Uncoupling Commissions: A Fairer Marketplace?

Will this be the episode that gets us canceled? Probably not, but in this episode, we sit down with Steve Brobeck, Senior Fellow for the Consumer Federation of America, to discuss cooperative compensation and commissions. Steve’s insights have been cited in the lawsuit settlement, debating the effects of commission price-fixing and advocates for a more transparent system.

James and Keith challenge some of his views, exploring the complexities between buyers, sellers, and agents. Steve’s unique perspective on the future of real estate commissions and licensing standards provide a thought-provoking conversation.

Follow the link below for the reports mentioned in the show:

The Agency Mess
Florida Report
NYC Report

Full list of Housing reports from CFA.

Connect with Steve on LinkedIn - learn more about Steve at CFA.

This podcast is produced by Two Brothers Creative 2024.

Chapters

00:00 Introduction and Objective of the Conversation
01:19 Background of Steve Brobeck and the Consumer Federation of America
03:13 The Effect of Lawsuits on Commission Price Fixing
11:38 Cooperative Compensation and Price Fixing
13:28 Buyers Paying Their Own Agent Fees
19:43 Sellers' Unwillingness to Provide Compensation to Buyer Agents
28:14 DOJ's Position on Seller's Choice of Compensation
32:01 The Future of Agent Commissions and Negotiation
34:43 Settlement and Mandatory Buyer Contracts
35:12 Agent Commissions and the Need for Change
41:50 Simplifying Contracts for Transparency and Fairness
46:30 Improving Education Requirements for Agents
58:03 Finding Common Ground for Positive Change in the Industry

[Cleardoor]

Thank you for keeping the market informed. Well done. From our perspective, it's not necessarily the method (i.e. buyer financing) buyer agents are paid, but the amount (2-3%) that's off-market.

[DolceIbarra]

Home prices are not going to go down by having buyers pay the buy side commission. Cost to purchase can only go up by having buyers finance the buy side commission. We’re making it harder for the most important people in the system to participate in the system. An earlier podcast interview nailed it, when it was said that the unintended consequences of choking off the first time homebuyer isn’t going to be evident for another 15-20 years, and it’s not going to be pretty for anyone. This interview doesn’t seem to understand the damage that their theories are causing or maybe he does, because he did state that making it easy for the buyer to finance the B-side commission would be a solution, which is exactly what was being done by allowing it to be wrapped into the price of the home. This is a very frustrating podcast to listen to but I’m glad you do these interviews, I find them invaluable.

[RexTheDane]

this content is so good. I want to hate the way a conversation seems to be pointing and then you or the guest summarizes it in a way that makes me appreciate the intellectual ride it took to land on that answer. thank you very much. (broker/owner/one man office trying to figure out where this is all heading)

[AZNewsRE]

Excellent. As a licensee for 52 years and a real estate educator for 48 years, I was preaching against sub-agency for years. NAR's stance on sub-agency back in those days was insane to require it until the 90's. Clearly that was promoting dual agency because the buyer's agent would in fact be an implied agent to the buyer. This in Law of Agency is called an agent by Estoppel. NAR has had many missteps over the years and has done more harm to the industry than good in many respects. Sub-agency and all of the issues today should have been resolved at least in the 70's or 80's, and if it had been, real estate agents would be more professional today in public opinion. NAR, in my opinion, as driven all of these terrible policies and now is paying for their lack of smart leadership.

[AZNewsRE]

Steve is correct about making entry more difficult. These discussions are not new and have been discussed even back in the 70's and every decade thereafter. James is 1000% correct that all states are not on board with that. Even in Arizona, they want to make the exam easier because the passing rate is too low, and they believe that it prevents some people from entry into the business. And yes, they are looking at the financial aspect to the general fund of the state too.

[barttracy]

Wow! There are no fees in the sale price of a home. A home is priced on many factors however it is not based on the fees to sell their home. Buyers ultimately decide the final sale price. 44 years it does not appear you understand how selling a home with a real estate consultant works.

[AZNewsRE]

And to Keith's excellent point - stay away from Facebook Groups! And just to prove Steve's point on education of agents, I saw a post a few years ago where the agent wanted to know the payment on a $300, 000 loan at 5.50%. The agent couldn't figure it out - enough said about that!

