Monday, September 16, 2013

Is It the Beginning of the End for Real Estate Sales Commissions?

When home sellers are shown the savings in fee-for-service listings versus listing commissions, they nonetheless usually choose to pay a commission. Moreover, an inherent conflict of interest is created when a seller enters into a commission-based listing agreement with a broker. Why this practice continues is anyone's guess.

In the past few weeks, though, Inman News has posted several articles on the issue, far and away more than is Inman's customary practice. This blog has done its own riffs based on the Inman stories, one having to do with innovative marketing and the other with dynamic broker startups. Does this new and sudden buzz foretell a change in the way real estate brokers are compensated?

Stay tuned. The Captain believes that the biggest driver for change is demographic. Brokerages are having a tough time recruiting young people because Millennials don't like pay based solely on commission. At the same time, their larger numbers will supplant Baby Boomers' within six or seven years, dramatically changing the housing market.

A possible last straw: Mortgage loans arguably include pay for the buyer's broker. Will lenders unbundle this amount?