The commission lawsuits and action by the DOJ will cause buyers to wonder if they need to pay for representation, and what do they get if they do.
It will also be a function of how much it costs. If the service was free, everyone would do it.
It’s been like that in the past, but it also caused buyers to be a little too casual about who they selected, and they tended to just grab someone – which doesn’t always bode well.
If the fee was 1% at closing, you’d probably do it – if you liked them.
If the fee was 1.5% to 2.0% and the terms were clean and non-exclusive plus the agent made a really good case why he’s worth it, then yeah, maybe.
If the fee was 2.5% to 3%, there would need to be some guarantees or real promise that you would get exactly what you wanted, and be very impressed with the service too.
Buyers will be able to include in their purchase offer that the seller pays all or part of the buyer-agent commission. But there won’t be any promises about what a seller might pay – if anything. So buyers should be prepared to pay the entire amount to their agent, as agreed up front.
What should buyers expect? What are the skills that good buyer-agents possess and implement on behalf of their buyers? Here is my quick list:
Overall analysis of general market conditions
Video /audio tours of prospective homes for sale
Pinpoint Home-Value Analyses
Measure up the sellers and listing agents
Contingent offers that win
Tough and detailed inspections with free quotes on repairs/improvements
Expert deal management
Off-market homes for sale
Sniff out any shenanigans
See the new listings in person every week.
There are also the 132 things agents do for buyers linked here, but the real problem is demonstrating the skills. How will buyers know what they need? How will agents show them what they have to offer?
When you go to the car dealer, they let you take the car for a drive around the block. How can you do that with a buyer-agent?
It would be fruitful for agents to have a blog where they demonstrate how they work, and provide evidence of their results. But that may be asking too much of agents.
We do free consultations for sellers. Let’s do them for buyers too.
Buyer-agents should offer their list of services AND be willing to meet any prospective clients-to-be at a home for sale so agents can show them what they do. A tour of a house to point out the positives and negatives will give the potential buyers a great sense of the agent’s expertise.
Agents – let’s make the free consultation at a home for sale part of the effort to assist buyers. Besides, you want to get a sense of whether you want to work with these buyers too.
Before you get married, you should have at least one date!
What do you look for when you meet your potential realtor at a home for sale to see what they have to offer? If they add to the experience something you didn’t know, then you’re on the right track – ask questions! If they say, “Here’s the kitchen”, it is an automatic disqualification – just run to your car!
These Palo Alto guys have been making national headlines since they rolled out their reduced-commission program last week. They are offering a $10,000 fee to buyer-agents, instead of a percentage, AND encouraging buyers to come directly to the listing agent to avoid paying any fees (which is my beef).
Why would a high-end independent brokerage that sold 100 homes in the last 12 months – mostly in the $3,000,000 to $10,000,000 range (with sales of $40,000,000 and $44,000,000 too) – feel the need to effectively shut out their fellow real estate agents? Beats me.
Last week, the Department of Justice stated that commissions should be decoupled and NO fee be offered up front to buyer-agents by the seller or listing agent (though they did agree that buyer-agents can include a seller-paid commission in their buyer’s offer).
What gets lost in the discussion is the 120-year history of broker cooperation – where other agents can sell my listings, and I can sell theirs. It is a terrific system that best serves the sellers and buyers, which is our fiduciary duty.
But greed and market-share dominance is pushing fiduciary duty to the sidelines. Instead, brokerages are taking advantage of the current uncertainty to craft a quasi-single-agency package that effectively shuts out the cooperating buyer-agents under the guise of saving the seller money. Is it in the seller’s best interest to discourage the outside buyer-agents?
This is one of their first listings to hit the open market that offered their $10,000 fee to buyer-agents, and it went pending in seven days:
Agents will give you all sorts of mumbo-jumbo on why you should hire them, with the most favorite being that they are the “Local Expert”. Agents were local tour-guides before the internet – back when buyers would roll into town and plunk down their $72,500 for a house without knowing too much. But America was more innocent then.
Today, what matters more than anything is whether an agent can get people to the finish line.
If you have a particular agent in mind, all you have to do is input their name here:
Zillow will give you the sales history for any agent in America who has a webpage with them! Draw your own conclusions, but just seeing how many sales they have closed in the last 12 months is a good start.
Every agent can pull data from the MLS too.
It took me a minute to produce and share our listing history from the last 24 months with a seller:
The blip in active listings over the last week isn’t too concerning and could just be from the weather.
The count of active listings is a good indicator of the demand though. During the mega-frenzy conditions from late-2020 through early-2022, you can see that the new listings were being gobbled up as quickly as they came on the market, and there was no build-up of the supply. Last year, the demand was hot enough in the early months that the active-listing counts were fairly flat too.
If this year’s count of active listings surges above 400, it will mean that we are exiting the frenzy days, and the market’s normalization is underway.
It is subject to the overall number of listings, and I’ll reuse yesterday’s chart to show the flow:
NSDCC Listings and Sales, Jan 1 – Feb 15
The total number of listings in 2024 is still in the frenzy range.
It’s the number of active listings that help demonstrate the velocity of the demand. Are they being gobbled up as fast as they hit the market like in recent years, leaving the number of actives fairly steady? Or are the actives starting to pile up, like they used to do? (see the 2019 green line in graph at top)
This is how we will know where the Spring Selling Season is going.
Buyers already have reason to be cautious and wait patiently because Powell opened his big yap and said he was going to lower his rate THREE times in 2024.
If the active listings break out of the frenzy range and start stacking up unsold, it will be irresistible for buyers to wait longer to see if sellers capitulate on price, while hoping rates might come down too.
Want to know where the market is going? Just watch the number/trend of the active listings!
In the last week, the number of NSDCC active listings shot up by 12%, and the number of pendings dropped 10%, which at first glance looked like a bunch of escrows blew up.
But it was more due to the number of closings. There were 35 escrows that closed last week, bringing the February total up to 83 already. Last February there were only 112 closings, which we should easily beat.
NSDCC sales are 14% higher than last year, and we’ll have a few more late-reporters to add this year:
NSDCC Listings and Sales Between Jan 1 – Feb 15
Here are Bill’s latest graphs. It’s incredible to see the comparison to 2019 – the active inventory was down 57.7% but sales were only off -19.5%: