If you are in a battle but don't realize it or refuse to acknowledge it, you are sure to lose. Underestimating your competition can prove fatal. For years, real estate commissions have been under attack. Historically, FSBO's and discount brokers have been a small share of the market, while full service brokers have made a comfortable living. But some powerful forces (information age, the market, the US Department of Justice, and the maturation of the X & Y generations) have descended on the battlefield and put downward pressure on commissions.
Commission rebates are one battle in the war. Marcie Geffner writes in an Inman News article that Tennessee has passed a new law banning cash rebates to buyers and seller. The ban was favored by the Tennessee Association of Realtors and opposed by DOJ. Ms. Geffner calls the law "protectionist". She makes some strong arguments.
I have worked at a "full service brokerage" for 20 years. I have benefited from the system, but I must admit the disconnect between what I do when representing a buyer, and what I get paid for. I act in my buyer's best interest, find a home that suits their needs, and make sure they don't overpay. I get paid (by the seller's broker) because I caused them to buy a specific house. It makes sense that buyers should have the right to negotiate the cost of the service we provide to them. Rebates allow that negotiation.
But there is another issue relating to rebates that rarely gets discussed. That is lender disclosure on the HUD settlement statement. There are some mortgage programs that may not allow buyer rebates and others that require a minimum buyer contribution. For this reason, rebates must be disclosed on the HUD and down payments may have to be increased to offset the rebate. Failure to do so may be mortgage fraud. I have heard this from a RESPA official at HUD and a leading real estate attorney. However, our Minnesota Association of Realtors and the Minnesota Department of Commerce have yet to render an opinion to my knowledge. If anyone has a definite answer on this, please let me know.
Disclosure issues aside, I'm sure buyer negotiation will only grow. If not rebates then it could be MLS's dropping the offer of coop pay for the buyer's agent. Imagine a world where your buyer not only has to negotiate with the seller on price, but with you on commission. This world may be coming to a real estate market near you.
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Would it really be so bad if the buyers fee were negotiable in the contract? Should I choose to charge X% to represent a buyer and the seller is offering a different amount, with the amount equal to 1% more or less, why should it not be allowed to be negotiated in the contract as a buyer cost. Makes sense to me!
There is a new real estate world on the horizon!