In a recent episode of the Real Estate Insiders Unfiltered Podcast, the hosts dive into commission sharing practices for agents, the associated risks and the alternatives ahead of the National Association of Realtors‘ (NAR) business practice changes that are set to take effect on Aug 17.
Co-hosts James Dwiggins and Keith Robinson urge agents to stop sharing commissions and discuss ways that listing agents can put their seller’s needs first while avoiding legal trouble and creating an excellent experience for their clients in an uncertain market. They believe that agents should focus on building their businesses the right way instead of chasing workarounds.
To kick off the conversation, Dwiggins shares his overall thoughts on commission sharing and discusses buyer compensation after an offer is made. To illustrate his point, Dwiggins uses a car dealership analogy.
He explains that when car dealerships are profitably selling cars, you won’t see any special offers or deals until after you express interest in the vehicle. Dealerships that understand their value proposition don’t need to cut prices with special offerings until after an offer is made, Dwiggins explained. Conversely, struggling dealerships would offer to cut prices to attract customers.
Dwiggins ties his example into real estate with a pointed statement.
“I do not believe that you are serving your seller correctly if you are advertising compensation in advance of an offer,” Dwiggins said. “Only if it’s a buyer’s market should you offer potential compensation and or concessions.”
Instead, he suggests that listings agents express the seller’s willingness to entertain any and all requests for compensation in the purchase contract to avoid showing the seller’s hand unnecessarily. Sellers may not understand the sentiment behind this approach, and that’s when agents should stress that expressing a willingness to entertain all requests in the purchase contract opens up opportunities for a higher net profit.
“We put their interests above our own and we advise them,” Robinson added. ”And sometimes that means we’ve got to lovingly say, ‘Hey, silly, you don’t actually care. What you care about the most is the net’ and what gives us the best opportunity.”
Drawing from their shared experience as executives at NextHome, Dwiggins and Robinson share another key nugget of advice: don’t do cooperative compensation. Using standardized forms to outline buyer’s agent compensation plays into what lawyers would consider to be a “potential conspiracy,” since you’d be prioritizing compensation over seller needs and using the MLS as a vessel for these transactions.
Dwiggins reemphasizes that a seller’s agent can advertise compensation off the MLS, remove themselves from the equation and be free from liability by telling the buyer’s agent to put any seller-provided compensation in the closing offer — which would allow the seller to pay the buyer agent’s compensation directly.
Dwiggins and Robinson also discuss commission sharing websites and the legal implications of using them. Following the NAR lawsuit, the Department of Justice and its attorneys stated that they do not approve of platforms where agents can steer clients based on compensation. The duo urge agents to avoid commission sharing sites and the risk of legal trouble.
To close the conversation, Robinson explores ways that agents can benefit from the new compensation rules by understanding their top-line revenue. Agents can curate a better buyer experience by offering certain services that justify the need for extra compensation. These services can include hiring a mover or covering a storage unit — and they can be factored into written agreements.
Before signing off, Dwiggins and Robinson urge agents to make smart business decisions in light of the NAR settlement and use the changes to their benefit instead of trying to find a workaround.
maybe the whole thing is backwards, the agent that deserves to be paid is the one that actually sells the home not the one just simply listed it. Sellers could LIST on Zillow , use a showing service to set appointments, and pay justthe agent that produces a buyer