Redfin's homebuyer refund program, are lower RE commissions coming?

In the wake of Sitzer/Burnett commission lawsuit, Redfin has re-launched it's repeat homebuyer discount program (essentially a rebate of buyer RE commissions) in exchange for six months of a buyer agency agreement.

Called 'Sign & Save' the program provides buyers who sign up to work with a Redfin agent/broker before the second home tour - and purchase a home within 180 days, a discount of .25%-.5% at closing.

The program is only available select states and similar to a program the company ended last year, but after the NAR lawsuits and the concerns about homebuyer's ability to afford buyer representation if the practice of cooperative compensation is banned.

Historically brokerages have been very firm with brokers not offering incentives or discounts to their clients. In Oregon, a broker is technically not allowed to make a contribution to a buyer/seller so ultimately it is reflected in a reduced sales price.

I've been speaking to a long time RE friend that if the way transactions and commissions have been paid for the past 100 years in the US changes, it could be a race to the bottom for buyer's brokers. When I started in this industry in 2004 6% RE commissions were common and it wasn't unusual to make 4-5-6% on a mortgage loan.

Rightly, times and costs have changed. Buyers and Sellers have more resources and information at their disposal, efficiency of transactions has improved dramatically and theoretically a RE Brokers job is 'easier' than it was decades ago. I think the lawsuits have a valid case (clearly), why should sellers be paying for a buyers broker to negotiate against them?

On the same hand, the system works and buyers often should/need independent representation to truly protect their interests and incentive to efficiently 'sell' a home. There is minimum cost of performance for the often incredible (and unappreciated0 amount of work and expense that goes into representation a client in a purchase or sale. I'll wager if given the choice, few property owners would want to pay an hourly rate and reimbursement for the time and travel required for any given sale. (Especially for the deals that don't work out!) Even at an average hourly rate, both buyers and sellers would not appreciate that bill.

I personally think RE Brokers should be more empowered to make a deal work if it's in the best interest of their clients and their transactions. Additionally I always at least offer a repeat client discount to my clients, although none have taken me up on the offer..

The biggest threat of the lawsuits is to the Mainstream RE Brokerages and low volume real estate brokers. If individual broker/agents are earning less (on lower transactional volume) there is more demand on these corporations to support their also antiquated brokerage commission structures of often up to 25%+.

Personally I keep my costs consistent so that they are uniform and as I have expansive geographical business with inherent costs and evolving network and ecosystem. My business could not operate on much less than the standard 2.5%-3% per side. Just to hold a license in two states costs almost $300/month plus. That's not to mention a valid mortgage license and everything else that comes with running a growing small business.

This is not a poor me post, but what does happen if seller(s) are no longer able/required to pay buyer's brokers? I think the same thing that is happening now!? Here me out; As of today, cooperative compensation, or the payment of usually 5-6% of the sales price from the sellers proceeds to the brokerages, is essentially financed. Or in other words, the bank and appraiser assess the property to (based on the lawsuit) cost the seller 2.5-3% more in 'inflated' sales price.

If the seller doesn't pay it, the buyer does, but how? Out of pocket at closing? That would be VERY prohibitive. Imagine a buyer having to fork over nearly double the closing cost cash at closing? It would destroy the market. What I think is more likely to happen is lenders will revise their guidelines. They are already assessing and underwriting the sale at $500k. If it was $487,500 (with the seller's commissions) the lender will use that to establish the LTV and allow a $12,500 (2.5%) Buyer's broker fee to be rolled into the loan (for a total of $500K) plus any seller concessions. The property still needs to appraise for the $500k. If it's a cash transaction, the buyer pays the buyer broker at closing. He was paying it before.. The Closing statement and forms will change but the asset value and transactional cost will not. Well, maybe a little.. ;)

What about you? Any RE professionals discount services or how do you see cooperative commissions playing out? Are RE Commissions too high? Or moving in the wrong direction?