Commercial Real Estate Model is not right for Residential

Mission Forge

A shift towards something already in place

Commercial real estate has operated this way for a long time.

Commercial listings generally do not offer compensation to cooperating brokers of buyers.

It does not mean that buyer representatives are not paid. It means that buyers must ask the listing broker if there is any cooperative compensation available.

In the event the answer is no, then the agent must consult with the buyer and refer to the exclusive right to represent form.

Clear differences exist between commercial and residential. Immediacy is generally not present in commercial as it is common in residential. Rapid moving residential markets can be impeaded or slowed by this added layer of discussion (assuming the offer to compensate is withdrawn from the MLS. Now the process has an extra layer of discussion which could retard the process and flow when time is of the essence.

In addition, residential buyers have financing concerns that play into compensation that are not there in the commercial world. For instance, buyers with VA loans are not able to make payments to the agent or to a vendor for repair. That could be very harmful to some of our most important buyers. It is potentially a dramatic erosion of one of their signature benefits.

Often times consumers will call the sign in commercial real estate and proceed with no buyer agent. In some cases they may ask the listing firm for dual representation and other times they may proceed unrepresented. Residential real estate has methodically and purposefully moved away from this and comfortably gotten to a situation where buyer agency is clear and defined and common, while seller agency remains intact. Both sides have agency and compensation did not increase.

One really questions the benefits to the residential process that will result from the decoupling of advertising compensation in the MLS. The theory on the ground is that since compensation is still permitted from the seller to the buyer’s agent that it will still take place largely as normal and hopefully with more transparency than before.

The fear is that our most prized and vulnerable buyers will be sidelined, and may resort to calling the sign, perhaps out of desperation and frustration and perhaps in the hopes of trading representation for perceived savings to make a deal work. The ramifications of thousands of unrepresented buyers who are financially sensitive could be devastating if they don’t have capacity to negotiate repairs, oversee important disclosures, review documents, navigate extensions, deadlines, review repairs and verify payments to vendors. It really could be lambs to the slaughter in some cases---sadly out of needless desperation caused by the DOJ.