The Changing Landscape For Buyers And Buyer Agents In The Real Estate Industry

While TV analysts, talk show hosts, and others debate relevancy of Buyer Agent compensation on the heels of the long-anticipated NAR settlement, Buyer Agents, feeling both overwhelmed and undervalued, are concerned with the potential ramifications of the NAR settlement on their careers. Sellers are ecstatic to know they will no longer be bullied or blackballed if they refuse to acquiesce to extreme compensation requirements. Buyers are equally ecstatic to know they have the right to determine what they will pay for services rendered, without having to incorporate extremely high Buyer Agent compensation fees into their loan products. Fortunately, in a move advocating for ethical change, one of the DOJ settlement terms required MLSs to remove hidden search criteria utilized by unscrupulous Buyer Agents, which prevented Buyers from viewing properties based on the compensation payable to the Buyer Agent’s Brokerage.

Home Buyer Agents vs Real Estate Attorneys: The Compensation Debate

Contrary to media hype, Buyer Agents do offer more services than just opening doors, whereas Real Estate Attorneys apply their expertise to complex issues that may arise during the transaction. This begets the question of compensation. Sellers and Buyers are asking why an Ohio Real Estate Agent, with a license requiring 120 hours of education, should be compensated thousands of dollars per transaction when a Real Estate Attorney, with a license requiring 7 years of education, is compensated on an hourly basis. Many Buyer Agents have begun to implement strategies to justify their compensation with extensive bullet point brochures and presentations, while others continue to debate whether to escrow their license or exit the industry altogether. 

Setting Standards: A Look at Agent Training and Mentorship

When I first entered the Real Estate business back in the early 80s, Real Estate Brokerages required agents to complete weeks of mandatory in-house classroom studies covering all aspects of the real estate industry, as well as months of intense mentoring followed by Broker analysis, discussion, and review of any documents prior to sharing with a client or customer. 

Fast forward 40 years, it has become evident that training opportunities offered to new Real Estate Agents are often minimal at best. I am personally appalled at the number of Brokerages recruiting agents fresh out of real estate school and throwing them to the wolves, expecting they will sell to family and friends, knowing if they fail, they will be replaced with the next recruiting class of agents. The potential for misrepresentation due to lack of skill set should be of great concern, as it adversely impacts what is most likely the most expensive financial transaction a Buyer or Seller will deal with in their lifetime. 

The result of this egregious behavior speaks for itself. A study facilitated by nonprofit watchdog Consumer Federation of America has determined an astonishing 49% of ALL Realtors only sold one or zero units in all of 2023, and nearly 3/4ths of all agents sold less than 5 units. Once again, the top 10% of agents facilitated the vast majority of all transactions. This is the third report highlighting what CFA calls a “glut” of more than 1.5 million agents nationwide selling between 5 and 6 million units per year, proving most agents are “unable to sustain themselves solely on sales commissions, contributing to widespread incompetence and pressure to maintain high commission rates.” 

“Consumers do not benefit from the failure of companies to adequately train and oversee new agents,” stated Stephen Brobeck, the report’s author, and “incompetent agents impose costs on consumers ranging from missed sales opportunities to disadvantageous sale prices to problematic homes.”

Beyond the Transaction: The Role of Supportive Brokers

In October of 2023, I agreed to participate in a 30-minute interview with National Public Radio (NPR), where I explained at length my advocacy and support for DOJ investigations, various class action lawsuits, and the need for a complete overhaul of the industry. I was not at all surprised when less than a week later I received a call informing me they were not going to air the segment, as they realized they needed to focus on Brokers who do NOT want to see the industry change at all. I am aware the National Association of Realtors (NAR) spent over 80 million dollars in lobbying and advertising campaigns last year, and I am also aware NPR generated over 300 million dollars in advertising revenue. I anticipated this outcome as I understood the need to promote the viewpoints of their advertisers to ensure future income, therefore I elected to record the entirety of the interview myself. In future blogs I will share some of the clips from this interview as well as clips from conversations with other Real Estate Attorneys, Agents, Brokers and Lenders. 

I have great respect for those who have chosen to embark on a career in Real Estate, and I am sympathetic to their frustration when they feel compelled to call either myself or other Brokers directly for advice. Real Estate Agents are often frustrated with the lack of advocation, communication, and training they receive once committing to a Real Estate Brokerage. Over the years I have had numerous agents, unable to reach their Broker, call me asking how to rectify challenging issues and complete various forms, as well as clarify verbiage for various contract clauses. I can’t even begin to count how many times after completing a conversation, I hung up the phone and thought to myself: “Here is another reason why God invented wine.” 

It truly warms my heart to know that many agents who have reached out to myself as the Broker for Ohio Broker Direct for advice over the years–and other inspirational “hands-on” Brokers such as Chris Russell, Broker of Plum Tree Realty in Cincinnati, Ohio and Robert Kutschbach, Broker of Carleton Realty in Westerville, Ohio–have gone on to establish themselves as top producers, with many having opened their own successful Real Estate Brokerage firms. 

