Many brokerage firms are trepidatiously moving to a model with no cooperative compensation in light of the impending business practice changes outlined in the National Association of Realtors’ (NAR) nationwide commission lawsuit settlement agreement. Peter Voss at 3% Listing Co. is wondering what took them all so long to make the switch.
Voss founded the Iowa-based 3% Listing Co. in 2023. Despite the firm’s name Voss says the brokerage works with both buyers and sellers, but on the sell-side he and his agents only charge clients for their services.
“We leave the buy side up to a negotiation between the buyer and their agent, and then the buyer, if they need, can ask the seller to contribute towards the cost of the fees or other concessions,” Voss said. “We see that as a big benefit to the seller because they are able to negotiate what could be a large cost to them, and it keeps the seller’s bottom line a little bit more in focus and allows them to be a bit more in charge of it than they may have been in the past.”
Voss said the idea for his firm and its model came from him struggling with the idea that sellers were having to pay somebody to represent somebody else who is trying to negotiate against the seller.
“I really struggled with that dynamic of why would I, as a seller, want to offer money to somebody who is going to actively try and get me to gain less?” Voss said. “I looked at that and then tried to see if there was a way for us to separate commissions like we had done years ago with agency.”
While it is clear that 3% Listing Co.’s model gives sellers more agency in the transaction by allowing them to potentially negotiate buyer broker fees with their buyer, the firm has come under fire, as some have wrongly assumed that due to their model, 3% Listing Co. refuses to work with buy-side agents.
“Our model is sometimes wrongly explained or described as refusing to work with buyer’s agents, and that is not correct,” Voss said. “I think the misunderstanding for a lot of agents is that they are still thinking that their paycheck only comes from the listing agent. I think we as an industry really need to separate that; we need to say, ‘You as a buyer’s agent need to talk to your buyers about how much you are getting paid, and then once you figure out what that number is—if you buyer needs you to—you negotiate at least some of it into the contract on the property they purchase.’ But the days of agents saying there is no cost to work with a buyer’s agent are long gone.”
Although many real estate professionals believe this is the model the industry is moving to, despite NAR’s settlement agreement still allowing for the practice of cooperative compensation, there are concerns that sellers will flat-out refuse to entertain offers that ask for concessions or to help with buyer agency fees. At 3% Listing Co., Voss said that typically isn’t his experience.
“We have conversations with our sellers explaining why it is beneficial for there to be buy-side representation because they are going to help find a buyer for the house and help organize the transaction,” Voss said. “This is always a really beneficial conversation because a lot of sellers then understand why it is help to have an agent on the other side of the transaction and it makes some of them more willing to consider helping the buyer with their agent’s commission.”
Voss said he also works with listing clients to make sure they are focusing on what their overall financial goal is for the transaction.
“We are trying to minimize costs and maximize profits for each individual client, but at the end of the day it comes down to what their overall goal is, which is to sell the house, and what they want to walk away from the transaction with, so we focus on that amount instead of getting caught up in how much they might be being asked to pay the buyer’s agent,” Voss said. “If they are walking away with at least the amount they want, it shouldn’t be much of a concern.”
Voss said negotiations with buyers asking for concessions or help with buyer’s agent fees frequently results in the buyer agreeing to increase the home’s purchase price, allowing the seller to still walk away with the proceeds they want.
“It is about the dollars that you are walking away from the transaction with, so if the buyers is willing to offset their ask by increasing the purchase price, it isn’t costing the seller anything,” Voss said. “I think that is where a lot of agents are struggling or will be struggling.”
But in using this tactic, consumers run the risk of the property not appraising for the price offered, something Voss said is “a very real concern.”
His brokerage has yet to run into an issue with this, but he said he and his agents make it clear to listing clients that this is a possibility and that like they have always done, they need to make sure their seller has a realistic expectation for the price of the property.
Transitioning to a model like this may be challenging for some agents, but Voss feel de-coupling commissions, as well as having buyer representation agreements, offers many benefits to buyer’s agents as well. Voss said he learned this lesson early on in his career when he took a buyer client to see a property only to find out after they had submitted an offer on the property that the cooperative compensation fee the listing agent was offering was far below what he was expecting to make on the transaction.
“I remember asking the agent if there was a way for us to negotiate more compensation by raising the offer price, and to this day I can still hear the reply: ‘You’ll get what you get and you won’t pitch a fit.’ So, as the buyer’s agent it felt really wrong that I had zero control over how much I got paid for representing the buyer client,” Voss said.
After this experience, Voss said he began utilizing buyer representation agreements. While he had some pushback from clients, he expects this to go away in the near future as agency agreements became mandatory in Iowa on July 1.
As Voss looks to the future, he believes moving to a model like his is the logical next evolution for the real estate industry, even without changes being mandated by a settlement agreement.
“It was super interesting to see the changes when buyer agency first came into the market,” Voss said. “For years it was everyone works for the seller and then all of a sudden, the buyer had someone working for them and it was a great thing for consumers and for the market, the only downside is that they didn’t separate compensation at the same time that they separated agency and instead they left it up to the seller to fund it. So, now I feel like that is where we are starting to even that ship back out. I really do feel like there is a way to structure this that works best for everyone.”
