If We Were Building This From Scratch
The buyer agent compensation model was never redesigned. Here’s what it would look like if we started over.
(Part III in my series on Real Estate Industry Incentives and Buyer Agent Commissions)
History is full of systems that persist not because they were intentionally designed, but because they were inherited.
The QWERTY keyboard layout was originally engineered to slow typists down so mechanical typewriters wouldn’t jam. The mechanical limitation disappeared long ago. The layout didn’t.
Buyer agent commissions represent a similar kind of inheritance. As I argued in my last article, percentage-based commissions made sense under the old sub-agent model, when all agents worked directly for the seller. But the model never got seriously re-examined after true buyer agency emerged in the early 1990s. We’ve been living with the carryover ever since — and it doesn’t hold up well under scrutiny. Not for consumers. And, less obviously, not for buyer agents either.
If none of this is ringing a bell, pause here and read that piece first.
At the end of that article, I raised what I thought was an obvious question:
If we were designing buyer agent compensation from scratch today, what would we build?
Though, apparently, it’s less obvious than I thought, given that most of the industry has been actively avoiding the question for thirty years.
You can only kick the can so far down the road. At some point, someone has to pick it up.
Before I propose anything, a caveat worth stating plainly: I don’t believe there’s one right way to structure buyer agent compensation. But I’m equally convinced there are a million ways to do it wrong. So rather than prescribe a single model, I want to establish the principles that should govern whatever model we’re evaluating.
My cards on the table.
A well-designed compensation model should:
Align the agent’s incentives with the buyer’s goals
Be transparent and understandable to consumers
Allow meaningful competition on price
Work for different types of clients by offering different levels of service
Reward a professional’s time and expertise, regardless of final outcomes
A broken one will:
Misalign the agent’s incentives with the buyer’s goals
Obscure how compensation actually works
Lock in pricing in ways that prevent meaningful competition
Treat every client as if they need the same thing
Tie pay to blunt metrics that have little connection to the work actually performed
Agreement on these principles isn’t the finish. It’s Ground Zero. Every proposed model should be tested against them before the conversation goes any further.
The good news is we don’t all have to land on the same answer.
One mark of a mature industry is that consumers can choose the pricing architecture that fits their situation. And with that as the foundation, here are three models I think have real legs over the next decade.
Model 1: Flat Fee Buyer Agency
Everyone’s loosely familiar with flat-fee agency. But what I’m describing isn’t the discount brokerage model that’s spent thirty years being — sometimes fairly, sometimes not — maligned by the industry.
I’m talking legit, white glove, red carpet, six-star, full-service buyer representation. Offered for a flat fee.
The word “discount” has no place in this model.
Here’s why it works: compensation is fixed regardless of purchase price. The agent is rewarded for the quality of their work, not the size of the asset their client happens to buy. It’s transparent by design — the buyer knows exactly what they’re paying before the relationship begins, and that number doesn’t move.
It also eliminates one of the more persistent consumer frustrations with traditional buyer agency: Why does my agent get paid more when I spend more?
Under a flat-fee model, they don’t.
Whether the buyer closes on a $300,000 starter home or a $1.3 million estate, the agent’s compensation is the same. Their incentive is tied to the quality of service, not the size of the transaction.
This structure also subtly reinforces something most agents claim to want: to be viewed as professionals rather than commissioned salespeople.
Attorneys, accountants, and consultants aren’t paid purely based on the size of the asset their client holds. They’re paid for their time, judgment, and expertise. A flat-fee model moves buyer representation meaningfully closer to that framework.
Of course, one of the uphill battles this model faces is the stigma that flat-fee equals half-ass.
That reputation didn’t come from nowhere. For this model to be taken seriously, flat-fee agents have to offer their clients the same — if not greater — levels of care, attention, skill, and professionalism as any traditional agent. They also have to charge fees that are genuinely reflective of their expertise. The goal isn’t to compete primarily on price and race everyone to the bottom. It’s to compete on value creation and alignment.
The other limitation: flat-fee still assumes every client requires roughly the same level of service. Some buyers close in three weeks. Others need four months and forty showings. Charging them the same amount is its own kind of mismatch.
Which leads naturally to the next question.
Model 2: Tiered Service
If flat-fee solves the purchase-price problem, it doesn’t solve the service-level problem.
Some buyers need extensive education, repeated showings, and patient guidance before they feel ready to pull the trigger. Others already know what they want. They find the property quickly and need professional help with analysis, negotiation, and the mechanics of closing — not discovery. They don’t need hand-holding. They need a skilled collaborator for the hard part.
Treating those two clients as though they require identical service and charging them identically doesn’t make sense. It never did.
I know this because it’s exactly the problem I set out to solve when I built my own model.
What I landed on was a tiered structure built around a simple premise: buyers should be able to choose the level of representation that fits their actual situation. Not the level the industry decided everyone gets by default.
At the foundation is something standard across almost every other professional advisory industry: a retainer. When you hire an attorney, a consultant, or an accountant, you typically pay an upfront engagement fee. It compensates the professional for their time and expertise, and it signals real commitment from both sides. It establishes the relationship as a professional one before the work begins.
Buyer representation can function the same way.
From there, buyers choose the tier that matches what they actually need.
