Pioneering Flat Rate Real Estate Commissions

Ten years ago, VerraTerra started a quiet revolution in the Bothell area real estate market. Founder, James Hsu, championed the concept of flat rate real estate commissions, also called flat fee real estate. This is a model that defied the standard percentage-based fee structure. It was a move that garnered more than a few negative comments within the industry. Back then, on our blog, we questioned the status quo and dared to offer an alternative. We’ve been firm in our belief that real estate commission should be transparent and fair.

Legal Recognition of Long Standing Industry Standard Unfair Practices

On October 31, 2023, a pivotal court decision emerged from Kansas City, Missouri, where a federal jury ruled against the National Association of Realtors (NAR) and several prominent residential brokerages, including affiliates of Berkshire Hathaway. The jury determined these entities were to be held accountable for colluding to artificially raise commission rates on home sales, resulting in a staggering $1.78 billion in damages. This landmark ruling challenges long-established industry norms which have permitted real estate agents to escalate their commissions in step with increasing home values and mortgage rates, a practice that has financially burdened consumers by amplifying the costs associated with housing transactions.

Transparency: Does the Seller Really Pay the Real Estate Commision?

For far too long, the industry has perpetuated the notion that sellers pay the commission costs of the buyer’s agent. Ask “Who pays the real estate commision in a real estate transaction?” you’ll commonly hear that the home seller uses the proceeds of the sale to cover the cost of the real estate agents’ commssion. Therefore, the buyer is footing this cost – for the seller and themselves as the buyer. The costs are merely hidden within the home’s purchase price.

Fairness: What’s the Value of a Buyer’s Agent?

When presented with the reality that the buyer ultimately pays the commission, buyers are increasingly scrutinizing the traditional 3% fee. After all, the worth of a buyer’s agent can significantly fluctuate depending on the buyer’s circumstances.

Take, for instance, a newcomer to home buying or someone buying from another state; these buyers might lean heavily on their agent’s insights and advice to navigate the entire process. Compare that with seasoned home purchasers who may only need an agent’s assistance to unlock the door of a property they’ve already selected. Does the mere access to view a house justify a 3% commission? We argue that it doesn’t, and we believe most buyers would share this sentiment.

We think it makes sense for buyers and their agents to work out a commission or decide on a flat fee that’s good for everyone involved.

Vindication and Commitment: Our Stance on Flat Rate Real Estate

As we think about this landmark judgment, we feel a sense of vindication. It’s a bittersweet moment – on one hand, the lawsuit has exposed practices that disadvantaged many. On the other, it reaffirms that our approach was the right one. We’re proud to have been at the forefront of this change. We remain committed to offering our clients the integrity and fairness they deserve.

Looking toward the future, we anticipate a new era in real estate, one where the focus is on the client’s best interest, not just the commission check. We’re here to lead by example, one flat fee at a time.

A Thank You Note and An Invitation

If you’ve been a client during this past decade, we thank you for believing in us. To the skeptics in the industry, we welcome you to join us in this new chapter. The future of real estate is transparent, fair, and client-focused.

If you’d like to explore how we can help you with your real estate or property management services, contact us or learn more about our flat rate real estate sales.