Interesting article posted on Yahoo Finance today - Real Estate War Traps Consumers in the Middle. Basically, this is a rehash of the "discount broker" controversy with a new twist: traditional brokerages fighting back by refusing to pay the commission to the selling office. Maybe I'm naive, but I didn't know you could even do that.
For those who still believe in the tooth fairy, do not read any further.
Many traditional agents already offer discounts in many instances. What many seem to be getting upset about is premising a business model on discount services. Curiously, I find this to be a circular argument.
In the current market, I see most smart agents offering what is considered locally to be the traditional selling office commission of 2.5%. There are still many offering 3%. I even found one in the MLS yesterday where the listing office was offering 3% plus an additional $5,000 if the property could be put into escrow before July 3rd. (That seems like a commission dispute or lawsuit waiting to happen.)
With so many properties on the market, this seems like a good way to make sure that listed properties get shown or at least not avoided. Truth be told many agents will not show properties where the selling office commission is at 2% or less.
On the other side, there are agents offering commission rebates of 20% or greater. For example, the commission is $10,000 the agent rebates the buyer $2,000. The Yahoo article gives some examples of how the listing agent, when learning that the buyer is going to get part of the commission, goes to war. Silly.
At this rate, it will only be a matter of time before the listing agent tries to keep the lion's share of the commission rather than see the selling agent give part of it away. That will have the undesired consequence of having even fewer agents show the properties.
So, the net of this is that ultimately the buyer may be getting the largest cut of the commission. Not exactly the way it is supposed to work is it?
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