Early this year, I wrote a piece titled The monster under the bed, in which I observed that the industry was largely unprepared for the fallout the building legal and regulatory pressure on buy-side commissions might bring.
In August, I was onstage at Inman Las Vegas, where I stated that should structural change befall us, it would bring about not a real estate apocalypse, as some had characterized it, but rather a “happy reckoning.”
This got a laugh, but I meant it.
See, all kidding aside, some chickens that have come home to roost have been crapping on real estate’s floor for too darn long.
The contracting market will wash perhaps a couple hundred thousand agents out of the business over the next year or so. But that still leaves 1.4 million people for, say, 4.5 million sales in 2023. The sheer flabbiness of the industry makes it hard for excellence to claim its fullest reward.
If the current system of commission sharing is destroyed, some will be able to deal with it just fine, and some will not.
And that’s a good thing.
Part of me thinks this whole issue is a tempest in a teapot, a gossipy complex of secret meetings, depositions, legal motions, and delicious doomsaying.
My wife and I bought an apartment in Italy earlier this year. We did our homework and found an outstanding agent who won our confidence quickly.
I asked her, “How do we pay you?”
She replied, “You pay me 3% of the purchase price when we’re done.”
I said, “OK, great.”
I could have tried to negotiate, but I didn’t. Penny wise, pound foolish and all that.
The seller paid their agent 3%.
How hard is that?
Too hard for too many, it seems. Many buy-side agents who have deliberately avoided the compensation conversation, or waved it away by stating that their services are “free,” will fumble explaining their value relative to compensation for the first time. Some brokers won’t be prepared with training and systems to handle this well.
This shouldn’t be the case, of course. You know and I know that a great buyer’s agent is worth every bit of what they’re paid. But the sad truth is that this hurdle may prove too challenging for those who are not, shall we say, uh, rock stars.
And we have a few of those, right?
So look, commissions get divorced. Those who are capable and prepared will be fine. Those who aren’t won’t.
Happy reckoning. Life and the industry go on, quite possibly better for it.
My thinking on this issue has evolved. An “exogenous shock,” as the economists say, won’t be without pain, but it’s hardly all bad.
And given that it’s likely out of our hands anyway, it’s probably best to internalize this possibility, look for the opportunities it presents, and get cranking.
Have a great weekend.