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Unethical practices that affect buyers:   1  ●  3  ●  4   ●  5   ●  6   ●   7  ●  8   ●  9  ●  10 
Unethical practices that affect sellers:   1  ●  2  ●  3   ●  5   ●  6   ●   7  ●  8   ●  9 

Unethical Practice #1:  Buyers’ agents who steer clients towards properties that offer higher commissions. 

In a mandatory Realtor® ethics course I once took, someone asked if it’s ethical for buyers’ agents to let the size of the commission influence which homes they show their clients.

Our instructor's reply went something like this:  “Suppose you have fifteen identical homes that fit your clients’ needs.  You can’t show all of them, can you?  Since you need to narrow down the list, it is okay to consider the commission when deciding which properties to show.  There’s nothing in the Code of Ethics that prevents agents from making a profit.”

I was mystified by her response, since agents never encounter identical homes.  I got the impression she was giving us permission to steer clients towards listings with higher commissions.

I believe that it's a breach of the agent’s fiduciary and ethical duty to steer clients towards high-commission listings.  But there’s evidence it happens all the time:

  • A Redfin study found that homes took an average of 68 days to sell when the buyer’s agent was given a 3% commission, and 89 days when the commission was below 3%.  The study also found that homes took and average of 129 days to sell when the commission was above 3%, but this may be because the highest commissions were being offered on hard-to-sell properties.

  • Many sellers offer high commissions to buyers' agents.  Why would they do that if they felt it was ineffective?

Steering can also occurs in areas where one real estate agency is dominant and wishes to protect its monopoly by blackballing listings from other agencies. 


How to protect yourself


  • Search online for properties yourself.  Present your agent with a list of properties you want to see.  The agent might want to add to that list, but by taking charge you put the agent on notice that you're monitoring his or her choices. 

  • Insist on a buyer rebate.  Limit the buyers' agent's commission to a fixed percentage of the sales price, and have the agent rebate the balance--plus any selling bonuses--back to you as a buyer rebate.  This will eliminate the agent's incentive to steer you towards high-commission properties since it will be you--not the agent--who benefits. 

Agents will sometimes act as if they've never heard of buyer rebates, but they're quite common except in a few states where they're outlawed.  I have another website, CapturetheCommission.com, that explains how to negotiate buyer rebates.


  • Host regular open houses.  Buyers' agents are less likely to steer buyers away from you if there's a chance the buyers can find you on their own and cut them out of the deal entirely.



Are buyers' agents free to buyers?

Buyers sometimes shrug it off when their agents behave badly, perhaps because they think a buyers' agents' services are "free" to buyers.  But they almost certainly are not.

It's true that the seller usually negotiates the buyers' agent's commission, and that the commission is debited from the seller's side of the settlement statement at close of escrow.  But if sellers didn't have to pay high commissions, they'd likely be willing to accept lower prices.  This means that buyers indirectly pay part of the commission, too, in the form of higher purchase prices.

Allowing the sellers to "pay" the entire commission conveniently allows the commission to be incorporated into the purchase price, where it can be largely financed with a mortgage loan.  If a buyer and a seller each had to "pay" their own commissions, the buyer's agent's commission would need to come out of the buyer's often scarce cash reserves.  So making the seller "pay" the whole commission is more about stretching the buyer's cash than it is about allocating a cost between a seller and a buyer. 


©Lori Alden, 2010.  All rights reserved.