaller amount than X.
Why an Agent Bonus Can Be Horrible For a Home Buyer
Here is where the problem comes in. If you are an advocate for a buyer, the commission that is offered should have no bearing whatsoever in regards to whether the agent shows you a home or the advice they give you surrounding that particular property!
The agent must put the buyer’s 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 unsure why?
You likely have met one of the rotten eggs in our industry. This type of agent probably does not do much business, and every last dollar is crucial to them. Obviously, this type of Realtor is not ethical and certainly not someone you want in your corner.
Buyer’s Agents Should Never Give Advice Based on Commission
A good buyer’s agent will not give advice based on how much money they will make!
An agent bonus is another sales tool that tends to rear its ugly head when the market is weak and just as bad. Agent bonuses can be given for several 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 you bring a full-price offer.
Sometimes the bonus is just there if you sell the home with no other stipulations. Any Realtor 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 explicitly targeting the crud of the industry.
Buyers Don’t Know About a Commission Bonus
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 clarify commissions and what is offered as compensation when selling a condo or house. Sometimes, the commission being offered could be far lower than what would be considered reasonable.
Every buyer’s agent who establishes a buyer’s agency relationship with a client should discuss their commission policy.
If an agent has specific compensation parameters that they feel need to be met, they should be explained to you when you hire them.
This discussion avoids the abovementioned problems 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 behind your back.
It always makes sense to check on a realtor’s credentials and track record before committing to use their services.
Some people like to think that paying Realtor fees isn’t worth it. That is a discussion that brings great debate.
It is essential to work with a buyer’s agent you can trust. Look for someone you feel will put your interests ahead of their own. The best agents could care less about agent bonuses.
The commission is never paramount in doing the right thing to help their clients make the best home-buying decision.
About the Author: The above Real Estate information on real estate commission and agent bonuses were provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at email@example.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 36+ Years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.