With so many bargain basement deals available to buyers, some brokers are implementing a “minimum commission policy”. They ask buyers to sign an agreement guaranteeing a commission of $X, anything less than that, the buyer makes up the difference at closing.
Many property prices have slipped so low that their position is that they need to net $X per closed transaction to cover the time and effort put forth to find, show, negotiate and close a deal. This concept is not too different from the more traditional buyer-broker agreement, with one large difference. Traditional buyer-broker agreements are normally written to guarantee a fixed percentage that the broker requires, regardless of how low or high the sales price is, whereas the intent of this new twist is to merely cover minimum operating costs per transaction.
The argument against minimum commissions is that it is not fair to the consumer. The buyers wouldn’t have to pay that difference should they buy using another agent who is happy to receive whatever the listing agent/seller is offering. The market is the market. Furthermore, the detractors of minimum commissions would add that the people buying these lower priced properties are already at the low end of the economic ladder and it is unfair to put an additional financial burden on them.
Proponents of the minimum commission believe that their time, knowledge and expertise in finding and negotiating deals is worth a minimum of $X and any less than that just doesn’t make business sense for them to work on those transactions. They state that the buyer can make the decision in the front end if they want to work with them under those conditions or not. Furthermore, they state that many of the lower end properties are being bought by cash investors, not retail buyers.
The argument for and against minimum commissions is a heated one and it comes down to what makes better business? Looking out for consumer first and foremost which will breed good-will, now and in the future, or making business decisions based on what you need to net per transaction, to be profitable.
I’d like to hear your thoughts, pro or con!
Image courtesy of jepoirreier
