Realtors reacted strongly to columnist Jim Gillespie's suggestion that it's time to change the rules on selling agents having to show homes that the listing agent is offering low co-ops to sell.

"I agree it is time for a change but I think the change needs to be made in who pays the commission," writes Charleston Realtor J. Warren Sloane. "In the story noted above, the author gives the example that in the 80's, an agent could expect to get 1/2 of the commission paid by the seller and that half would equal 2.5 to 3%. He then goes on to say that in today's market he is seeing more and more unequal splits and lower commissions. What he does not go into is the different types of agency and its impact on the home buying process. The advent of Buyers agents calls into question the entire compensation methodology. Why should the seller be required to pay for an agent that's stated purpose is to work in someone's best interests other than the seller?"

"In a sports analogy this would be like one team paying their competitor to get a great free agent," suggests Sloane. "Yes, this might make the game better and therefore increase profitability of the league but it works against the best interest of the team."

"It is time for the traditional model of commission payments to change," he says. "It is time for buyers to begin paying for the services they receive. Just like a contract that a buyer asks for help with closing costs, the fee for their agent can be added onto the offer to cover the expense and allow the buyer to finance the amount."

Anchorage broker Niel Thomas agrees. "In the new world of buyer brokerage, I would say it's more likely that the business model will shift in favor of separately negotiated fees for buyer's agents and seller's agents."

"Sellers are still first to the market and negotiate a fee that may or may not include a co-broke," he says. "The co-broke will be, as it is now, different amounts from property to property. Next to the market is the buyer, who negotiates a fee with his or her agent. Part of that discussion is how the co-broke will vary from one property to another. All the buyer needs to understand is that "the price on this property includes a co-broke amount of 'x'". That may be all or none of the buyer agent's fee. The buyer is coached that when the co-broke fee is insufficient, then the buyer has the choice of adding the difference to the price. Having added any or all of the co-broke to the price, the buyer and his or her agent can make a decision whether the property is priced competitively in the marketplace."

Explains Andrew Show, president of the National Association of Exclusive Buyer Agents," Most so-called 'exclusive buyer agency agreements' have nothing to do with agency, but rather compensation. Do you know anyone calling an Exclusive Right To Sell Listing Agreement a "Exclusive Seller Agency" agreement?"

"The way to protect our interests is to have exclusive buyer representation and exclusive seller representation agreements," suggests Show. "But you cannot serve the highest and best interests of our 'clients' if you discriminate based on commission dollars. And you should never protect a 'prospect' unless they are a client. A prospect is nothing more than a customer until they have been fully informed and then consent to representation. And that's the key."

Show explains that NAEBA offers an 'Exclusive Buyer Agency Agreement' that offers two ways of compensation, either a percentage or hourly fee with retainer. "Our client is responsible for the fee," says Show, "but they direct us in all offers to have it in the purchase contract that the seller pays it to us on their behalf. I reject any MLS compensation offer. There are many benefits to the buyer, to us, and to the seller."

Published: November 2, 2004

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