Real Estate Commission Bonuses: The Good, Bad, and Ugly
When I got into the Real Estate business many years ago, every Realtor represented the seller. Consumers did not have the luxury of having a Real Estate agent in their corner to represent their best interests.
Consumer law in Massachusetts, however, changed in the 1990s. Buyers can now have a buyer’s agent represent them in purchasing a home or other property.
Frankly, the opportunity for both a buyer and seller to have representation makes far more sense. It is a level playing field where both parties should get good, solid advice.
Does this always happen? You would love to think so, but this is not always the case in the real world.
Like many industries, there is a word that gets in the way of people doing the right thing. It is called GREED!
Real Estate is a commission-based business, and when a Realtor makes a sale, this is how they get compensated. Talking about Real Estate commissions is always a highly debated topic. It brings a lot of passion from both inside and outside the industry.
Back when every Realtor represented the seller, there were far fewer consequences regarding commissions and agency relationships.
Commissions Are Displayed in The MLS
How so, you may wonder? In Massachusetts and, I assume, most other states, an offer of compensation is made from one Real Estate brokerage to another when a home is added to the Multiple Listing Service (MLS).
The exclusive right-to-sell contract executed between the agent and seller will explicitly state the total commission.
The offer of compensation is some percentage of the total commission the seller offers to get their property sold. The MLS lets every Real Estate agent know when a property has been put up for sale and the commission they will earn with a sale.
The MLS system that is the backbone of how Real Estate sales work across the country.
The problem that arises with Real Estate commissions and buyers’ agency is the amount…