When news broke on a rainy, overcast Wednesday in March that Koenig & Strey would be requiring its buyer clients to sign an exclusive buyer-broker agreement – and that a $250 fee would be attached to the document, upon a successful closing – the Chicagoland real estate community reacted with ridicule and praise in equal parts.
Some agents questioned Koenig’s new business plan, seeing it as a revenue-booster that could ultimately cost it valuable clients and agents, but others were complimentary, if not congratulatory, for its actions, applauding the company for its bold initiative and business savvy in these trying economic times.
For the naysayers, it did not matter that mandatory buyer-broker agreements and fees had existed in other real estate markets in the U.S. for decades. In Florida, for instance, non-negotiable fees are commonplace for buyers and sellers, and often at rates that exceed Koenig’s. What mattered was that such a business policy rarely exists in the Chicagoland market, and with its announcement, Koenig & Strey simultaneously forced brokerages and agents to reconsider how they did business in the modern real estate climate.
Real estate has been a remarkably consistent industry, and that is largely by design. Though mortgages have existed in one form or another since the 15th century, modern real estate in the U.S. did not really take shape until the 20th century, when Realtor associations began forming and adopting uniform policies that were eventually implemented on a national level, from forms and contracts and standard commissions (which, by 1950, were already set at 5 percent), to a national, unilateral MLS system in the early ‘60s, which, by 1977, would claim 93 percent of real estate firms as members.
At every stage in real estate’s evolution, from the creation of the National Association of Real Estate Exchanges in Chicago in 1908 (NAR’s predecessor) to its first Code of Ethics in 1913, a consistent business model was always the emphasis of the industry, and excluding several blips on the radar, such as Century 21’s popularization of the franchising model in 1971 and RE/MAX’s 100 percent commission model in 1973, its central focus on networking, leads, client acquisition and the ultimate payoff of a commission has been unaltered, especially in Chicagoland’s marketplace.