Published August 23, 2024 by Susan Kadilak

A major settlement in the real estate industry has been making waves, with news outlets buzzing about its potential impact on home sellers. While the headlines can be overwhelming and full of speculation, let’s break down what these changes really mean if you’re planning to sell a home in today’s market. Spoiler alert: it’s not as scary as it seems. Here’s what you need to know, especially if you’re thinking about selling your home.

What do the New Rules Mean for Home Buyers?

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How Real Estate Commissions Worked Before

 

Traditionally, the home seller was the one who called the shots when it came to paying real estate commissions. When you hired a listing agent, you’d negotiate their fee, which typically included compensation for both your agent and the buyer’s agent. This “co-brokerage” commission was then advertised in the Multiple Listing Service (MLS), ensuring that the buyer’s agent knew how much they’d be paid for bringing in a buyer.

This system made things straightforward—for decades, sellers could predict and plan for the cost of selling their home, knowing it would cover the fees for both agents involved in the transaction.

What’s Changing:

As part of the settlement agreement, the long-standing practice of sellers being required to offer compensation to the buyer’s agent is now coming to an end. What does this mean for you? Simply put, it changes the dynamics of how things are negotiated in a real estate transaction. Here’s a closer look:

  1. Buyer’s Agent Commission No Longer Guaranteed: Buyers will now be responsible for having a written agreement with their agent, including details about the agent’s commission. This shifts the responsibility from the seller to the buyer to negotiate how their agent gets paid. The era of listing agents automatically offering a portion of their commission to the buyer’s agent is ending.
  2. No More Commission Visibility on MLS: Sellers can still choose to offer a commission to attract buyer agents, but this won’t be advertised on MLS anymore. It’s a behind-the-scenes negotiation now, rather than a given part of the deal.

How to Navigate the New Rules When Selling Your Home

With these changes, you’ll need to be more strategic in how you negotiate with your listing agent. Here are some crucial points to consider when hiring a listing agent:

  • Decide on Offering a Buyer’s Agent Commission: Are you willing to offer a commission to the buyer’s agent? While it’s no longer required, it could still be a way to attract more buyer agents to your property. Discuss the pros and cons with your listing agent and decide whether or not it makes sense for you.
  • Different Fees for Different Scenarios: There are 2 sides to every transaction:  the listing side and the buyer side. Ask your listing agent what their fee will be if the buyer has their own agent versus if your agent handles both sides of the deal. 
  • Understand Dual Agency: If your listing agent ends up working directly with the buyer, will there be dual agency? Will your listing agent work with a buyer but only represent you? Make sure you’re clear on the terms and how unrepresented buyers will be handled before you sign any agreements.  

What Happens If You Don’t Offer a Buyer Agent Commission?

Opting not to offer a buyer agent commission can be a smart move in some cases. Here’s why you might choose not to offer one:

  • Uncertainty of Offers: You might agree to a certain commission upfront, but what if the buyer’s offer doesn’t line up? They might ask for more, or less, or nothing at all. Waiting until you see a written offer gives you the flexibility to decide whether you’re open to compensating the buyer’s agent.
  • Negotiation Leverage: If a buyer asks you to cover their agent’s commission, you have the power to negotiate. You could accept, counter, or reject the offer based on the overall deal they’re proposing. This puts more control in your hands, allowing you to make decisions that are in your best financial interest.

How Will Buyer Agents Get Paid Now?

With the responsibility shifting to buyers, how they choose to pay their agents becomes a critical part of the transaction. Here’s how they might handle their agent’s fee:

  • Seller Pays the Commission: The buyer could request that you, the seller, cover the agent’s fee as part of their offer. This has become a standard option in many purchase agreements.
  • Financing the Fee: Buyers might roll the commission into their mortgage, effectively financing it over the life of the loan. This can ease the burden of upfront costs.
  • Out-of-Pocket Payment: In some cases, buyers may choose to pay part or all of the fee themselves, directly out of pocket.

Why These Changes Might Benefit Sellers

While the changes might seem daunting at first, they could actually work in your favor as a seller. Here’s why:

  • More Control Over the Transaction: With buyers now responsible for negotiating their agent’s commission, you’re less likely to be locked into a pre-set fee. This gives you more flexibility and control over the final terms of the sale.
  • Reduced Selling Costs: By not automatically offering a buyer’s agent commission, you might save on your overall selling expenses. You can choose when—and if—it makes sense to contribute to the buyer’s agent fee, rather than being forced to do so upfront.
  • Negotiation Power: The negotiation of commissions becomes part of the broader deal-making process. This means you can leverage commission discussions to negotiate other aspects of the sale, such as the purchase price or closing date, to your advantage.

As the real estate industry adapts to these new rules, it’s essential to stay informed and be prepared. Whether you decide to offer a buyer agent commission or not, understanding the implications and knowing how to negotiate effectively will be key to a successful home sale.  Don’t hesitate to ask questions, weigh your options, and choose a strategy that makes the most sense for you.