I was recently online and saw a real estate agent make the statement that he would hesitate to show a property that was paying less than 6% commission to agents (3% for buyer's agent, 3% for seller's agent). The same agent also said that he would not show flat fee listings altogether.

This agent was promptly scolded by real estate investors and other agents on the website, but I wanted to discuss the narrative this agent was trying to push, along with my opinion on why the agent would make such statements.

Will agents avoid showing a listing that is not paying a full 6% commission?

Background info: On the Multiple Listing Service “MLS", you can see the commission that the seller's agent is offering the buyer’s agent for finding the buyer. The seller’s agent negotiates the total commission with the seller (for example, 6%) and then lists the home on the MLS where the seller’s agent offers a portion of that commission to the buyer’s agent.

The truth: We are a member of every major MLS in California, and none of them ask how much commission the seller’s agent is making. I have also never been asked by a buyer’s agent how much commission I was making. In addition, there are so many “discount” brokerages (for example, redfin) which are paid less than 6% commission, that if this was standard practice, the industry would grind to halt (or a lot of buyer agents would lose their buyers).

Will agents avoid showing flat fee MLS listings?

Background info: Flat fee MLS listings are when the seller pays an upfront fee to an agent to list the seller’s home on the MLS (for example, we do this for $95 in California). The agent who lists the seller’s home on the MLS is paid nothing more (caution: read the fine print when working with flat fee agents).

The seller can decide how much commission they want to offer buyer’s agents on the MLS (for example, 3%). Sometimes, but not always, the flat fee MLS listings can be identified by the listing agreement that was used, which the seller’s agent must note on the MLS. The typical flat fee MLS listing uses an “Exclusive Agency Listing” agreement.

The truth: We have done hundreds of flat fee MLS listings and never once have I had a buyer’s agent tell me they won’t show a property because it is a flat fee MLS listing. The only reason I’ve had buyer’s agents tell me they will not show a property is when the seller has offered a commission that is much lower than similar listings on the MLS (for example, offering a 1% commission when similar listings are offering 2.5%).

In addition, on many MLSs in California ~20% of the listings are an “Exclusive Agency Listing”, which means there is a good chance they are flat fee listings. Again, if buyer’s agents not showing these listings was standard practice, the industry would grind to halt (or a lot of buyer agents would lose their buyers).

Agents will keep their buyer happy and show the flat fee listing, instead of hoping to find another home the buyer is interested in or potentially losing the buyer. Some buyer agents may get worried they will have to do more work when dealing with a flat fee listing, but it has never been our experience that it stopped them from showing the home.

I could be convinced that the rare agent would refuse to show a flat fee listing, at the same time I would argue that it is more common to find agents who refuse to work with certain other agents because of a deal gone bad in the past (you’d be shocked at how often this happens - even in big cities). In addition, some seller’s agents are known for “pocket listings”, where they try and find a buyer prior to placing a listing on the MLS so they can keep the entire commission from the seller for themselves - this is a huge problem for buyer’s agents in California and creates friction between agents.

Agents will come out hard against For Sale By Owner “FSBO" because they are not getting paid at all (or the commission is not being offered on the MLS, where it is binding). This is understandable as the buyer's agent can’t make a living at all.

Why would an agent make comments about not showing a below 6% or flat fee listing?

A few possible reasons:

  • The particular agent who made the comment was a “coach” for real estate agents, so that may have something to do with it.
  • The agent may want to create the positive impression amongst their agent peers that they are fighting to preserve high commissions.
  • Create FUD. Even if a statement is ridiculous and easily debunked, some agents will continue to make such comments hoping to scare consumers into paying 6% - the sales industry calls this creating fear, uncertainty, and doubt “FUD”. The real estate industry tends to do a good job of creating FUD.

Posted in Seller, Education on Apr 10, 2017

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