I don’t think anyone in the realtor industry recognizes the harm being done to the consumers by squeezing out the buyer-agents. The good ones offer a valuable service by assisting homebuyers with the complexities of purchasing a home; a challenge that is tougher than ever in 2023.
For example, let’s say you come across a good buy – what do you do with this?
This weekend, the listing agent got 20+ offers and shut it down. Then he just accepted one. Game over.
None of the other buyers got a chance to win. But at least they had a chance to offer.
If buyers were directed to the listing agent, do you think the realtor teams would have 20+ buyer-agents ready to serve everyone who wants to make an offer? Or would they just write offers with the first couple of buyers and shut it down?
I can’t tell you how many times we see in the confidential remarks, “PLEASE NO MORE SHOWINGS”. We already have an environment where listing agents believe there is no incentive to keep taking offers – especially if/when they already wrote an offer with their own buyer and will double-end the commission.
It’s only going to get worse. Forces within the industry are conspiring to eliminate buyer-agents altogether, and are conspiring to create a system that makes it even harder for buyers to get a fair chance. The local MLS companies are launching a new search portal that directs all inquiries back to the listing agent.
Do you think an outside buyer-agent will have any chance of selling that listing now? If multiple buyers contact the listing agent, then what happens?
Here is the article:
An excerpt:
With the goal to “promote a more competitive marketplace,” three of the largest multiple listing services announced plans to launch a new consumer home search portal this spring.
Called Nestfully, the website will be owned and operated by California Regional MLS (CRMLS) and Bright MLS, under a joint venture, and REColorado has signed on as a participant. The founding MLSs designed the site and its features, and real estate tech company Constellation1 is providing technology services.
Key points:
- Nestfully is expected to debut by April 1 with listings from a pool of 240,000 agents and brokerages that are MLS subscribers.
- Agents will get leads at no cost, and consumers will have direct access to the property’s listing agent.
- “With Nestfully, we believe we are in the best position to deliver what agents want and need in this changing market,” said Brian Donnellan, CEO and president of Bright MLS.
With the goal to “promote a more competitive marketplace,” three of the largest multiple listing services announced plans to launch a new consumer home search portal this spring.
Called Nestfully, the website will be owned and operated by California Regional MLS (CRMLS) and Bright MLS, under a joint venture, and REColorado has signed on as a participant. The founding MLSs designed the site and its features, and real estate tech company Constellation1 is providing technology services.
“Nestfully is run by MLSs whose primary goal is to promote an open, clear, and competitive marketplace,” Art Carter, CEO at CRMLS, told Real Estate News. “We are a neutral source working in the best interests of consumers, brokers and their agents.”
For agents, Nestfully offers a financial advantage over advertising-powered portals. The site will not have ads, and leads will be delivered directly to agents and their brokerages at no cost, “taking a significantly escalating cost out of the existing system,” Carter said.
Agents and brokerages companies will also have access to a lead management platform on Nestfully with lead tracking, analytics and metrics that gauge success.
“We believe we are in the best position to deliver what agents want and need in this changing market,” said Brian Donnellan, CEO and president of Bright MLS, adding that the new search engine will “serve as an extension of the agents’ marketing initiatives to promote listings, attract qualified lead prospects and forward these opportunities directly to the agent at no cost.”
The goal is not to monetize the consumer search, he said, but to help answer consumer questions about properties for sale and connect potential buyers with property listing agents or with a local agent or broker in their communities.
Asked in an interview if MLSs will be compensated for the initiative, a company spokesperson said that “financial arrangements are not being disclosed.”
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Will they advertise enough to compete with the established search portals? They will need to promote some new whiz-bang feature…..which will be that buyers should go direct to the listing agent, and use their fancy new portal to do so.
I don’t think they have a clue – or they are flat out ignoring – how they will be putting buyers at a bigger disadvantage, and destroying our business as we’ve known it for the last 100 years.
An auction company would fix everything though!
Bigger disadvantage for buyers: Going direct to the listing agent means no buyer representation. I know, I know, they will sign the form saying they are being represented by the listing agent, or one of their flunkies, but all that means is they will have to lay down and take it.
There won’t be anyone on their side pushing for thorough inspections, let alone repairs and/or credits. No one there to make sure the appraisal comes in right, and because they were told to waive the appraisal contingency, they will have to pony up the difference. Plus they will be strongly encouraged (forced) to use the listing agent’s lender who may not tear their head off but will make an extra point on the deal to keep paying for lunches and golf with the listing agent.
