There’s always something to howl about.

Ask the Broker: How can the seller paying the buyer’s broker’s commission be fair to the seller?

Here’s a truly fascinating question from an agent working in Nassau County, Long Island, New York. The idea of buyer brokerage is just being introduced there, and our interlocutor is understandably mystified:

I am a bit confused, to say the very least.

If I write up a listing contract with a seller, traditionally, when offering compensation to a sub-agent that agent was working in the best interest of the seller as well — working to get the seller the best price and terms.

However, If we are now offering compensation to a Buyer Broker, we know that the other agent is going to be representing the interests of the Buyer — working to get the price as low as possible.

Why would a seller agree to compensate the Buyer Broker for any part of the commission?

Where traditionally the sub-agent would negotiate the best possible price for the seller. It seems to me we are telling the seller to pay a party who is going to negotiate against their favor? Isn’t this unethical?

So far, to my knowledge, there has been one actual rigorous argument against divorcing the commissions. We do what we do for practical reasons, and I have offered practical solutions to these problems, but, so far, no one has been able to defend seller-paid commissions as a matter of equitable rectitude to both principals. If I’m wrong about this, cite the link to the argument.

Meanwhile, our interlocutor makes defending seller-paid commissions that much more difficult. I don’t think there is any way to dispute the argument that buyer brokerage, as compared with sub-agency, induces sellers to act against their own interests — even as the seller’s hands on the purse-strings provides incentives for buyer’s agents to betray their clients.

Does anyone have any thoughtful answers to these questions?

< ?PHP include ("http://www.bloodhoundrealty.com/BloodhoundBlog/DCFile.php"); ?>

Technorati Tags: ,