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Seven years ago, Michigan real estate agent Michael Crossman began experiencing a series of symptoms that looked like a stroke.
Klausman told Inman he started falling and losing his memory. Eventually, doctors discovered he had suffered a brain disease rather than a stroke, but the experience still meant he could no longer work.
“I couldn’t talk or do anything,” said Klausman, who now works at Luxury Living Real Estate. “I lost my job. I had to move out of where I was living.”
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But moving to an apartment, where he had better access to care, proved crucial. Klausman recalled that he never spoke to the seller’s agent, but instead coordinated with the owner himself. When he asked the owners about their experience, they revealed they had not met with their agent either; instead, they hired a flat-fee agent who charged hundreds of dollars to get the property listed with local multiplexes. Listing services.
Klausman suddenly realized he had an opportunity. He couldn’t drive around town to open doors or hold open houses. But even with the brain disease, he can still work online for a few hours a week. So, he built a website and began offering flat-fee services to consumers. It worked.
“My business took off,” he said, adding that even after he recovered, he continued to offer flat-fee services to consumers who didn’t want to pay regular agent commissions. “The truth is, I’m making more money now than I ever was.”
Klausman’s story ended up being a case of an agent using a particularly sour lemon to make lemonade.
But this is more than just an inspiring human story. Rather, the reason we’re talking about Klausman now is because the real estate industry more generally is in the midst of some big changes — lemons, at least to some observers — thanks to a massive settlement proposed by the National Real Estate Association. Realtor just fabricated evidence in multiple commission lawsuits. If approved by the court, the settlement would involve a substantial payment by NAR as well as rule changes. While exactly how these changes will play out remains to be seen, one possible outcome of more discussion is that fewer consumers will choose to use agents for transactions in the future.
In other words, Klausman’s experience may be a harbinger of a future in which more and more people will choose real estate.
It is worth noting that this outcome is far from guaranteed, and there are still many unknown factors in entrusting litigation. Some also believe that not much will change after the commission case. Just last week, for example, Barbara Corcoran said the commission’s lawsuit was actually no big deal.
But Inman was curious what would happen ifFor example, more and more buyers are entering into negotiations without an agent. Will the seller’s agent help them? Will some kind of flat-fee model flourish? Will dual agency become more popular? Inman contacted agents seeking answers. While reactions have varied, the takeaway from these conversations is that buyers’ and sellers’ agents may have to become more creative in a future that looks very different than today.
Fixed fee coordinator
Of the agents Inman interviewed, Klausman had the most atypical pattern. But partly because he’s helping sellers take a more proactive approach, he’s also fielding direct inquiries from buyers relatively frequently — including the morning he got the call from Inman. Klausman said such activity is likely to become more common in the near future because buyers are often reluctant to pay agents the 3% commission.
Michael Crossman
“The first agent says to a buyer, ‘I need you to sign this agreement that says I’m going to buy an $800,000 house for $24,000.’ The first thing[the buyer]has to do is ask , ‘$24,000 to write me a quote?'”
In response, Klausman speculates that buyers will start to be more proactive, such as visiting more open houses and spending more time combing through listings on large portals. Some agents may end up being better off in the future.
“It’s good for me and good for the people who are listing their homes,” he said.
When asked how he responds to unrepresented buyers who don’t want to work with an agent, Klausman said that in the past he has referred buyers to sellers so they could work directly — like when he bought to start his Apartments. Flat fee journey. But he also said he can serve as a transaction coordinator for buyers who want to transact with sellers. He’s not talking about dual agency, but a different role like the one he plays for sellers who just need him to get their property on the MLS.
In this case, if the seller offers the buyer’s agent a commission, he also shares that money with the unrepresented buyer, Klausman said.
“When these buyers call me, I sell the house and share the commission,” he said.
Recommended and DIY modes
A recurring theme in the conversation for this article is that many agents dislike double representation. Among those taking this view is Bill Brandt, a Coldwell Banker broker in the Phoenix area. His argument was, “Even if you can be fair and honest, it’s not a good situation.”
Bill Brandt
Brandt told Inman that if an unrepresented buyer approaches him about one of his listings, he first asks if they are working with an agent. If the buyer is unrepresented, he will offer to refer them to someone who can represent their interests. Brandt has repeatedly emphasized the importance of working with an agent, noting that when he first started working as a real estate buyer’s agent decades ago it was not common practice and he considered it a poor way to do business.
However, if a buyer doesn’t want to work with an agent, or may not want to pay a broker in the future, Brandt said he would invite them to complete the transaction themselves. While Brandt sees value in agents, he also says consumers can and do figure out how to make deals for themselves.
“I would tell the person, ‘If you decide to do this on your own, you are more than capable of doing it,'” Brandt said. “If they don’t want to represent them, that’s fine, but for liability reasons, I’m not going to represent them.”
Change can be challenging
Last week, RE/MAX Florida agent Tammy Campbell asked a question In the popular Real Estate Mastermind Facebook group for industry professionals: “Who cuts commissions in half when buyers are unrepresented?”
The post ultimately received more than 130 responses as of this writing. Some agents say they have literally cut commissions or are doing whatever it takes to close a deal. Others say they simply pocket the full percentage offered by the seller.
“My money almost doubled at that time,” one netizen wrote. “Give me 3.5% and give 2.5% to the buyer’s agent. If there is no buyer’s agent, I will give 6%.”
Another explained: “If it was both sides, I would go down to 4% and the amount would be higher.”
“If that’s what it takes to get the deal done, I will. Then move on to the next one,” another said.
(It’s worth noting that a significant number of agents have also urged other members of the industry not to discuss commissions publicly for fear of facing further litigation.)
Tammy Campbell
The conversation highlighted widespread industry-wide attitudes toward unrepresented buyers (and perhaps anxiety about the unknown). But Campbell said on the call with Inman that simply redistributing commissions may not be so easy once trading begins.
“It’s difficult to change a contract based on who represents the buyer,” she said.
Campbell’s point is that sellers may be approached by buyers with varying representations. This seller may be willing to offer a total of 6% (or some other number) to attract a buyer, but may not be too keen on offering the listing broker the full amount. It remains to be seen how this situation plays out following the settlement of the commission lawsuit, but keep in mind that a world where large numbers of buyers lack representation will be uncharted territory for today’s U.S. real estate market.
Klausman points to other challenges as well. In his case, for example, he was able to pivot to a completely new paradigm when health issues hampered his work. But he now says that when other factors get in the way of some brokers’ livelihoods, they may run into brokerage firm rules or policies that limit their flexibility.
Regardless, Klausman does stress that, whether you like it or not, change is coming
“If you don’t do something different now,” Klausman said, “you’re going to die there.”
Email Jim Dalrymple II