Plus the continued sellout of realtor.com will continue to put lead generation into the hands of those who pay the most for it:
https://www.vendoralley.com/2023/01/24/costar-to-purchase-realtor-com/
The reason buyers agents are being pushed out right now is because of limited supply.
If there were thousands of properties to choose from buyers agents would be king because they’d represent a potential sale.
It just shows how out of wack the real estate market is right now.
Also I agree that auctions are the way to go. Unfortunately they rarely happen in a market with limited supply. This is because it’s easy to find buyers. Ironically auctions do tend to occur when there’s massive supply + are used as a gimmick to find buyers.
You answered your own question. As one with a ton of experience here:
Going straight to listing agent gave me more direct information
Usually we’re able to make a deal because listing agent gets a bit more through me
Incentivized to help me make deal over others
It’s quite the opposite of your argument. Removing buyers agent gave me a distinct advantage over the last 20 years.
I always say, the best listing agent for me (as buyer) is an incompetent one. I always loved listings where agent didn’t return calls, was a newbie, unprofessional, etc. I knew it would weed most buyers out and would play to my advantage.
It’s been great for you – congrats. You have exploited the system to your advantage, and the only people to blame are the unscrupulous agents who gave you an unfair advantage over others.
The bigger picture is that this practice you’ve described is now becoming the rule on how homes are sold, and how agents handle it is usually unethical because they don’t want to bother with giving everyone a chance.
It’s in contrast to how realtors have cooperated with each other for the last 100+ years – our whole system was built on sharing listings, and letting every buyer have a crack at it.
My listing in Del Cerro has 18 offers. I went around to every single agent and gave them TWO chances in writing to improve their offer, and then asked each of them if that was their very highest. Then I had my buyer beat it. That’s how it should be done – everyone gets their best offer considered.
But agents are too lazy, and they take their clues from how they see other lazy agents do their business. The most common method is to grab and offer (usually one that the listing agent wrote) and shut it down. You saw it right in his confidential remarks – DO NOT CALL THE LISTING AGENT.
Even in a single agency model, couldn’t buyers continue to hire agents as “consultants” to help advise on potential properties, assess value, coordinate inspections, etc and pay a flat fee as opposed to a percentage of the house price? Single agency will never have either the buyer’s or seller’s interests in mind; it will always favor the needs of the agent selling the house.
Even in a single agency model, couldn’t buyers continue to hire agents as “consultants” to help advise on potential properties, assess value, coordinate inspections, etc and pay a flat fee as opposed to a percentage of the house price?
Certainly. But you’re up against three things:
1. The listing agents are telling buyers that it is better to go direct – and now, so is the MLS.
2. It’s already hard enough work that it’s not worth 2% and barely worth 2.5% to chase like crazy for weeks and months knowing you might not get paid at all. Now those same agents will be faced with getting paid what? $2,500? $5,000? 1.5%? With some or all of it upfront, there will be agents available but when most of those agents think that filling out the contract forms is the bulk of their job, don’t expect much.
3. Older agents will quit instead – and those are the ones with the 20 to 30 years of experience and actually have something to offer the buyers.
Brokerages and the listing agents will probably offer an agent-lite to open doors for $50 – at no charge to the buyers. If you see a hot buy online and it flashes ads to click here and for $50 an agent will meet you at the house in two hours, aren’t you going to go for it? Most will, and there they will be told that inquiries are pouring in and you better make an offer right now to buy it. The thought of hiring an independent buyer-agent gets forgotten, and buyers will go along. You’ll get what you get.
Single agency will never have either the buyer’s or seller’s interests in mind; it will always favor the needs of the agent selling the house.
Absolutely true.
I’ll be as blunt as possible.
There is no oversight. There is no enforcement of the rules (refreshing the listings is against the rules). There are no realty cops. The Code of Ethics is scrunched up in the back of a drawer somewhere. Brokers and managers have no idea what their agents are doing (my manager has 300+ agents).
Worst of all, agents see other agents doing shady stuff and they figure it must be ok and they should do the same thing. We are cultivating a lazier, shadier group of agents every year.
In single agency, won’t commissions go down?
No. Listing agents will charge 5% or 6% and keep all of it.
