By John Stemlar, Sage Real Estate Advisors
If you ever listed a home for sale with a traditional real estate brokerage, you know how commissions work. The Listing Agreement provides for half of the (typically 6%) total commission to be paid to an agent bringing a buyer. If the buyer has no agent, however, the listing agent gets both sides – the entire 6% commission; this is known in real estate as a “double dip.” This customary commission structure holds the potential for a serious conflict of interest between the listing agent and her client where there are two or more competing offers on the home.
There have always been homebuyers who, for whatever reason, choose to not have a real estate agent. In recent years, there has been an increase in agent-less buyers.
A listing agent receiving competing offers on a listing, where one is from an agent-less buyer, has the double dip incentive to favor making a deal with that buyer versus making a deal with a buyer coming through an agent, with whom the commission must be shared. The listing agent controls the negotiations, manages the information and filters the communication among all the parties. She is, therefore, in a position to manipulate the process in favor of a deal with the agent-less buyer for her own financial benefit. Her unwary seller-client would never know if he was sold out; that perhaps the best deal could actually have been negotiated with the agent-represented buyer.
When you hire a real estate agent, you expect that she will promote and protect your interests, free from conflicts of interest. Your agent’s financial interests should NEVER come into play. Recognizing this, Sage adopts a commission structure that eliminates the double dip where there is no buyer agent to pay. In addition to avoiding the potential conflict of interest, the unearned “excess” commission either stays in our client’s pocket or creates more price flexibility to bring a deal together. This commission structure is consistent with True Agency, our unique, fiduciary standard of brokerage.