Earlier this week I wrote an article addressing some of the current issues that will likely significantly impact the residential real estate business. IIn the article, I suggested that, as a result of the various challenges to present-day practices, sellers may no longer be required to pay commissions to the buyer’s agent in the near future. Does this mean the role of the buyer’s agent in a transaction is going away and that buyer’s agents are not needed? The short answer is no, buyer’s agents are not going away.
So, buyer agents won’t be impacted by these changes?
Wait, I didn’t say there no impact or effect on buyer’s agents, I said, generally speaking, they are not going away. However, this doesn’t mean that there won’t be real estate agents leaving the profession as a result of not being prepared, able, or willing to deal with the changes. Some agents will leave the profession because, quite frankly, with the change in the way buyer’s agents are compensated, they will find that there are not enough people who see value in paying them to represent them. I know this sounds a little harsh, but I’ll explain what I mean in more detail below.
The bar will be raised…
While my earlier statement sounds a little harsh, I think the reality is that agents that are not committed to this profession, lack the knowledge and skills they should have and don’t deliver the level of representation and service they should to their clients, are going to find it hard to survive in the business in the near future. As transparency increases on how buyer’s agents are compensated, particularly when it becomes known that the compensation is either coming directly from their buyer client or indirectly from them, buyers are likely to be more selective about the agents they choose to work with. Some may argue that buyers may opt to forego having a buyer’s agent and deal directly with the listing agent instead to save some money. I will address that in more detail later, but for the most part, I don’t think that will be the case. Instead, good agents, those who know this business and the market and are true professionals with their clients’ interests at heart, will be rewarded.
Why will good buyer’s agents benefit from thee changes?
I’m going to generalize and stereotype here, but historically consumers have been pretty picky about the agent they list their home for sale with. The typical seller will interview one or more agents, ask about what they will do to market their home, want to know how many homes in the area they’ve sold, and a myriad of other things before choosing who to list with. Oh yeah, one of the things sellers definitely want to discuss, some even more so than the other stuff I mentioned, is the commission rate the agent charges. By the time a seller selects a listing agent I think they are convinced they know enough about the agents skills and service to feel they will get value for what the agent is going to cost them and the seller is very away of what the commission will be.
On the other hand, historically consumers have not only been less than picky about the agent they will use for a buyer’s agent, in a lot of cases they have been downright lackadaisical about it. It’s kind of rare for a buyer to interview agents to select a buyer’s agent, and it’s even rarer for the buyer to ask the agent what it’s going to cost them to be represented. In fact, the conversations have more likely been the buyer wanting to confirm “this isn’t going to cost me anything, right?”. As I mentioned in the article earlier this week, until a couple of years ago, when the National Association of REALTORS® (NAR) came under fire by the DOJ, NAR allowed its members to tell clients there was no cost to them. As a result, unlike sellers who knew they were paying the agent and thus are careful who they choose, buyers would pick an agent just because they were related to someone they knew, a neighbor, or just the first one that they tripped across. That practice rewarded lower-quality agents but punished better ones as they lost opportunities to people they shouldn’t have lost them to. Back in October, 2021 I wrote an article blasting the practice of representing an agents services as “free”.
I think it’s a pretty safe bet that buyers are either paying their buyer’s agents directly for representation or are aware it is costing them indirectly, I think buyers will start acting more like sellers have in the past with regard to selecting an agent. This will be a win-win across the board. Buyers will be more informed on the process and will end up with better agents representing them and serving them better, which when it’s all said and done likely save many buyers more than the cost of the agent.
But why not just skip the buyer’s agent and save the money?
I’ve covered this in depth in a few prior articles that you can access below (particularly in “Buyer’s Agents Aren’t Free“) so I’ll just bullet point some of the more important reasons to use a buyer’s agent and how a good one delivers value that exceeds their cost:
- Their knowledge and experience of the local market. A good buyer’s agent has the tools and resources available to stay up to date on home values, trends, inventory, and off-market homes that may be coming to market soon. This knowledge is used to help you find the home you’re looking for and properly guide you so that your offer is presented in the best way possible.
- Their knowledge of the type of real estate you’re looking for. For example, if you love older homes, such as the 80+-year-old ones that exist in Kirkwood, Webster Groves, you’ll want an agent with extensive knowledge of older homes. This will be invaluable when evaluating the condition of the home, reviewing your building inspection, and more. If you’re looking for a mid-century modern, it would also help to have an agent that knows what you’re talking about and where to find that style of home.
- Their knowledge of the process and guidance they provide. Today, we’re very much in a seller’s market, and buyers are having to compete with often a dozen or more offers on a home. You’ll want an agent that is detailed, knows the process and contract, and has a great grasp on how to best prepare you so that, when the time comes, your offer is seen in the best light possible by the seller. A good agent will not leave anything to chance in this area.
- Their relationship and reputation in the industry. There is a fine line on this one, as you don’t ever want to choose an agent that is more concerned with what the agent on the other side of the deal thinks of them rather than fearlessly representing your best interests. However, you don’t want an agent that has a bad reputation in the industry or is known as someone that is impossible to work with. You’ll want to find one that you’re convinced will always have YOUR best interest in mind, that understands their fiduciary obligation to you, and is well respected by their peers.
- Their commitment to what’s in your best interest. A good buyer’s agent will be laser-focused on your interests and will work to do their best to get you what you want under the best terms and price. But, at the same time, they will be confident and professional enough to also “stand up to you” if necessary to set you on the right track or to keep you from shooting yourself in the foot
I’ve written a few articles in the past that contain some good information on buyer’s agents, the value of them how to choose them and more. A partial list is below;
- Buyer’s Agents Aren’t Free
- The Value of Good Data Coupled with a Good Agent
- Transparency in the Home Buying Process Including Buyer’s Agent Commissions
- Who Pays the Buyer’s Agent?
At MORE, REALTORS®, we have been tracking these cases since the beginning and have been making plans for the changes coming to the industry. We see this as an opportunity to be proactive and make changes that will allow us to protect our agents while, at the same time, serving our clients even better than we can today. For this reason, we already have new ways of doing business, along with new processes, forms, etc to carry out these ideas. Buyers and sellers have nothing to worry about and I think will find comfort in knowing that not only are we prepared for the changes, the changes we’ve made and are making are really adding more transparency to the home buying and selling process and quite frankly making it fairer as well.
