The Buyer Agent – A Real Conflict of Interest

Under traditional real estate, when two brokers are involved in a transaction, the seller’s agent shares a portion of the real estate commission paid by the seller with the cooperating agent.  And of course, the higher the price paid by the buyer, the larger the commission to be split between the agents.  This fact alone is why the seller is due a fiduciary duty and the buyer is due something less.  A few years ago, efforts began to promote the “buyer agency” so the buyer would receive as equal representation as the seller.  State laws and regulations were passed and many real estate agents now claim to be representing buyers, but do they?

The Problem:  In the real world, any transaction where the real estate commission is paid by the seller, even the buyer’s agent wants to make sure that the seller likes the deal, if he is to get paid.  The buyer agent is mentally representing the seller.  The buyer wants his agent to negotiate the lowest price possible, but to do so means the agent will make less commission.  The buyer agent’s objectives and the buyer’s objectives are conflicted.
So what law, regulations or disclosure is going to persuade the buyer agent to negotiate for a lower purchase price that will result in a small commission check? Unfortunately, no rules can change human nature.

The Solution:  As long as the buyer agent’s income is from the seller and that income is based on a percentage of the purchase price, buyer can never be assured they have the representation that state laws and regulations were intended to give them; therefore, the method by which buyer agents are paid must be changed.  Buyer agents need to be paid by the buyer and that fee should be a flat fee rather than a commission or percentage of the sale.

Buyer agents cannot expect a buyer to pay unless they provide a complete service.  A complete service would include calling expired listings, contacting for sale by owner, and searching out new listings before they are placed on the multiple listing service.   

When this occurs, the laws of the State and the laws of human nature will provide buyers with the same representation as presently received by sellers.