The just-completed presidential election had a variety of issues for American voters to consider, but as has usually been the case with these four-year contests, the one concern that trumped all others was the economy. Or, more specifically, what the new leader could accomplish to get more money into people’s pockets.
It’s similar to the current residential real estate realm. While lawsuits, mortgage rates, inventory and other subjects are worthy of much discussion, what really counts to most agents, like workers in other industries, is how they can earn as much as possible. The now legendary Burnett verdict has caused upheaval in how real estate deals are transacted, and not in a positive way regarding commission percentages for buyer agents.
Rick Haase, president of United Real Estate, which has experienced phenomenal growth over the past few years, stresses that it is imperative that agents be ready to make whatever changes are needed as the market continues to evolve.
“There are always two times when it becomes necessary to double down on training, education and development,” he says. “The first is when someone is new to the job or position, and the second is when the job/role once again becomes new. The latter of the two, in real estate, can happen due to new programs, tools and services being launched or due to outside forces like regulatory or legal changes.
“Agents who are not properly prepared to respond to change are at a disadvantage in protecting their clients and maintaining their earnings. United has effectively done this throughout the nation with localized, regionalized training that reaches across the entire country. Helping our agents, brokers and owners understand and navigate the changes has been a key determinant in not having our businesses disrupted by the external changes landing on the business.
“Our team has spent countless hours helping our agents understand and communicate their value on the buyer representation side just as we have for years on the seller side of the transaction. As an early indicator of the effectiveness of those invested hours, our agents have seen only a nominal impact on commissions earned.”
RISMedia’s new Contract & Commission Study focused on the initial impact of the Burnett settlement changes. The report, covering the last year (and specifically carving out post-settlement activity), surveyed over 1,300 agents and brokers across the country and took a deep dive into the seismic ripple effect of recent policy changes regarding when, where and how real estate compensation has changed. The data can serve as a roadmap to a successful future, pinpointing which brokerage models, regions or agent profiles are bucking the commission negatives, or how companies are adjusting in the face of new rules.
One particular result from the study was that inexperienced buyer agents saw commissions drop by 0.76% post-August 17, while experienced agents were only down 0.10%. Why did this happen? What are experienced buyer agents doing better, or what do they learn to mitigate a commission drop? Real estate professionals from several brokerages provided opinions.
“Consumers are now selecting agents based on their experience and the value they bring. It’s a more intentional process. Like for other professionals, the pay scale varies based on who you hire.”–Pam Rosser Thistle, agent, Berkshire Hathaway HomeServices Fox & Roach, REALTORS®, Philadelphia
“I believe the main reason why experienced buyer agents are doing better is because they confidently articulate their value.”–Liz Torres, agent, United | Chicago and CRR Fort Lauderdale
“It has been my experience that the majority of experienced agents are not shy about asking their clients for their actual worth, while the inexperienced ones are a bit timid in doing so. The experienced agents negotiate themselves better because they are more confident in their worth and seem to explain that to the client better than the inexperienced agents do.”–Richard Williams, managing broker, United | Chicago
“With the changes and the inability to publish cooperating commissions, we saw many agents unable to explain it clearly to buyers and sellers alike. Experienced agents wisely explained to sellers that although all commissions are negotiable, buyers’ agents should be compensated for the hard work needed to stay an important component in the listing agreement.
“Some agents, not necessarily well-versed in the new laws, told sellers they no longer had to pay buyers’ agents. This has always been true, but standards of practice allowed these fees to be rolled into the selling price, after which the seller would offer the buyers’ agent a portion. This practice has not changed, but the level of experience in agents left many sellers confused, and reeducation became imperative.
