I saw an advertisement for a company. It was a house listed for sale and it was new construction, and so it was being listed by the company that built it. And one thing in their advertising that they said, and this was public advertising, they said if the buyer comes without having an agent then they will discount the pricing. And the question is, is that legal? Is that ethical to advertise that you will charge less if they come without an agent?

Real Estate Commission Splits

Now, one of the reasons this is even a thing is because of a market that we sort of set up in the real estate industry where seller agents, the person representing the seller, would often split or share their commission with the buyer agent. One of the good reasons they set up this system was that it gave more opportunity for buyers to get an agent and to get representation and to have someone on their side advocating for their needs.

So that was one of the benefits of this system. But one of the drawbacks is it sets up this situation like we’re talking about now, where the person selling the home might save money because they’re the one paying that commission. They might save money if the buyer comes without representation, and that’s a double benefit for the seller if the buyer comes without representation because then there’s nobody advocating for the buyer’s needs, right?

It’s Not Illegal to Advertise This Way

It’s not illegal in any way to do that type of advertising, but it is problematic for the buyer in that the buyer is not going to get all the knowledge and help that they potentially need, right? And so it’s not illegal that they would offer that, but the situation of the market where real estate agents split the commissions has kind of created some of these edge cases where, well, I say edge, but it actually happens quite frequently where the amount of commission becomes part of the negotiation. And that’s not all bad.

All of that should be negotiated, but we wish that the buyer and seller could individually negotiate with their agents and then they could come together on terms on the property. So this market where there’s sort of a split between buyer and seller agents is a system that has some benefits for sure, but some of the drawbacks I hope maybe we can find a better solution for.

Recent Changes for the Better

And there have recently been some changes that are for the better. For example, there was a change about 18 months ago as of this article where they sort of made a change and divided the commission amounts in the contracts. So it’s very clear what seller agent gets and buyer agent gets, and it wasn’t a single number that was going to be split. And so that kind of made things a little more clear and removed some of this issue. But we’re still seeing some of it in the market.

And so there’s still some more thinking to do for us to help find a better solution. But I appreciate everyone that’s working on it, and I appreciate the questions that help us to consider these things so that we can find a better outcome. The more we think about it, the better it’ll get.