Commissions in a Slow Real Estate Market
I've been trying to figure out what bothers me about this Bob Bruss column, in which he suggests (to a person trying to sell his house in a buyer's market) "increasing the sales commission to 7 percent with 4 percent going to the buyer's agent who produces an acceptable buyer."
There's always a conflict of interest involved with real estate brokers, especially with respect to buyer's agents. A buyer's agent gets paid if (and only if) his or her client buys, and the amount of the agent's commission is dependent upon the price of the real estate purchased. What if the buyer's agent pressures the buyer into purchasing a house the buyer doesn't really want (or a particularly high-priced house), simply because of the commission the agent will receive?
A similar problem exists if you increase the commission going to the buyer's agent. (Mr. Bruss even suggests more direct -- or, if you prefer, more vulgar -- ways of appealing to buyer's agents. These include "offering buyer's agents
incentives such as the home seller's car, a Hawaiian vacation, and
various other special incentives to get a property sold.")
Mr. Bruss wouldn't consider offering these types of incentives unless he felt that buyer's agents can successfully persuade their clients to purchase house A instead of house B. But what if house A and house B are identical in all respects other than the commission to be received by the buyer's agent? Or, what if house B is actually a much nicer house than house A, but offers a lower commission?
By increasing the buyer's agent's commission, what you are really doing is hoping that some buyer's agent will behave unethically in steering his or her clients your way. Isn't this just a bribe by another name? Is the real estate market so slow that it's really come to that?
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