Did IDX Kill Buyer Agency?

If you wind back the clock, the greatest value of working with an agent as a home buyer was access to inventory – the MLS and "coming soon" listings. There was no internet, and consumers could not reasonably find all of the homes in a market on their own. They were limited to newspapers and magazines. Back then, buyers highly appreciated the service of a buyer's agent to find listings, schedule showings, craft buyer CMAs, offer submission and negotiation, and closing management.

IDX allowed the consumer to find listings without an agent, and in some ways, schedule showings. But the rest of the work has remained the domain of the buyer's agent.

I am a strong supporter of buyer agency and understand the value of IDX to serve the home buying consumer and their agent; but, I believe that IDX is a child of the offer of compensation. If the listing broker is offering buyer-broker compensation, then it strategically aligns to support programs – like IDX – that allow buyer agents to advertise their services to consumers with home search.

Now, the Department of Justice (DOJ) has issued an opinion in the Nosalek case which points the industry toward eliminating any offer of compensation to the buyer agent from the seller/listing firm.

The DOJ does not condemn buyer agency; they condemn the relationship of competitors working together with the seller and buyer to determine commissions. They want a clean cut. The seller hires their agent, and pays them. Same is true of the buyer's agent — they get paid by the buyer.

The listing broker is no longer incentivized to support the buyer agent lead generation on IDX websites if the offer of compensation is not part of the MLS.

Given this new construct, it seems like the best way that MLSs can support buyer's agents is by eliminating IDX. If consumers no longer have access to every listing on the 500,000+ websites, it would increase the need to work with a buyer's agent.

The online landscape of property search would dramatically change if IDX was terminated. The only property search solution remaining for consumers would be VOW. VOW requires home buyers to register and hire a buyer's agent to search for property.

If you want to see a model property search solution on a broker website without IDX, search homes in Cleveland using HowardHanna.com. Howard Hanna Real Estate Services opted out of IDX, so they only display their own listings to consumers who are unregistered on their site. When you register and agree to use a Howard Hanna agent to buy your home, you see all of the competitor listings.

I have long believed that the buyer's agent often does a lot more work to earn a commission than the listing agent, even in today's condition of limited inventory. I want to see the buyer agency survive these class action lawsuits. The best idea that gets my vote is the cancellation of IDX.

The one segment of the industry that would be most damaged by the loss of IDX are paper brokers. Those are brokers in license who only use their license to gain data access and do not endeavor to represent home buyers or sellers. I have not conjured up a fix for those companies in the absence of IDX. I guess that they would need to go back to being advertising websites, and advertising in magazines and newspapers may have a comeback. Additionally, ListHub or similar services would presumably have a comeback.

To view the original article, visit the WAV Group blog.