In this highly competitive, technical, disruptive housing marketplace, teams, iBuyers, Power Buyers and whomever else are willing to accept lower-than-historical commission models.
Downward Pressures on Compensation Models
Everyone agrees there is much downward pressure on agent commission models right now. However, as with “many” in every field, agents and brokers have different opinions about where pressures are coming from.
Carl Medford, leader of the Medford Team in the San Francisco Bay Area, believes the downward pressure on commissions comes for the competitive marketplace. Medford said, “Because the unit (inventory) count is so low for teams in this region, (teams) will do almost anything to get a transaction.”
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The result? More and more sellers are paying 5% commissions, with agents on each side of the deal getting 2.5%. Medford added there are sellers’ agents offering 4% commissions and only collecting 1.5% for themselves.
Nick Bailey with RE/MAX said that commission competition was creating a “…race to the bottom.” Bailey said, “There is always someone out there that has a license who will be willing to do something for nothing.”
Baily added, “…in a seller’s market there is pressure on commission rates to go down. In a buyer’s market there is upward pressure.”
Adam Hergenrother, owner of multiple Keller Williams brokerages, believes tech-enabled firms are “…starting to put pressure on the consumer to put downward pressure on the agent.” Likewise, companies with huge war chests from investors are exerting downward pressure on agent commissions.
Mike DelPrete, real estate consultant, indicated that iBuyers are pressuring agent commissions.
Russ Cofano, CEO with Collabra Technology, and former president of eXp Realty, summarized the bottom line on agent commissions by saying, “We’ve not hit the bottom yet in terms of commission rates, in my opinion. They will go lower.”
Ways Agents Might Defend Their Commission
Tiffany McQuaid, president of McQuaid & Company, believes that agents must be prepared for clients asking them for discounts. McQuaid advises agents to have a prepared “script” that conveys “…what makes you stand out over and above others.” She also believes that agents might best serve their own interests by proactively initiating the “discount discussion” with the client. McQuaid said that the opposite of defensiveness is proactive offensiveness by conveying your value upfront.
McQuaid said, “If they (the client(s)) are looking for an extreme cut and comparing it to what others (agents) will take, remember your value and worth. In the infamous words of Kenny Rogers, ‘Know when to hold’em, know when to fold’em, know when to walk away, know when to run.’”
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Missy Yost, an eXp agent who is the team leader of the Yost Group, will reduce a total commission from 6% to 5.5% due to intense competition. But, Yost does not discount the buyer’s portion. “I’ll do 2.5% and give the other side 3%.” Why? Because, Yost said, “You need the other agents. So, you don’t want to discount the buyer’s agent portion.”
Thanks to Inman.