Above, Leo Pareja, CEO, eXp Realty
In the aftermath of recent lawsuits, the next major legal battleground in real estate is going to be steering. It’s not a matter of if, but when.
During the litigation over cooperative compensation in MLSs, one of the central claims by plaintiffs’ attorneys was that real estate agents were steering buyers toward properties offering the highest commissions. They alleged that agents were motivated by compensation rather than client needs. However, this accusation was quickly debunked by research conducted by Bright MLS that found that agents do not “steer” buyers to homes with higher buyer agent commission. In their analysis of over one million home sales transactions, properties with higher offers of compensation did not sell more quickly than properties with lower offers.
As someone who spends time with agents daily—whether in large group settings or one-on-one conversations—I value the feedback loop that helps improve the agent experience. Lately, however, I’ve been hearing troubling stories about a disturbing trend.
Calling a listing office in advance of showing is not a negative. However the slippery slope becomes if a buyer agent fails to show based on upfront compensation offering. Most sellers appear to be opting for buyers to put any compensation requests (as) part of the offer, not upfront prior to showing. This has allowed the seller a path to negotiate everything from price, concessions, compensation and contingencies. There are instances where a buyer’s agent has made an appointment, called for compensation and then declined the appointment based on upfront offering.
Let’s be perfectly clear: this is the very definition of steering.
Real estate agents and brokers should be fully prepared for the reality that regulators and attorneys are likely secret-shopping you and recording your interactions. How you present options to consumers and how you explain your fiduciary responsibilities will be scrutinized in any future litigation. If your communication doesn’t align with your duty to represent your clients’ best interests, you could be held accountable.
After all, as a licensed professional, your obligation is to prioritize your client’s interests above your own. This has always been the expectation, and it remains so even after the changes to compensation rules that went into effect on August 17th.
The correct process should look like this: Meet with buyers, conduct a thorough buyer presentation, execute a Buyer Representation Agreement, and show them all available properties in the market—regardless of any compensation agreements between brokers.
Once the buyer identifies a property, they can make an offer that works for them, based on their financial qualifications. As part of that negotiation process, the buyer and seller will negotiate all terms, including whether the seller contributes to the buyer’s agent compensation. The terms can vary—part, all, or none of the compensation may be covered.
If you, as an agent, are not showing certain properties to your buyer because of commission concerns, you are engaging in steering. And it’s only a matter of when, not if, you’ll face legal liability for doing so.
