Do Buyer Agents Avoid Flat Fee MLS Listings?

Will buyer agents avoid bringing their buyers to homes that are listed on the MLS as flat fee listings? The answer and deeper truth may surprise you...

Do Buyer Agents Avoid Flat Fee MLS Listings?

No, the vast majority of buyer's agents do not avoid flat fee MLS listings.

You may occasionally come across a real estate agent who avoids them, but even more common is having an agent who refuses to work with certain agents who they have had disagreements with in the past. Many buyers and sellers would be surprised how often an existing agent-to-agent relationship destroys a potential sale before it even starts.

Real estate is a contentious business and agents that are around long enough are bound to have a deal that turns sour, which can create lasting issues with the agent on the other side.

They Will Avoid...

Buyer's agents will avoid a listing that is offering a below market commission. The typical commission offered to buyer agents on the MLS is around 2.5%, depending on the home value.

We help sellers list on the MLS for a flat fee and they choose how much commission want to offer buyer agents. It never fails that when the seller offers buyer agents less than 2.0% commission, some buyer agents will call and state they will not bring their buyers to the home due to the low commission.

Clearly this is not behavior that is in the best interests of the buyer, but the buyer's agent has a conflict of interest. For example, if a buyer is looking at properties in the $300,000 range, their agent is expecting a potential payday of:

$ 300,000 price
x 2.5% commission
$ 7,500

If a seller decides to offer on the MLS half of the typical commission (1.25%), then the buyer agent would receive a payday of:

$ 300,000 price
x 1.25% commission
$ 3,750

It is quite the difference to the buyer agent ($3,750) and often leads the buyer agent to nudging their buyers to different homes... homes that happen to be offering the market rate commission (e.g. 2.5%).

What About Collusion?

Some might be tempted to think that buyer agents would refuse to work with any seller who does not have a full-service agent that they are paying a 6% commission - the logic that the buyer agents would collude to protect all agents from commission erosion.

But we know this is not reality.

Cartels like this don't work because there is too much incentive to cheat (among other issues, including being illegal). Agents are human, nearly all of them will work with sellers who have flat fee listings as long as they can get their market rate commission - whether they get paid 2.5% from a flat fee listing or a full service listing, they could care less, since it does not impact their bottom line.

Posted in Seller, Seller Marketing on Oct 15, 2015