All Posts

    Real Estate’s Dirty Little Secret -- the “Fixed/Not Fixed” Commission Model -- and How We’re Changing All of That: Introducing Flexible Agent Commissions and the Trusty Guarantee

    7 min read
    Tim Hyer

    Are you looking for a real estate agent?  Perhaps you’re buying your first home, or a vacation home.  Maybe you’re ready to sell and thinking about who can get you the best price and the smoothest path.  Either way, there are probably a lot of things people tell you to think about if you’re selecting a real estate agent.  Things like...

    • How long have they been an agent?
    • How many transactions have they done?
    • How active are they in your local area?
    • What’s their typical price range?
    • Have they worked with anyone you know?

    BUT, chances are no one is talking about something just as important:  how much commission they will make.  It’s real estate’s dirty little secret that it has held onto an outdated commission model for more than a century!  While most industries have adapted to modern times and business practices, real estate has remained frozen in time… until now.

    The history of the long-standing “fixed/not fixed” commission model

    For more than a century, industry standard has been a 6% commission model in real estate.  That 6% gets evenly split between the buy and sell side agents, then shared by the brokers they work for, all divided up neatly.  But, if you look into the law, real estate commissions are not fixed, nor can they be legally.  So why is it then, that although different states have adopted slight variations, commissions generally range between 5-6% throughout the United States?  Is it just coincidence?  Hard to believe. 

    What should a real estate agent get paid?

    Back in 1920, the average home value was $6,000 which would result in a 6% commission of $360.  Fast forward 100 years and the average home value is $246,334, which results in a commission of $14,780... greater than 40x more than 100 years ago.  In addition, new technology tools allow buyers and sellers to do a lot of the legwork that was once done by the agent.  Back in the day, you needed an agent just to know which houses were for sale.  Now, that information is available in your pocket, and emailed to you the moment relevant listings hit the market.  So is 6% too much in 2020?  Maybe.  On the other hand, modern real estate agents do a whole lot more than their counterparts did back in 1920.  With the increase in technology comes an increase in choices, strategy, negotiation, speed, competition.  Today’s real estate agents deal with extensive contracts, addendums, liabilities and contingencies that didn’t exist 100 years ago.  Successful agents will tell you they never turn off their phones or computers, making it a 24/7 job, also unlike 100 years ago.

    In the end, whether you think agents do less or do more than they used to, or should do, the point is you shouldn’t be paying them based on an outdated commission model.  Modern businesses thrive in transparent and competitive environments, where consumers decide how much they want to pay based on the value they expect in return.  Why should real estate be any different?

    Disrupting the 6% in a new way 

    There have certainly been new entrants in the market with the goal to disrupt the 6% commission model which many have been deemed “old” and “broken.”  Services like Redfin and Opendoor, for instance, and dozens of others, promise commissions as low as one-third of what is traditionally charged.  They do this by hiring teams of agents on salary, or eliminating the agent piece of the commission entirely.  And that’s a valid way to go for some.  But what consumers miss out on with this approach, however, is knowing that their agent has their best interest at heart.  The decision to purchase a home can be stressful and taxing which makes a capable and compatible agent your best chance at success.  The new players count on the commoditization of the deal, without the same level of personal service, nuance, and attention to your needs -- the transaction becomes a formula, prioritizing a speedy, efficient deal rather than what’s necessarily in your best interests.  What the discount brokerage model also misses is having a diversity of hyperlocal experts who can share their expertise with the clients they are best suited to work with.

    Trusty believes that there’s another way to think about disrupting the 6% commission model.  One that puts the consumer first, and keeps the individual agents -- and their local knowledge, expertise and service to the client -- front and center.  Trusty believes that real estate is personal and that a relationship should be treated as more than just a commodity.  We believe there should be room for negotiation when it comes to commissions, and that the agents themselves should decide what commission they want to charge, and be utterly transparent about it.  Trusty doesn’t set commissions, nor would we want to. 

    Introducing Flexible Agent Commissions

    So when you think of all the criteria agents can compete on, why isn’t price one of them?  Trusty has spent time with hundreds of agents, who’ve told us about their desire to use commission as another lever in the agent evaluation process.  As a result, we’re proudly rolling out flexible agent commissions.  Flexible agent commissions give individual agents the choice to offer financial incentives to both buyers and sellers.  The financial incentives they choose to offer -- in the form of rebates and discounts -- provide another way for you to evaluate which agent you want to work with.  And Trusty lets you compare multiple agents, not only on their experience, personality, activity, communication style, etc. but also on what they’re willing to offer in terms of their compensation.  Some will choose to give a portion of their commission to the buyer or seller.  Others a flat dollar amount.  An agent might offer to pay for the home inspection or a gift certificate to their favorite local restaurant.  Another agent might stand firm at 6% as what they think their service is worth.  It’s completely up to the agent --  what they’re comfortable with on any given transaction, and how much value they believe they can add for a client.  In other words, unlike other 6% commission busters, the Trusty model is fully transparent, utterly flexible, and up to each individual agent and client to decide on. 

    Introducing the Trusty Guarantee 

    Trusty is not only disrupting the 6% commission model, we are guaranteeing that you will pay less through the Trusty Guarantee.  Due to the flexibility of the platform, Trusty recognizes that there will be times when agents don’t offer any financial incentive to buyers or sellers depending on the individual agents’ preferences at the time.  As a party to transactions facilitated through the platform, Trusty also receives a portion of the commission through referral fees.  In an effort to put our money where our mouth is, Trusty is committed to sharing the referral fees we receive with home buyers and sellers to guarantee you save money!  Which is why we’re introducing the Trusty Guarantee, where 20% of our referral fee is given back to our customers.  This means any transaction completed on Trusty will return 5% of the buy or sell side commission to you in the form of a rebate or discount -- you’re guaranteed to get a minimum of 5% back in addition to what your agent offers.  No one else can promise you both your choice of agent and a guaranteed minimum 5% in your pocket.

    Trusty is proud to be the first to offer a flexible agent commission model to the market -- replacing the “fixed/not fixed” system with one that provides transparent pricing, healthy competition, and consumer choice.  We believe that it’s what today’s homebuyers and sellers want, deserve, and frankly, expect.  If you’re looking for a real estate agent, now there’s an even better way to evaluate who you want to work with.  Click here to start browsing houses and agents. 

    All Posts
    Social Real Estate
    Trust in the community
    Join the conversation