The report addresses a fundamental flaw in the commission structure of real estate transactions, where buyer agents may be motivated to keep home prices high instead of advocating for their clients' best interests. Research indicates that agents negotiate better for themselves than they do for clients, which underscores a conflict of interest. Additionally, the expression of commissions as percentages can mislead clients about true costs, coupled with studies showing a pervasive misunderstanding of percentages among consumers.
The financial incentive of buyers' agents to keep home prices high ultimately compromises their ability to effectively negotiate on behalf of their clients.
A study revealed that real estate agents negotiating for themselves often secured deals 4% lower than what clients typically paid, showing a direct conflict in interest.
Most real estate commissions being percentage-based often leads consumers to underestimate costs, with many unable to grasp the concept of percentages properly.
Backwards incentives for buyers' agents create a challenging environment for home buyers, especially with changes that have made buyer broker contracts mandatory.
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