Built into its very design, the commission structure between Buyer and Buyer’s Agent creates a fundamental misalignment:
The Buyer is rewarded for the lowest possible price. Every dollar saved goes directly into their pocket and reduces their mortgage burden.
The Buyer’s Agent is rewarded for the highest possible price. Their commission is calculated as a percentage of the selling price.
This creates perverse incentives at critical moments:
- When the buyer considers offering less, the agent loses money if that lower offer succeeds
- When negotiations stall, the agent has financial motivation to push the buyer higher rather than walk away
- The agent profits from convincing the buyer to stretch their budget
- Closing the deal quickly at a higher price beats spending more time to save the buyer money
The agent will say they “want the best deal” for their client, but their compensation literally increases when the buyer pays more.
The argument that the Agent’s inherent conflict is overcome through professionalism and repeat business incentives may, or may not, hold true for any given Agent at any given time. However the underlying mathematical reality, and inverse incentives, remain. The commission structure rewards the buyer’s agent for outcomes that cost the buyer more money.
In short, they are incentivized to pull the same rope in opposite directions.