Tragedy helps us better appreciate the good things in life.

One great thing is the challenge of selling real estate, which is undergoing an evolution right before our eyes.  Agents themselves are contributing, and we could end up undermining –  or imploding – the current system ourselves.

A reader brought up the $100 listing model, where the agent accepts $100 as his fee to advertise a home on the MLS – and then the seller has to fend for himself to figure our the rest.

This week I’ve seen two other twists, and both were a hybrid commission model where the home’s listing is inputted into the MLS, but no commission offered to the buyer’s agent.

This is single-agency in disguise.

While it is possible that outside buyer’s agents will negotiate a commission with the seller and/or buyer, it’s more likely that they will be discouraged.

Meanwhile, the MLS exposure populates all the real estate portals – and these listing agents are hoping that internet buyers will contact them directly.  The agent gets paid their pre-arranged fee, and buyer is, in effect, unrepresented.

It sounds like a great new way to save on the commission.  But if buyer agents are discouraged, how do you know if you got top dollar?

The highly motivated buyers – the ones who pay top dollar – want and need the help of a buyer’s agent.  When a new listing pops up, some buyers aren’t going to burn their agent.  The resulting pool of motivated buyers is diminished.

Offering to pay all agents a specific commission amount (bounty) to sell the home is the most effective way to cause a top-dollar sale.  Listing agents who offer zero commission are NOT doing their sellers a favor.

The MLS rules prevent a listing agent from offering zero commission, unless it is an open listing.  My friend at Sandicor sent me this five years ago:

Entry Only, Open Listings. The law supersedes the rules for Open Listings and commissions in the MLS. The California Civil Code Section 1087 states the following:

1087.  A multiple listing service is a facility of cooperation of agents and appraisers, operating through an intermediary which does not itself act as an agent or appraiser, through which agents establish express or implied legal relationships with respect to listed properties, or which may be used by agents and appraisers, pursuant to the rules of the service, to prepare market evaluations and appraisals of real property.

If an open listing is placed in the multiple listing service, the total compensation that the owner is to pay shall go to the selling agent who procures an enforceable offer from a ready, able, and willing buyer on the terms accepted by the owner.  An open listing need specify no compensation to the selling agent, but may state that the compensation is to be negotiated between the selling agent and the owner.

This only applies to Open Listings and is not relevant for Exclusive Right and Exclusive Agency Listing contracts.

But do these listing agents disclose to their seller that it is in their best interest to appeal to all buyers and agents? It’s on the form now, but nobody reads it.  Will sellers see past the ‘commission-saving’ pitch and notice that the plan discourages the very buyer-agents you want selling the home – the ones with highly motivated buyers who pay top dollar.

Don’t get me wrong, I still think we are heading towards single agency.  But it should be one of the commission options, not the only.  We really need an auction format to weed out the agent-shenanigans, and enforce transparency.

In the meantime, maybe it will go the other way? See below:

The commission war will continue, but one thing won’t change.

If the price isn’t right, it’s not going to sell!