Entry by Lester Langdon

Has Buyer's brokerage run its course my answer may surprise you

  5 Comments

When I first sold real estate in 1984, buyer’s brokerage was rarely practiced and even more rarely compensated. The theory was at that time that if the buyer wanted an agent to represent them, then the buyer should be the one that pays for it.

https://activerain.com/blogsview/2467253/has-buyer-s-brokerage-run-its-course-my-answer-may-surprise-you

When I first sold real estate in 1984, buyer’s brokerage was rarely practiced and even more rarely compensated. The theory was at that time that if the buyer wanted an agent to represent them, then the buyer should be the one that pays for it.

The actual implementation of the concept usually only occurred in commercial real estate transactions. For whatever reason, business buyers seemed to grasp the notion that the entity deriving the benefit from the service should be the one that pays for it.

After some significant litigation in the early 1990’s in which residential buyers claimed they had been duped by brokers that represented the seller as a sub-agent, buyers DEMANDED representation.

However and quite inexplicably it was still assumed that the seller would pay the commission. It is very unusual to say the least for one person to pay for services that will help the other party prevail against their own interests.

Which leads us to where we are today:

Many consumers do not want to be represented. They prefer to shop their own deals and fend for themselves.

This is perfectly fine, except that this process usually will involve some time and effort from one or more traditional buyer’s agents that will show houses, offer services, and never be paid.

IDX and the proliferation of information on the Internet have triggered a cataclysm that will eventually lead to the demise of brokerage. The old models are no longer in demand and will eventually succumb to market forces.

It’s just a matter of time.

 

By Richard Weisser  ( he may not be an ACRE )

5 Comments

Interesting post in AR Lester - thanks for bringing it to our attention - I encourage ACREs to add their thoughts because this situation cries out for a new model.

I don't think it is true that consumers don't want to be represented, I think they don't realize the real risk they are undertaking by being unrepresented. Some REAL stats on real estate lawsuits with FSBOS vs. sales with Realtor representation would be a good place to start... Sort of like packing your own parachute the first time you jump from a plane!

David, the legal stats would be indeed interesting. With just a cursory search on google, I pulled up a class action lawsuit against "buyowner.com" that was evenutally settled in 2009. The suit seems to be about giving consumers a way out of the contract -- a 3 day cancellation clause that had not been originally included. But, the comapny is still in business.

It is interesting to see the evolution of the real estate industry, it will be even more interesting to see how things continue to evlolve.  Out of the changes that are sure to come, new opportunites will develop.

There are a lot of leads that I speak with that do not want representation and many use redfin.com and do not even realize that the terms of service for redgin state that the online user is entering into a representation agreement.  It's no wonder many people think they don't need representation.  At our firm we have an in office consultation, review our fee schedule and have then make their initial payment.  If we don't agree on representation or compensation, we don't go tour homes.  Straight forward and upfront about what we will do and how much it will cost.

This page contains a single entry by Lester Langdon published on August 22, 2011 10:49 PM.

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