A charming and seasoned agent took serious issue with my recent blog – Greed Can Be Very Costly!.
She did not like how I cavalierly mentioned that my son wrote an offer to his landlord, “without commissions.”
She was concerned that the casualness of my comment fed into the misconception that consumers sometimes have about Realtors being unnecessary.
It was both unfortunate and ironic, as I am a huge proponent of commissions – based on both personal experience and observation over a 30-year career.
SIDEBAR: My son actually had experienced brokers advising him, whom he offered to pay. They were, however, a close friend and a family member, so they refused payment.
I will repeat the reasons I am a fan of commissions below.
But – below my traditional reasons, I illuminate a new reason that is much stronger and extremely interesting (and the reason I’m writing this blog).
Traditional Reasons Why I Am Pro-Commission (What We Share With Our Clients)
I am a licensed real estate broker myself, but I got in way over my head on two occasions because, as a lender, I lacked the necessary experience to work in the real estate realm.
Many years ago, I wrote an offer on behalf of a borrower, thinking it would be an easy commission. But the property had severe condition issues, and the listing agent, bless her heart, had to coach me to make sure I didn’t get sued (and yes, I gave her my commission).
In another case, I listed my own property (a flip) with a major foundation issue that I had repaired – and I again would have likely been sued to Sunday if a seasoned broker had not stepped in to help me.
And in one more case, when Heejin and I sold one of our Texas properties, we engaged a listing agent who was so masterful at staging and marketing that she sold the property for $100,000 more than we ever thought possible.
But her composure was even more impressive than her marketing skills. The buyers’ agent was an ass, to put it mildly, and his petulant demands made me and Heejin so angry that we wanted to kill the deal.
Cooler heads (aka our agent) prevailed, however, and she salvaged a deal that would have never closed if we were negotiating ourselves. A perfect example of the importance of third-party (agent) negotiators.
So, the justifications for agent commissions are many and include: (1) Market knowledge; (2) Expertise – reading and writing contracts, understanding contingencies and market nuances, reading inspection reports, etc. (3) Negotiating skills; (4) Liability protection; (5) Access to referral networks – lenders, title companies, inspectors, contractors, etc. (6) Time (agents put in far more time than consumers realize); (7) Third-party objectivity – for both negotiating and advising emotional buyers and sellers; and (8) Financial advice, regarding financing and real estate itself.
None of this is new to most of the readers of my blog.
The Most Interesting and Powerful Defense of Realtor Commissions
But here is the most telling and powerful defense of Realtor commissions: the market and/or the wisdom of crowds.
When the NAR lawsuits (claiming that MLS and brokerages effectively forced sellers to pay commissions, violating antitrust laws and inflating commissions) surfaced in 2023 and early 2024, “experts” were predicting that we’d see commissions drop by 25% to 50%.
But, not only did commissions not drop significantly, they have risen for the last three quarters, per this post on X. They were actually higher in Q2 of this year than they were last year.
Consumers need and want competent agents – and are obviously willing to pay for them.
Credit to agents, too, for selling their value.
CAVEAT: The agent I mention above reminded me to make it clear that this is not the case in all markets, and that the data on X is not always accurate.
You Don’t Hate Class Action Attorneys Enough
Grok estimates that total settlement costs paid by NAR and various brokerages (RE/MAX, Anywhere, KW, Compass, etc.) were close to $1 billion.
Of that amount, the attorneys took home almost $600 million. While a bunch of consumers got checks in the mail for $27 (give or take).
Yes, the entire exercise that sent all of us into a tizzy, cost hundreds of millions, and wasted thousands of manhours was just another money-grab by trial lawyers. It benefited nobody – but them.
All of us pay far more than necessary for numerous products (prescription drugs, medical devices, medical services, cars, insurance, etc.) solely so we can subsidize a very politically connected trial lawyer industry.