[stevenhattan]

Fantastic interview. Very enlightening and a great choice of guest, guys.

[barttracy]

A seller should have the right to offer or not offer compensation to a real estate consultant for bringing a qualified buyer. Simple as that. There is no need to complicate the ability to help both buyers and sellers navigate through the selling and buying process with real estate. Also NAR membership needs to be an option for real estate consultants not a forced membership.

[sarahgjrealtor]

I enjoyed this episode. Your guest says the current commission structure is price-fixing, but then he said we should standardize commission at 2% per side. Which is it? Also, I have long said that we need a standardized mentoring system. Last, in Florida we have to get an agency agreement signed before "working with a buyer" which starts with "identifying properties". That was a major change as a result of the settlement. I guess theoretically the point is to have a transparent conversation with buyers about my fee and how it's paid, but your guest says it shouldn't be signed until the first offer. The most important thing he said was that we need the political will to get Fannie and Freddie to allow buyers to finance their buyer's agent fees. All in all, a good conversation.

[barrydunn]

Thanks for bringing him on. It’s nice to put a face with all the reports he has published. 😀😀

[NewLegacyRealty]

This entire conversation to me sounds convoluted. How can you begin to have a buyer and seller agree to/negotiate anything independent of their buyer and seller agents that they hired? This was confusing.

[realtywithnate]

Wouldn't it be great if those who know best could recommend what everyone should make and what everyone should do and how many should be involved in one industry or another? You know... now that I think about it, there are places in the world that do this. Places where everyone lives in a state of euphoria, where fairness and equity abound, and money grows on trees. Why stop at 2% as a fixed rate for agents as the guest suggests? Less would be even better for the consumer no? Nobody trying to earn a living has the time or the luxury for all of this pontificating and theorizing. Isn't it great that some do?

[AZNewsRE]

I was okay with your guest until he thought the commission rate should be fixed at 4% and 2% or thereabouts. I would think this would be price fixing at its highest level! Talking about "target" rates?? Serious! if an agent wants to charge 10%, as long as there is no collision among other agents and the buyer is okay with 10%, then that deal is 10%! Should we start to target the price of 75-inch TVs at $500 and attorney fees to $200 per hour rather than $800 per hour. In my opinion, any discussion of maximum dollars for anything would be a path that no one should go. If so, then maybe I can get my new car for $20, 000!

[loripoirier-realtor]

I haven't finished listening to this but I felt I had to comment about the part wherein the guy that does "research" states the easy in theory but hard in reality theory is to have the buyers be able to finance the commission for their agent. Hello, that is exactly how's it's been happening!!! How did neither of you pick up on that? A contract between buyer and seller has always been a bilateral agreement. And I love that this guy thinks home prices will come down because of this. I have not seen that at all nor is there a field in MLS to note which comp had a buyers agent payout and which has not. Not ONE seller will reduce their list price because of this. I'm extremely disappointed in this "interview' thus far.

[MAZDAKPRODUCTION]

there was never price fixing. When was the last time this guy bought or sold a house is the question you should have asked him. Never is what I assumed. You guys gave him too much cloud and too much respect for all that ignorance he brought to the table

[marjiegirl]

Steve you sound like the dog that caught the car... now what, you seem to have no actual definitative way to proceed. It is great you want to finance compensation, but we don't have the power to make that happen with the snap of a finger. You may feel like you advocted for the sellers, but you have left the actual consumer (the buyer) in the lurch.

[kevinleatherman]

Steve, It is highly inappropriate for you to suggest any Broker Fee numbers to consumers. You are trying to price fix! What qualifies you to understand broker and agents costs of doing business? Further, it is ludicrous for you to suggest a seller should negotiate the Buyer Broker Fee when it is included in the purchase offer. The seller should respect the fact that the buyer negotiated their own Broker Fee and mind their own business and negotiate the sales price which controls the seller’s net.

[michellecluff]

It pains me to hear the discussion of dropping BA fees lower. BAs are working their butt’s off. I know it’s negotiable. I know the good agents will demand more but it is consistently across the board the discussion is “pay the BA less”. I am a broker. They deserve more. They need to show their worth and get MORE.