Why Do Nashville Homeowners Pay Both Real Estate Agents?

March 2, 2021

The prevailing practice is that Nashville home sellers pay both real estate agents but, do they have to?

No, homeowners are not required to pay both real estate agents. This answer may be contrary to what you “know” or believe about Nashville real estate but, it is true. I argue against homeowners paying both agents because it’s an outdated practice that has no place in modern home selling in our digital syndicated marketplace.

Here is the truth agents are not telling you.

For a buyer to hire an agent to represent him, the buyer and agent must have a bilateral written representation agreement. This agreement is law in Tennessee. For this representation contract to be valid, the agreement must have something called consideration. Consideration is a legal term that means “something of legal value.” In a representation agreement like the one between a buyer and a buyer agent, the consideration is money or compensation for services. Below is an actual clipping of the Tennessee Association of Realtors Buyer Representation Agreement. Please pay very close attention to how buyer agents are compensated. NOTE: The word “Client” in this context is the buyer, and the term “Broker” is Buyer’s Agent.

37  E. To authorize Broker to negotiate for a fee paid by the Seller and/or the Seller’s agent, the payment of which will be

38      fully disclosed to Client. If a fee is not offered or paid to Broker, as could occur, for example, in the purchase of an

39      unlisted property, Client agrees to pay Broker a total of $__________ or _____% compensation

40      based on the total sale price. In the event that Buyer leases a property in lieu of purchase, the Buyer agrees to pay

41      Broker a total of $__________ in compensation unless otherwise stated herein. In the event that the amount of

42      any cooperating compensation paid by Seller or Seller’s broker is less than the amount listed above, Buyer agrees to

43      pay Broker the difference at closing, or on the date of possession in the case of a lease. Source: Tennessee Association of Realtors, RF141-Exclusive Buyer Representation Agreement (Designated Agency), Page 1 of 6

As you can see from highlighted lines 39-40, the buyer has a written bilateral agreement to pay his buyer agent. In other words, the buyer agent knows from the start how much he is going to get paid for everything he has to do to get his client to a successful closing. The agreement on highlighted lines 41-43 goes even further and requires the buyer to guarantee the buyer agent’s compensation. Yes, you are reading that correctly but, let me recap to make sure we are all on the same page.

  1. State law requires agents to have a bilateral written agreement in place before they represent anyone in a real estate transaction.
  2. The agreement must have consideration, and with buyer agent representation agreements, that consideration is compensation for the buyer agent’s services.
  3. Buyers guarantee their agent’s agreed-upon compensation by paying any difference that may arise due to the seller or seller’s agent offering less than the amount agreed to by the buyer and buyer’s agent.

Tennessee buyers guarantee buyer agents compensation because squashing all concern the buyer agent may have regarding who is paying them and how much they are getting paid, the agent can represent their client without any commission bias. It removes the risk of the buyer agent boycotting any listing due to compensation. This guarantee the buyer gives in return gets them unbiased fiduciary counsel from their agent.

Why do homeowners still pay buyer agents?

As I said earlier, homeowners paying buyer agents is an outdated practice. It has no place in our modern syndicated real estate marketplace. I suspect so many homeowners still do it because they are not informed about the compensation guarantee between buyers and buyer agents.

Another reason I believe homeowners offer to pay buyer agents because charlatans and immoral agents tell them that if they do not, their home will not be shown. Back when Realtors had control of housing data, this was very true. When buyers had no choice but to ask a Realtor what homes were available, they could boycott and not show homes the buyer was none the wiser to. Now with syndication, buyers have just as much, if not more information than Realtors do, right in the palm of their hand. When the National Association of Realtors agreed to publish their data publically and make it available to other competitor sites like Zillow, Trulia, Hotpads, and many more, Realtors lost their ability to stop a buyer from seeing a specific property. In this new real estate era, an unethical agent can not keep their buyer from knowing about a property’s availability. All the buyer has to do is pull up their favorite real estate search site on their phone.

Sellers can keep more of their equity.

Required by Tennessee State law, buyer agents have settled their compensation through their buyer’s representation agreement. With more buyers finding your property directly from their phones, I think it is time for homeowners to stop paying both agents. Your hard-earned equity represents your family’s financial future, not your real estate agent’s next dream car. Since 2019, I have had 39 clients offer nothing more than a $1.00 incentive to buyer agents vs. the prevailing market practice of 3%. I had 28 buyer agents take the $1.00 incentive and nothing more. Out of the remaining 11 buyer agents, my seller negotiated their compensation directly with their buyer and, on average, saving 89% off the prevailing 3% market practice. That accounted for $274,885.57 of equity my sellers put back in their pocket.

Want to keep more of your equity, give me a call.

With our proven and verifiable track record, our sellers keep more of their equity. Since 2019, our $999.00 flat fee to list your home and our $1.00 buyer agent incentive have saved our homeowners a total of $603,468.81. If you want to keep more of your equity, give me a call, 615-424-0961.