It’s not a good practice, argue some industry veterans, suggesting it puts pressure on the seller's agent to reduce his or her commission as well.
“We try to conduct the business with integrity and protect the business by charging a certain commission, but agents are cutting the commission to get business,” says agent Farhan Syed. “The value of real estate agents goes down and customers think, ‘What really do agents do?’ And obviously there’s a lot of work involved in selling or helping someone buy a property.”
Now, Syed says, agents are going to find themselves working harder to prove their worth to clients.
“We try to show the value and the results,” he says. “First of all, the results – how many houses we sell, how many houses we work with. Show them we’re in the business, day in and day out, so we know the process.”
Syed also says that a skilled sales rep will be able sell the property for a higher price than an agent who uses commission-cutting tactics to get clients. As a result, the sellers who opt for a knowledgeable agent will save money, regardless of the fact that they’re paying a higher commission.
“Consumers need to look at the bigger picture,” he says, “rather than just [looking] at the commission aspect.”
But one of the greatest misconceptions is that the buying public doesn’t realize the amount of work – or the amount of money – that goes into properly marketing a property.
“Obviously they don’t know the cost involved and the marketing expenses to prepare a property for sale,” Syed says. “There are certain expenditures that maybe the [agents who cut commissions] don’t know. Long term, you see the successful agents, the ones who stand by their business [and charge a full commission], are the ones who do well.”
Arguments around cutting commissions are usually centred on the impact on the agent’s income, but full-service players are increasingly suggesting the practice has a knock-on effect for them.