Many real estate agents already were struggling to get by in a housing market plagued by high prices and low inventory. Now a proposed settlement in litigation accusing the National Association of Realtors of artificially inflating commissions threatens to forever change the way they make money.
The settlement would do away with a 6 percent sales commission as a default, a longtime fixture of home sales. Experts say that could mean lower costs for home buyers, but also changed business strategies for real estate agents, who suddenly would have to charge whatever the market will bear.
The free-for-all is widely expected to drive commissions down and force many agents out of business. But others say they think the increased transparency will help.
Among them is Michael Reisor, a luxury real estate agent in Austin, who typically handles homes worth more than $3 million. Reisor leads the Texas division of the Eklund Gomes Team, a national group that sold $3.7 billion worth in homes nationwide last year.
How will the ruling affect your business?
I ultimately think that it doesn’t overall. But it does put the emphasis on what we always felt was most important: you have to be showing value to your clients, and you have to be providing exceptional service and communication constantly. And nobody should be paying for a service if they don’t feel that there’s value there. [You need] constant dialogue, constant communication about marketing strategies, constant communication about feedback on their home — showing how and why your marketing is different than others. We’re not a “put it on the MLS [Multiple Listing Service] and hope for the best.” We want to put your home in front of the relevant buyers in all of these different markets.
I assume you use the standard commission now? Do you think that will change with this ruling?
The standard commission in Texas is always an open discussion with the seller in conjunction with what the listing broker will be doing for that seller client. So there’s always a conversation. I won’t say specific numbers, I mean the standard is 6 percent. But what I will say is that in Texas, we’re very upfront and communicative with buyer representation agreements, as well as the listing agreement, which very solidly and specifically shows what commissions are being paid, to whom and when.
Will this ruling change the negotiations or the way you interact with clients?
It’ll go from default to dialogue about what’s happening and why the commissions are being paid. And it has to be up to the seller, or that representative for the buyer or the seller, to talk about what is being paid, and what is going to be put into action for that payment and why they should be paying it to you as the listing broker.
So there might be more selling there — where you have to really show them what you’re going to do for them?
Absolutely. And that should have always been the case. And I think that for many of the great brokers that is. But I think that it’s going to have to become the default. No matter what, it’s a dialogue with the clients, and the listing trader or the buyer’s broker representative, that is discussing why they are being paid a certain amount and what they’re going to be doing to serve [the client].
Is this going to make your job harder?
No, not me personally, because that’s something that I’m always showing. I think for some people who’ve been in “default mode,” the “hey, I have a buyer, I’m getting 3 percent” or the “I have a seller, I know I’m getting 3 percent,” there’s no more default. And for those people that have sort of rested on that, it will make their job more difficult. Because all of a sudden you have to wake up and say, “hey, what is my differentiator? What am I doing? What am I offering people that makes me more compelling than someone else?”
The Q&A has been lightly edited for clarity and length.
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