"Ethics and Eating" Isn't the Choice - A Strategy to Stand Out

There's a lot of gloating and "told you so" statements out there about the demise of Foxton's, the 2% (1% to buyer side) brokerage. In an article about discount real estate models, RealtyTimes is pouring on the "See, it doesn't work" examples. The demise of the upstart Iggy's House is also predicted.

There's no argument here that it is difficult-to-impossible to make a discount concept work that is based on offering coop commissions that are far below what most real estate buyer agents say they need to make a living. But there's also a problem with statements like this one in the same article: "Cooperating brokers are not required to show homes of competitors, particularly when paid less than market rate (And don't give me that ethics guff. Between ethics and eating, eating always wins.)."

If the offered commission is too low, don't show their listings is the mantra. That'll show em! They'll go out of business and we'll kill the next one the same way. Sorry, but I don't know what to tell my buyer, who has closed on a home, when they ask why they weren't shown the perfect home for them a few blocks over.

The choice is not between "ethics and eating." It's a clear choice of professionalism over reactive protectionism. There is already a mechanism in place to assure the buyer agent their commission of choice on every deal, no matter what the offered coop commission. It's called a Buyer Representation (or Agency) Agreement. In it, the real estate professional can set out in writing the minimum commission for which they will work. When the buyer wants to purchase a listing with a lower offered buyer agent commission, the difference is paid by the buyer or negotiated between buyer and seller.

Why isn't this used instead of the retaliation method? It's easier to just not show the properties, and the buyer usually will never know. Trying to get them to sign a representation agreement might lose them to another agent who will work without one. As a group, if we all stick to the retaliatory "no-show" strategy, we might keep killing off these discount upstarts. But the same result could be obtained taking the professional approach. After all, word gets around that the 2% the seller signed up for is rarely what they end up paying if everybody used buyer representation agreements with minimum compensation.

Let's get really radical and suggest that there's actually a very BIG marketing plus for agents and brokers who want to use this situation to their advantage. Positioning themselves as the most professional and consumer-friendly of us out there is as simple as marketing the agreement. "If you want to see ALL the homes listed, I'm the broker that will show them to you! Don't miss your dream home by working with agents who keep properties from you because of how much they'll get paid." Too "in their faces" for you? Tone it down as you like. The fact is that ethics isn't "guff." It's possible to be ethical, professional and profitable.