Real estate commissions

Real estate commissions to get high house sale prices ‘unethical’

PHOTO: Your real estate may not have your best interests at heart if they’re thinking of their next big payday. Source: istock

A little known “unethical conflict of interest” for real estate agents can often see them selling us short so they can get their money quicker.

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In this post-pandemic world of surprisingly buoyant property prices, few people understand the unethical conflict of interest between real estate agents and vendors.

This conflict of interest is created by the current structure of traditional percentage based commissions and has ethical implications for the $6 billion real estate sales industry.

For generations we’ve been conditioned to believe that a commission incentivises real estate agents to achieve the highest possible sale price.

This was based on the belief that the higher the sale price, the more the agent is paid.

There is a fundamental problem with this belief because it hides the real incentive that a percentage-based commission creates for real estate agents and agencies.

Assume that you are selling your home with an agency that charged a commission of 2.5 per cent. That real estate agency would only lose $250 for every $10,000 reduction they convinced you to accept.

Why would an agency convince you to sell for $10,000 less (and in many cases, much less)? Simple. To secure a quicker sale and collect their $20,000 commission sooner.

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