Why Separating Buyer Agent and Listing Agent Commissions Would Stir Up Competition

Home sellers can negotiate commissions with real estate agents involved in their transactions, according to The Washington Post, but uncoupling buyer agent and listing agent commissions could result in price competition, which would inevitably lower proceeds paid by consumers. Listing agents and their sellers currently must offer a fixed compensation to buyer agents, and fees for the services of real estate agents are deducted from the seller’s total earnings.

If buyer agent and listing agent commissions were separated, buyers could negotiate fees directly with their agents. As a result, sellers would not include buyer agents’ commissions in their prices, which would generate competition and likely lower home prices.

While buyers often think the seller pays all commissions, the funds for the commissions come from the buyer’s purchase of the home whether the buyers pay cash or their mortgage company provides the money at the settlement table. Fees for the services of real estate agents involved in the transaction are deducted from the seller’s proceeds from the sale.

According to the CFA report, if buyer’s agents were forced to compete, their commission rates probably would vary based on the amount of work they do, the sales price of the house, their experience or whether they are fiduciaries with loyalty to their clients or dual agents who are loyal to neither the seller nor the buyer.

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