The End of the Buyer Rebate
Alt-brokerages like Redfin and Prevu offer buyers a rebate — part of the buyer-agent commission. These firms salary their buyer agents, so the agent has health benefits and the rest and doesn’t need the commission the way a starving ReMax agent does.
Should Cohen Milstein win their class action suit, under Section 16 of the Clayton Act, a law could be passed that buyers have to pay their own agent, rather than the seller:
Lets face it, if sellers are paying commission in such gross excess that half of it can be rebated to the buyer, it really underscores the points made in their case.
Listing side fees can come down, and lots of nascent firms have entered the space doing just that. Homie.com, trelora.com, reali.com, homebay.com, door.com, offer rational flat fees to list. However, they still recommend the seller offer a buyer agent the standard 2.5 or 3%. By virtue of the corrupt design of sellers paying their buyer’s agent’s commission, a buyer agent can hold their buyer hostage for the fee they want. Obviously, if buyer’s paid their own agent, it would reveal the true free market value of a buyer agent, which would be nothing remotely close to what 2.5%-3% gets them.
Any business revolving around inflated fees will have to re-evaluate. I wrote about this in my piece, What Analysts Don’t Understand About Zillow Offers. I believe the most profitable firms in 5–10 years won’t be exploiting aspects of the old way, they will be firms with tech and systems that increase transparency, reduce friction; provide buyers seamless access and remove the barriers between buyer-homeowner communication. Brick and mortar brokerages like Compass, Keller Williams, ReMax and Berkshire are already obsolete in the sense that they are inefficient, bloated and overpriced, but in five-ten years time they will have finally gone extinct.
