As many people have probably heard, there was a big lawsuit against the NAR, or the National Association of Realtors recently, that is going to affect how commissions are paid to realtors. The last change for agents was back in the early 1990s! Wendy and I thought it might be good to make a video explaining just what these changes are, how they will affect Realtor commissions, and also, how it will affect sellers and buyers.
Traditionally, the seller has negotiated with the listing agent, how much commission will be paid out, both to the listing agent and the buyer’s agent. The seller pays the full commission to both realtors, and the buyer pays no commission. Because of the lawsuit, the NAR is setting up new rules as to how commissions are paid. Here is how it will work.
Beginning August 17, 2024, when the seller signs a listing agreement, he will negotiate with the listing agent how much he will pay the listing agent, but instead of agreeing to pay a buyers agent, the seller will decide what amount of money he is willing to contribute to the buyer directly, as a concession, so that the buyer can use that money to pay the buyer’s agent. This amount will be listed in the MLS under concessions, instead of under amount paid to Buyer’s agent. How is this change going to help buyer’s and sellers?
The lawsuit accuses some real estate firms of price fixing, because each listing lists how much a buyer’s agent will be paid at closing. This can cause some realtors to steer their buyers away from houses that pay less commission, and towards houses that pay a higher commission. This was really wrong! We have always thought that realtors got paid way too much commission, and that is why we started our company back in 2006. We have been doing 1.5% commissions, which is way less than most realtors have been charging, have been willing to be flexible on what our commission is, as well as what the seller pays the buyer’s agent, and even on what our commission is as a buyer’s agent.
The lawsuit needed to happen, because many realtors have been greedy in the past and it had to change. Here are the 3 main changes that will happen as of August 17, 2024
- Decoupling of commission: Meaning the seller only pays the listing agent
- Seller fee does not include the buyer’s agent fee,
- The buyer pays his own agent’s fee
How does the buyer’s agent get paid?
The first thing you need to know, on the first meeting with a buyer’s agent to schedule a showing of a property, the buyer must sign a Buyer Agent Agreement. This specifies how much a buyer will pay the buyer’s agent, what the time period is, and what the agent’s responsibilities are. Each of these things is negotiable. You will want an agent that is an expert negotiator who understands every aspect of this new law. If they don’t, it could end up leaving money on the table that could be in your pocket. We have more details on the buyers agreement on our website, and we also made a video for buyers specifically.
So a seller may think, wow I don’t have to pay any buyers fees! And that is true. You don’t have to pay the buyers agent anything. However, there are a few things that you might want to take into consideration that could greatly affect your ability to sell your house quickly and for the highest price. We really don’t know how it will all play out, but we need to understand what is customary in your area, so that you are competing on a level playing field. Here are some things to think about.
Because it will be difficult for many buyers to pay their agent a commission out of pocket in cash, being as prices are so high, downpayments are high, interest rates are high, closing costs are high…how will they be able to come up with another 2% or more to pay their agent? So many sellers agents may encourage their sellers to offer a seller paid concession to help cover the cost of a buyer’s agent. This will be listed in the MLS, under seller concession instead of buyers agent commission. If the seller pays more than the buyer has agreed to pay his agent, the buyer keeps the extra. This will keep agents from steering their buyers to buy a house with a higher commission. You can see a chart showing how this will work, on our website.
The amount that seller agrees to contribute to buyer, will affect offers. If a seller doesn’t offer any concession, and a buyer doesn’t have enough for closing costs etc, and then has to add an agent commission, they won’t be able to make an offer on your house. So it could reduce the offers. If you do offer a concession, it could help you get more offers, plus the buyer might offer a higher price because he knows he is not paying the buyer commission, so when he adds up all he is paying, he can pay more. It probably all equals out in the end. But offering a seller concession, that could attract more buyers and more offers, which benefits the seller and would potentially give the seller more money overall.
This is all so new to all of us, especially for buyers and sellers. It is important that you understand how this all works before you decide to list your house or to buy a house. The August 17th deadline is coming up quickly. If you have any questions about how the new commission systems work, please email, call or text us. We would love to answer your questions, or meet with you so we can talk in person and explain how the changes will work! This page is mostly for sellers. We also have written a page for people who are wanting to buy a house! The changes affect buyers and their agents, just as much as they affect sellers and their agents. You can click here to see a more detailed explanation of how the Buyer’s Representation and compensation will work!
