Mark your calendars for the ultimate real estate experiences with Inman’s upcoming events! Dive into the future at Connect Miami, immerse in luxury at Luxury Connect, and converge with industry leaders at Inman Connect Las Vegas. Discover more and join the industry’s best at inman.com/events.
Brokerages and real estate agents need to prepare for the post-Sitzer reality and adapt their practices to give sellers the ability to choose what commission, if any, they pay to buyer’s agents, according to a top broker in Silicon Valley.
Mike Repka, CEO and managing broker of DeLeon Realty in Palo Alto, California, said he immediately understood the impact of the jury verdict in the Sitzer | Burnett class-action lawsuit in Missouri on Oct. 31. This month, the brokerage began advertising commissions of 3.5 percent or less for homesellers who choose to work with the firm, with marketing material appearing online and in mailers that were widely viewed on social media this week.
“There are two types of agents,” Repka said. “Those looking at what’s going on and saying, ‘How can I adapt and enhance the experience for clients in this new post-Sitzer landscape?’”
“There are other agents I’m hearing just kind of complaining to each other, saying, ‘This is terrible and we won’t show any houses that don’t pay 2.5 percent,’” he continued, “which is exactly what the whole case was about. Those agents will fail.”
From a large brokerage in the Bay Area…They’re dropping agent commissions to 3.5% total (from the typical 5-6%). They’re offering the buyer’s agent 1% (or $10k), and not reducing the listing’s agent’s (2.5%). Is this the trend? How do they stronghold the buyer’s agent to a… pic.twitter.com/8S9tkE6eXb
— Tyler | Kenji Capital (@KenjiCapital) February 13, 2024
Engaged buyers can and already do research homes and neighborhoods on their own, Repka said, making it less likely that buyer’s agents can steer clients away from listings offering lower commissions. That situation came up just last week, he said.
Michael Repka | DeLeon Realty
“Someone contacted me and said, ‘My client loves that house, but I told them I wouldn’t represent them because the seller is only paying $10,000,’” Repka said. “They wanted the seller to increase the commission to what they referred to as 2.5 percent.”
The listing got 17 offers, Repka said.
“It turned out their clients just submitted an offer with another agent,” said Repka, whose team ranked No. 1 for transaction volume in 2019, according to RealTrends.
Repka said he expects there will soon be more new brokerages that offer both buyers and sellers flexibility in the commissions they pay.
“At its core, we are one of the only brokerages that acknowledged the reality that many buyers are finding homes on their own,” Repka said. “It’s not the same buying experience as it was 20 to 25 years ago when the information about the listings was kept proprietary.”
There are still buyers who might want or need a more hands-on agent with local knowledge and expertise the buyer needs and values, Repka said. Others are watching real estate portals and doing a first round of due diligence on properties they know are for sale and know they’re interested in.
Buyers will soon begin scrutinizing the agents they hire to represent them on a purchase for flexibility on commissions, he said.
“We’re going to find some brokerages opening up that are really streamlined,” he said. “The buyers and the buyers’ agents are going to negotiate the appropriate commission based on all the facts and circumstances.”
Repka’s brokerage, whose agents are employees rather than independent contractors, has long offered to represent buyers at no cost to the buyer or seller.
Since 2017, if a buyer showed interest in a listing and wasn’t already working with a buyer’s agent, DeLeon would waive 100 percent of the buyside commission.
“Someone from the buyer’s side of my company would represent them but we’d waive all the buyer side commission,” Repka said. “That kind of fits in nicely in this post-Sitzer landscape.”
The Missouri jury in the Sitzer | Burnett class action case awarded the homeseller plaintiffs $1.78 billion in damages, which by law will be trebled to $5.3 billion. It found that a conspiracy led by the National Association of Realtors existed to create and enforce rules that raised, inflated or stabilized broker commission rates paid by homesellers.
Repka said he quickly began drafting info about the impact of the verdict soon after it was handed down.
DeLeon Realty laid out its practices in video and marketing materials, including mailers, and recently released an article called “A New Era of Real Estate”. The brokerage now highlights its transparent and unique approach.
When writing up a listing agreement with a seller, DeLeon Realty asks the client to fill out a box that determines the commission they’ll offer to a buyer’s agent.
“It has a box that says would you like to pay $10,000, $20,000, 1 percent, 2.5 percent and a line that just says ‘Other,’” Repka said.
To date, Repka has said, just one seller has offered no commission to a buyer’s broker, and one has opted to pay a full 2.5 percent commission. (The latter seller feared buyer agents would steer clients away from their listing if they offered less than 2.5 percent, DeLeon said.)
Repka noted that more agents are using buyer-broker representation agreements with their clients. He said if such an agreement calls for a buyer-broker commission that’s higher than what the seller of a DeLeon listing is offering, the buyer would make up the difference.
Repka said that DeLeon’s practice offers sellers transparency over where compensation, if any, for buyer brokers is coming from. He also said he expects more brokerages will follow suit.
“We’re going to see really, really good, successful buyers’ agents thrive,” he added.
Email Taylor Anderson
Credit: Source link
