Real Estate Future in Distance
From the beginning, real estate brokers worked with each other and shared their commissions. That’s why sellers have always paid two agents to sell their house, one to help them and one to bring a buyer. Both agents worked for the seller.
The internet changed everything by giving consumers new options and new market access. Today, nearly every buyer searches the web. More than half find their homes themselves, online and without an agent.Since 1996, by law a buyer’s agent works for and owes a duty to the buyer, even though paid by the seller.
The Problem with Real Estate
Yet sellers still pay the buyer’s agent. Known as the “Selling Office Commission,” this seller-paid fee creates two giant problems. First, it keeps commissions artificially high. Because the fee is paid by someone other than the customer, there is no meaningful downward market pressure on it. Today – just like 100 years ago – the buyer’s agent is almost always paid 3% by the seller.
Second, this fee creates an obvious and real conflict of interest, which isn’t resolved simply with a law that says it’s OK. Like they say, “follow the money.”
Thanks to Zillow, sellers can finally stop offering this commission. This means that agents will have to look to buyers, their clients, for their fee. Lower commissions will soon follow, reducing overall transaction costs — a win for everyone.
Moreover, if buyers pay buyers’ agents, the conflict of interest at the heart of real estate is resolved. POOF! Gone. Suddenly we will live in a world where the interests of buyers and their agents are aligned. Ah, true representation at last….
Unfortunately, Zillow’s listing and marketing platform is not available to brokers who aren’t also on the local MLS (collusion, anyone?). So it is up to sellers themselves to lead the charge. By listing “for sale by owner” on Zillow, a seller can market and sell directly to buyers, each of whom can then be responsible for their own agent.
Easy? No. But that’s the leading edge for ya’. Some day, there will be a non-MLS real estate broker who offers a viable alternative marketing and listing platform. The future will arrive eventually. Until then, sellers need to market and sell on their own if they want to save 3-6% of the sale price in broker fees – with an attorney on board, of course.