Broker Compensation Conflicts
By Jim Palmer Jr.

For the second time in a month Realtors® have been accused in a lawsuit of engaging in a “concealed conspiracy” to force sellers to pay buyer broker commissions, thus theoretically squelching buyer’s ability to negotiate lower commissions.  That lawsuit goes to great effort to paint the ominous picture that the MLS (Multiple Listing Service) format is nothing more than a good ole’ boys club that has colluded in MLS’s across the country for their own benefit. While that assertion may seem plausible on its face, it is a one sided accusation and a far cry from the actual truth.

Spokane Brokers along with WA Association of Realtors® have been extremely proactive in their efforts to head off this type of argument by making changes to listing forms that make it abundantly clear that there are (and have always been) other options that are different than the traditional MLS model where commissions are built into the sales price of a property.  Washington legislators have also chimed in on this conversation by changing the Law of Agency for real estate brokers so that buyer brokers cannot engage with buyers without first creating a written contract that clearly spells out the compensation for the broker.

The recent Texas based lawsuit claims that home sellers “have been compelled to provide an inflated fee to brokers who represent their properties.”  That is far from the truth as well.  So let’s talk about the truth.
For over a century, real estate brokers have been driven by consumer pressure to provide their services in a format that offers one-stop-shopping in a comprehensive and accurate database AND with a commission based model that allows for compensation to the broker ONLY when a transaction has successfully closed, sort of like a Chinese doctor who doesn’t get paid if the patient doesn’t get well.      

Another truth is that if consumers were willing to pay on an hourly basis when brokerage services are rendered, fees for their services would/could/should be much, much lower. But most sellers and most buyers don’t have money to pay for such services out of pocket and have traditionally been unwilling to do so.  They would rather pay more on a commission type scale when assets are freed up from seller’s equity at the conclusion of a transaction. 

Yes, it is true that buyers who choose to pay their own broker will be able to negotiate a much lower fee, but they will have to be prepared to pay when invoiced for those actual hours worked, if the consumer chooses that model.