Empowering Buyers: Questions to Ask Your Agent

There are questions EVERY Buyer should ask when interviewing an agent to ensure a successful home-buying journey. It is imperative the Buyer evaluate the Agent’s communication skills and expertise, to determine whether they have the wherewithal to service all needs effectively. This requires a clear understanding of both process and skillset. First and foremost, regardless of experience level, does the Buyer Agent have direct access to their Broker to assist with all situations that may arise? To be clear, I specifically stated the Broker, not a team leader, not the office manager–the Broker. The Broker is accountable for all actions of their agent. If the Broker will not personally make themselves available to the agent, the potential for missteps throughout the process may increase exponentially. Here are some other things to consider:

1. Ask open-ended questions and observe. Be sure to evaluate their listening skills as well as the information they are gathering about your budget, lifestyle, needs, preferred locations, and more. Is the Buyer Agent maintaining direct eye contact? Are they taking notes? Communication is key. Discuss the utilization of various communication methods (phone, email, text, etc.) and set expectations regarding a timeline of updates.  Are they working with you or talking down to you? Have they ever owned real estate? (while this is not a requirement, it may provide further insight as to personal experience)

2. What are the Buyer Agent’s expectations regarding compensation? Are they amenable to an hourly rate, flat fee, or negotiable percentage of the sales price? Does the Buyer Agency Agreement offer a termination clause and what are the terms associated therewith? Remember, you will have a long-term relationship with this Buyer Agent until you either successfully close on a property or the agency agreement is terminated, therefore it is imperative the Buyer Agent you select treats you with the dignity, respect, and skillset you deserve.

3. How does the Buyer Agent personally feel about the recent NAR settlement and the various class action lawsuits and why? While everyone is respectfully entitled to their own opinion, how they choose to respond (attitude, body language, voice, etc.) will set the tone for the relationship moving forward. It is imperative the Buyer know whether the Buyer Agent is positive and proactive, or belligerent and negative.

4. What are the Buyer Agent’s personal experiences in your area of interest?

5. Is the Buyer Agent willing to provide previous client and customer references as well as contact information for your consideration?

6. Is the Buyer Agent willing to share their knowledge of various Comparative Market Analysis products? Knowing the Multiple Listing Service (MLS) does not incorporate all sales data outside the system, what other external sources are used and why? 
   • What is their knowledge and skill set with Realist?
     
   • What is their knowledge and experience with Realtor Property Resource (RPR)?
     
   • What other products are used to assist with helping to determine a fair offering price?

7. Is the Buyer Agent willing to share their experience with regards to home inspections?
   • What is their perspective on home inspections and timelines for facilitating home inspections, and how would they handle a situation in which the need for further inspections may arise? 
   • Does the Buyer Agent personally attend the home inspection to ensure all appropriate questions are addressed?
   • How do they handle all aspects of negotiating a request to remedy? 
   • Is the Buyer Agent willing to provide contact information for three home inspectors and explain why they were selected?

8. Is the Buyer Agent willing to provide knowledge and skills regarding the conglomeration of lending products currently available in the marketplace?
   • Does this Buyer Agent typically work with Buyers in your price range?
   • Which type of loan product do they believe would best service your needs and why? 
   • Does the Buyer Agent have an affiliated business arrangement with the lender in which they profit from directing the Buyer to that specific lender?
   • Is the Buyer Agent willing to provide contact information for three lending professionals and explain why they were selected?

9. Is the Buyer Agent willing to provide knowledge and skills regarding their experiences, if any, with For Sale by Owner products, investment properties and short sales? Are they prepared to explore these options if they would best suit your needs?

10. Ask the Buyer Agent to provide past experiences, tactics, and outcomes with the following scenarios, as applicable to your needs, regarding contract negotiations:
    • Appraisal Gap Addendums
    • Contemporaneous Offers
    • Dual Agency
    • Earnest Money Deposits
    • Escalation Clauses
    • Home Sale Contingencies
    • Land Contracts
    • Language Barriers
    • Legal Representation
    • Lease Options
    • Lease Purchases
    • Myriad of Loan Products and DPA Programs
    • Multiple Offer Situations
    • Mutual Releases
    • Short Sales
    • 1031 Exchanges 

In a time when the real estate industry is ripe for reform, Ohio Broker Direct stands at the forefront, not just adapting to these changes but actively shaping them. We understand that the essence of real estate goes beyond transactions—it’s about ethical practices, empowering both buyers and sellers through education, and advocating for a market where everyone is informed and well-represented. This commitment to change and education is what drives us to not only lead but to inspire others in the industry to elevate their standards. For more insights into how these evolving dynamics can benefit your real estate journey, we invite you to delve into our blog. 

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