DIY Support — For experienced or analytically-inclined buyers who want to drive the search themselves but value professional judgment at the moments that matter most. The buyer finds the property. The agent steps in for deal analysis, offer strategy, negotiation, and transaction management. The buyer stays in the driver’s seat, legally representing themselves throughout the transaction. But, when they want it, they’re buying expertise on-demand rather than a full-service package.
Limited Service Agency — A formal agency relationship with full transactional support, minus certain traditional services. The agent handles analysis, negotiation, contract work, closing coordination, and communications on their client’s behalf. The buyer takes on elements like property discovery, scheduling their own showings, and attending their inspections. It’s a genuine partnership where each party contributes.
Full Service Agency — Comprehensive guidance from search through closing. Property tours, market analysis, offer strategy, negotiation, inspection guidance, transaction management — all of it. For buyers who want someone in their corner for every step.
The result is a system where compensation actually reflects the work performed. A buyer who needs sixty hours of agent time pays differently than a buyer who needs twelve. That’s not radical. Or at least it shouldn’t be.
And here’s what I’ve found in practice: buyers respond to this. When you sit across from someone and say, here are your options, here’s what each one includes, and here’s what it costs — they lean in. Because nobody talks to them that way. The industry has spent decades collapsing all of this into a single opaque number buried in the seller’s closing costs. Giving buyers a real choice feels, to them, like finally being treated like adults.
In almost every other professional services context, this kind of tiered structure would be unremarkable. You choose your level of tax preparation support. You choose your wealth management tier. You choose your legal engagement structure. Real estate is unusual (and not in a good way) in having resisted tiered flexibility for so long.
A system designed from scratch today would almost certainly include some version of this. It just makes too much sense not to.
Model 3: Performance-Aligned Compensation
If flat-fee addresses transparency and tiered service addresses flexibility, there’s still a third question worth asking: what about incentive alignment?
Under a traditional percentage commission, an agent technically earns more when the buyer spends more. Most professional agents don’t consciously think about it this way — their reputation and referrals depend far more on helping clients make good decisions than on nudging them toward higher price points. But the theoretical misalignment exists. And perception has a way of mattering even if unethical behavior doesn’t inherently follow.
So, what if the compensation model actively tied the agent’s financial upside to the buyer’s financial outcome?
One structure worth considering: a base retainer that compensates the agent for their advisory work — research, analysis, negotiation, contract drafting, transaction management — plus a performance component tied to documented value created for the buyer.
For example: the buyer and agent agree on a target value for a property based on comparable sales and market conditions. If the agent negotiates a purchase below that benchmark, a portion of the savings is shared between them. When the buyer wins, the agent wins too.
This kind of arrangement exists in other professional contexts. Consultants, procurement specialists, and certain attorneys operate under shared-savings agreements where compensation is tied directly to measurable financial outcomes for the client. It’s not a foreign concept. It just hasn’t shown up in residential real estate in any serious way.
Admittedly, this model is more complicated to build than it might appear on the surface. Markets can move quickly, list prices aren’t always reliable benchmarks, and some properties are intentionally priced below market to generate multiple offers — which makes “savings” genuinely hard to measure. A purely performance-based structure would struggle to function on its own. But layered on top of a base retainer, it could create real alignment between what the agent earns and what the buyer actually gets out of the transaction.
The point isn’t to land on one precise formula. It’s that a system designed today would almost certainly experiment with compensating agents not just for showing up to transactions, but for creating measurable value within them.
Buyer agency itself was once a genuinely radical idea. Before the early 1990s, buyers had help but not representation. The agents who pushed to change that did something meaningful. They put someone on the buyer’s side of the table.
That was the right step. The compensation model just never caught up.
Nearly forty years later, the traditional brokerage model has largely ignored the problem, hoping it would go away. The newer players — the ones making all the headlines with seemingly infinite private equity backing — have mostly shuffled the deck chairs. Different packaging, same incentive structure, same misalignment, same opacity. Just delivered with better branding.
Meanwhile, the buyers getting squeezed by all of it are getting sharper. They’ve done the research. They’ve run the numbers. They know what comparable sales look like. They know what escrow fees are for. And they’re starting to ask, with increasing directness, what exactly they’re paying for and why.
That question is only going to get louder.
The QWERTY keyboard is still with us because the cost of changing it seemed too high for too long. Eventually that calculus shifts — not because everyone agreed it was time, but because enough people stopped accepting the inheritance.
We’re at that moment in real estate. The industry can redesign the compensation model deliberately, with the consumer’s interests actually at the center. Or it can wait — for the next lawsuit, the next congressional hearing, the next platform that decides it doesn’t need agents in the loop at all.
Those are the paths before us. Every agent will eventually have to pick one.
Wanna connect further?
Connect with me on socials (I’m most active on LinkedIn) @NickAufenkamp
Tiered & Flat Fee Real Estate Services in SW Washington: The Tartan Team
DIY Homebuyer Resources & Advocacy: DIY Homebuyer Academy
Advisory & Consulting
I advise a select number of proptech founders, MLS leaders, and real estate organizations navigating industry change. My work focuses on stress-testing assumptions, identifying second-order effects, and helping teams think more clearly about strategy, policy, and implementation.