Recently, The Seattle Times published an article that exemplified the glorification of sensationalized reporting to sell newspapers. The article, “Buying a Home in Seattle may get thousands of dollars cheaper…” was a gross misrepresentation of a seller’s rights, and the behavior of real estate brokers in our marketplace.
The issue at hand is that, effective this week, the NWMLS will now publish the commission rate paid to buyers agents on a transaction. We at Metropolist welcome the transparency for better understanding of how agents are paid and the value they bring. The reporting purports that this has been a “long kept secret” by real estate brokers and firms.
Metropolist brokers are trained to share how this works with our buyer and seller clients and take exception to the “spin” that the Times reporter took. Our outlook greatly differs from the sensational perspective presented in the article. Below is our analysis of these new changes.
The Seattle times article misrepresented one important fact. Sellers have always had the right to choose how much to pay a buyer broker. The current NWMLS listing agreement requires the seller pay a commission to the cooperating broker representing the buyer. It could be $1.00 if the seller chooses. That is pretty darn close to “offering no commission” and would satisfy the current requirement for a seller to pay something, which then requires brokers to show a listing to a client that meets their needs regardless of the rate of commission being paid.
The article also skews heavily around the rate at which buyer’s brokers prioritize listings based on commission. It is against current NWMLS rules to in any way dissuade a buyer from looking at or buying a property based on the amount paid in commissions. Further, it is a punishable violation to fail to show a home to a buyer based on commissions. In fact, this new rule changes this to allow brokers to refuse to show a home if there is no commission paid. This is most certainly a detriment, if practiced by brokers, to both buyers who might be losing out on the chance to find their dream home, and to sellers who would lose that market exposure.
The reality, whether 3 weeks ago or 3 weeks from now, is that real estate broker’s livelihood depends on being part of, and adhering to, the rules of the NWMLS. The likelihood that brokers would regularly risk that by breaking important consumer focused rules and regulations is extremely low. Additionally, taking great care of a client regardless of the commission offered means future repeat and referral business. I don’t know very many brokers who would step over a dollar to pick up a dime and lose a great client in the process. Further, there are even fewer who could afford to get kicked out of, or sanctioned by the NWMLS.
THE POTENTIAL DOWNSIDE FOR BUYERS?
Real estate commissions have always been part of the purchase price of the home. Regardless of who writes the check, ultimately the buyer is the one who pays it when they buy the home for “market value”.
Here’s the thing. Commission negotiations are not a factor in determining the market value of a home. Supply and demand are what set market value. We are currently experiencing the longest extended seller’s market in most of our memories here in Seattle which means there is upward pressure on price, and competition for listings, regardless of what the commissions are.
Buyers don’t base the price they are willing to pay on the rate their broker is getting paid. This is just not the reality of the process. Buyers buy homes when they find one that is a good fit. And in the Seattle market quite often they just have to pay what it takes to get it.
This means buyers could potentially end up paying the “market value” for the home they would have paid anyway, and also end up paying their broker on top of that because the seller didn’t have to. Same high values, more money for sellers, more expense for buyers.
THE POTENTIAL DOWNSIDE FOR SELLERS?
While buyers don’t base the price they are willing to pay for a house on the commission being paid they could very well choose not to bother looking at a house they can see is going to cost them a lot more money in the end. This could end up unintentionally costing sellers quite a bit of money if they don’t have the right broker to help them strategize to maximize their market exposure and appeal in comparison with their competition.
BUT IN THE BALANCE… WE THINK THERE IS AN UPSIDE FOR EVERYONE INCLUDING BROKERS…
One thing that has been a surprise to me over the years is how few brokers use a professional contract when they choose to work with a buyer. Listings require listing agreements. But brokers seldom sit down with potential buyer clients to have a clear and extensive conversation about the buying process, the value they bring and how they get paid. They don’t set a standard for their business and they run themselves ragged not knowing how and when they will get paid, or how much it will be when they do. This has never been in the interest of buyers or sellers. Stressed, overwhelmed people do not make sound advisors.
I hope this change in rules spurs many great conversations between brokers and their potential clients where buyers are given the opportunity to make an educated decision in choosing the right experienced professional broker for them. Not just the first one willing to open a door for a fee.
This could result in an elevated level of professionalism in an already extremely professional Seattle real estate environment and increase the quality of guidance both sellers and buyers receive when they launch into the adventure of making one of life’s biggest investments, or selling one. That will only make our business easier.
HERE IS WHERE METROPOLIST STANDS
In Seattle, the willingness to innovate is unsurpassed in the industry. Ultimately, we feel the publishing of this data will improve client communication and more importantly, client care and service.
We believe that this new example of proactive innovation will be good for our industry, the brokers in the field and the clients they are representing. Of course, we understand that sensational headlines catch attention, but make sure you ask your broker about what this truly means. Metropolist brokers have been practicing this for over 4 years now.
The Learning Lab at Metropolist teaches weekly contracts classes to our brokers and any that wish to visit, as well as quality UN-boring continuing education with the intention of doing our part to elevate the professionalism in our marketplace. We are developing a class specifically to discuss these changes and help brokers learn how to effectively represent buyers with a buyer agency agreement. Check out the Learning Lab for more information on all our classes.
We welcome conversation and collaboration to elevate the client experience and have invited the author above, and really any journalist interested in reporting on our industry, to visit one of our classes to see how great professionals have always been doing things.