“For a while there, sellers adjusted down their offer of cooperation, or hoped buyers would pay their agents. But with the market starting to finally adjust, we see a return to sellers being well educated by their agents and recognizing the incredible value that buyers’ agents bring to this market. Sellers are now getting competitive with their offers of compensation they are paying out to their agents and the buyers’ agents. Commissions have always been negotiable, but experienced agents on both sides recognize the unparalleled value they bring to both sets of clients.”–Janen Ardia, broker/owner, RE/MAX Heritage Properties, Flanders, New Jersey
“It can be tough to pinpoint the exact reason there was a drop in buyer agent commissions, but I believe it to be a combination of things. One, now that the way listing agents may approach potential sellers with fees might be different, it is opening up even more negotiation than before when it comes to buyers agent compensation. On the side of newer agents experiencing more of a decrease in buyer agent commissions versus some seasoned professionals, it is likely the difference of approaching negotiations for those commissions. Less experienced agents may have a harder time negotiating for a higher fee because before, they never had to do that. Experienced agents may have more confidence approaching this new age of real estate when it comes to speaking up for the value they bring to a transaction.
“I think it comes down to having a certain level of confidence that an agent does or doesn’t have. Just a couple months ago, to many agents it was ‘assumed’ that they would have a commission paid, and newer agents may have a tough time adjusting to the new normal. Experienced agents are likely standing their ground a little bit more when it comes to negotiating their fees by displaying their value in the transaction. Bottom line, I think some agents might not be ‘sticking up’ for themselves for the high level of service they bring to their buyers and, ultimately, the sellers, and may be a little too passive when it comes to negotiating a higher commission for themselves.”–Blake Blahut, broker associate and REALTOR®, Realty ONE Group Inspiration, Orlando, Florida
“This trend has been ongoing for years, but has manifested differently over time. In the past, less experienced agents often lost out on buyers entirely due to their lack of confidence and knowledge. For instance, years ago in our local MLS, we were prohibited from including personal contact information in public remarks. This was because buyers would see another agent’s number, call them, and realize the more experienced agent offered significantly more expertise, leading to the less experienced agent losing the client.
“However, this dynamic is now more easily monetized. Nowadays, less experienced agents tend to lower their fees to align with the value they believe they bring to the table. They believe that half a loaf is better than no loaf. The discrepancy is less pronounced with more experienced agents because they understand their value and what they bring to a transaction, and can confidently demonstrate their value, and that price is only a consideration in the absence of value…
“Buyer representation doesn’t start with signing an offer or after showing a single house. It’s a comprehensive and lengthy process. When agents accompany buyers through the entire process, there’s a different level of representation and education that comes with that. Unfortunately, because people have access to some information online, they sometimes believe they can represent themselves or negotiate a newer agent’s commission, thinking they’re saving money. While that may occasionally be true, less experienced agents often lack the skills to navigate transactions, negotiate effectively or handle structural issues, which can end up costing buyers more money. I see this happen frequently.”–Jeffrey Decatur, broker associate, RE/MAX Capital, Latham, New York
“The impact of recent changes to commission structures will vary across regions, being heavily influenced by local market dynamics and buyer preferences. As buyers become more informed, their expectations for agent services will continue to evolve. Agents must differentiate themselves by building strong client relationships, offering innovative services and adapting to market trends. Being able to effectively communicate and consistently demonstrate your value is key.”–Adrian Provost, owner/qualifying broker, Realty ONE Group Terminus, Atlanta, Georgia
“In my experience, new agents often face a learning curve when it comes to recognizing their worth and confidently negotiating commissions. Like in many fields, someone who is just starting out may not have the same negotiating strength or established client relationships that come with years of experience.
“More seasoned agents have refined their skills over time, learning to communicate the value they bring to transactions, which can help stabilize their commissions even in changing markets.
“When I was a new agent, I had no idea that commissions were negotiable. I thought you just take what was offered and be happy. As I learn more about the business and industry, I begin to realize that there are lots of different ways to set your compensation structure as an agent. It’s all based around your business model and what works for you. But you have to be sure you bring the value to match the level of compensation you’re requiring.
“Just as a recent college graduate’s initial pay rate may differ from a veteran in the same field, newer agents may still be building that foundation. With time, newer agents gain not only experience, but also the knowledge and tools needed to advocate for their work and negotiate effectively.”–Danielle Andrews, REALTOR®, Realty ONE Group Next Generation, Tallahassee, Florida
