025 Agent Conflict of Interest Not Solved by Education or Training

Neither Education Nor Ethics Training Helps (in their current form)

What is less expected, however, is that education, at least in its current form, does not mitigate the problem.  Teaching agents about ethics or adding multiple hours of education to licensing requirements has no impact on ensuring that agents act for their clients as they do when selling their own homes.  Only changing the compensation structure for agents makes the difference – and the only time this is seen is when the agent becomes the owner of the brokerage itself.  When an agent becomes or is the owner of an office, they now have a stake in the performance of everyone else in the office because they have a share of everyone else’s commissions.  This is not true of the sales agent whose only compensation is derived through their own personal sales activity.  These agents sell their own properties for around 4% more and keep their homes on the market longer than they do when they sell homes for their clients.

Ethics training is a cornerstone of understanding the agents’ fiduciary responsibility to clients and yet the training currently in place is not solving the issue that agents sell their own homes for more and take longer doing it, than they do for their clients.  The only thing that mitigates this failure of fiduciary responsibility is when the compensation structure changes, and the driving factor behind this is the concern that the agency owner has in preserving his own and his company’s reputation.

“Maybe the National Association of Realtors, [the NAR] could think about how could we leverage reputation… to tame the perverse incentives of the real estate agency.”