Does the pope condone Divorcing Commissions?

Galen

Jul 17

Agents

pope on divorced commissions

There is an ongoing debate over divorcing commissions in the real estate blog world that hasn’t yet jumped into the mainstream media. Divorced commissions doesn’t refer to the consumer divorcing the agent of their pay and it will certainly need a better name to get any traction (pay for representation?). In a word, it means you as a consumer pay your agent for representing you as a buyer or as a seller.

As it stands, sellers pay both their own agent and the buyer’s agent. They typically pay 2-3% to the agent who helps them put their house on the market, advertises it, advises them on offers, and negotiates on their behalf at closing. They then offer 2.5+% to the agent of the person who wants to buy the property. That’s to pay the “buyer’s agent” for dragging you to a bunch of properties, helping you figure out what’s right for you, advising you about each property, helping you put together an offer, and negotiating on your behalf through closing.

I’ve been racking my brain trying to find an appropriate analogy for this. Maybe it’s like bringing your lawyer to a divorce hearing (real divorce, not commission divorce) and having your soon-to-be ex-spouse pay your lawyer’s bill.

But it’s not really like that, because you as a buyer end up paying the commission. Say you just paid your agent yourself: The seller would probably pocket some of that 2.5+% they were offering your agent, but they’d probably also reduce the price of the house somewhat, leaving you with a choice about how much service you wanted from your agent and how much you wanted to pay for that service.

So when will commission divorce be just as common as the marital variety? Probably no time soon: banks are not used to it, so they would be wary of paying your agent from your end. Additionally, no one is going to go first: if you’re selling your your house, you don’t want to be the cheapo who offers $0 commission to buyers agents (because some of them will discriminate against you).

Jeff Kempe cogently argues that the perception of free buyers commissions makes consumers lazy about finding a good agent. Since divorced commissions are really an academic discussion in the short term, buyers should focus on finding good agents who will work on their behalf regardless of who is paying. Like in any industry, there are good real estate agents who focus on the long-term business and there are not-so-great agents who focus on the best buck today.

Interview a couple of great agents who can meet your needs and really know their stuff, describing what you need from them and what you’re looking for in a property, ask to talk to previous clients, and figure out if they are someone you would want to work with. Ask questions and ask more questions.