These developments have been coming on for years – this is what I said a year ago and it made it into an insider publication:
Eliminating buyer-agents is the easy solution to reach buyside extinction, and it’s well underway. Redfin has dumbed-down buyer representation by paying their newest agents $50 to open the door for buyers. These new agents literally have no experience or anything to offer the buyers as far as advice, and are directed to the professional agent back at the office for help—oh, great, to someone who has never seen the home. The resulting trend is to expect nothing from buyer-agents, and now the big listing teams treat outside agents like the enemy. Buyer-side commissions are dwindling, there is no transparency about making offers, and buyer-agents are treated with disdain. By now, home buyers don’t think they need help—heck, they can find all the homes for sale online—what else is there? When they find one they like, they can reach out directly to the listing team. Soon, there will be no need for the MLS, and the search portals will be optional. But the listing agent can, and will, charge 4% to 5% to transact. It will be called compression, but it is a result of the industry ignoring the value of buyer-agents for decades that they will become extinct.
A couple of weeks ago they asked me for an update. My response:
The last sentence has surely come true, and will probably never change – no one in the industry will ever appreciate and publicize what buyer-agents do for work. As a result, they will die a natural death, and I mean that literally, because it’s the old-guard realtors that brought years/decades of experience to assist each buyer that are fading into the sunset. Now the new agents on teams are assigned the buyer prospects, and told to get them into a house. Because the public has never been exposed to the benefits of working with a buyer-agent, they won’t miss them when they’re gone – and as far as they are concerned, working with the listing-agent’s team member got them the house.
The realtors who make up the old guard – those with 20+ years experience – still have a box of business cards so as long as they pay their dues every year, they will still be ‘in business’, technically. But with buyer-agent compensation being crushed by greedy listing agents, there is less incentive than ever for those senior realtors to do the tough work with buyers when instead they can jump on another cruise to Baja.
Some day – and it could happen in 2023 – a major company will emerge who spends hundreds of millions on advertising to attract consumers to their home-selling machine. What that machine looks like doesn’t matter – it’s because they spent the advertising dollars to get the customers that causes them to take over the industry.
Chicago’s herd of real estate agents is thinning — by thousands of agents — as the housing market grinds through the slowdown.
The number of active agents in the Chicago area in the fourth quarter last year was down 24 percent from the previous year, according to a company that monitors real estate agents and their transactions. There were about 7,200 active agents in the fourth quarter, down from 9,600 at the same time in 2021, which capped off an epic year for residential real estate across the nation.
The report defines an active agent as any agent that has a listing or co-listing, as well as buyer agents who participate in a residential transaction during the quarter.
Most of the dropout occurred in only the last six months, highlighting the rapid impact on the jump in the size of interest rate increases to 75 basis points that the Federal Reserve started implementing in June after making smaller hikes previously. In the third quarter last year, there were 9,048 active agents, meaning the area’s market participation fell by more than 1,800 agents in the fourth quarter from the months prior.
The data only accounts for agents who have closed deals, meaning deals under contract but not completed weren’t counted.
Jim – Do you think if supply remains so tight for an extended time, that sellers will catch on, and only agree to a listing fee (say 2%), and not agree to any buyer’s agent fee?
Somewhat like what the list-only DIY brokerages do?
Oh sorry and thanks Freedom for bringing that up – I should have tied it all together.
The current lawsuits against the big brokerages aims to do just that – ‘decouple’ the commissions, and have sellers only pay their listing agent.
It will be the final blow to buyer-agents. There will still be a few around to help you complete the forms, but that’s it.
A good buyer’s agent is worth his/her/them weight in gold. When buyers become scarce again, sellers will be glad to pay you for finding a buyer. We have all seen markets like this. However the game changer last downturn were loan modifications and banks giving sweetheart deals to REO listing agents who sold them under market to other brokers in their office who formed LLCs. Price discovery was not happening and you were aced out. Crooks.
Hang inn there.
If NAR loses the case, buyer’s agents could see themselves removed from the equation entirely, and the number of real estate agents across the country could drop dramatically, Oppenheim believes.
“You could see hundreds of thousands of real estate agents leaving the profession, and major brokerages go out of business,” Oppenheim told Yahoo. “We’re on the precipice of an armageddon that nobody talks about.”
There is the possibility of a settlement or appeals, but either outcome will still likely see the current structure of real estate deals get majorly overhauled, an event Oppenheim says he would welcome.
“I think there are too many real estate agents anyway, so I don’t think that’s part of the problem,” he said. “I think the problem is that if we remove the buyer’s agent’s commission, you’ll see the listing agent representing the buyer in 90 percent of transactions. It’s called dual agency.”
“I don’t think that’s healthy for the consumer because I think that the buyer should have their own representation. It would be no different than going into a courtroom and you have one lawyer, representing both sides,” he added.
This would create a situation where agents would have a fiduciary duty to one side of the transaction, the sellers’ side, he said.
“It’s something that’s not talked about that much, and it could be difficult, probably more in 2024, but it’s coming,” Oppenheim said.