Historically, when a seller hired a listing agent, they agreed on a commission rate for selling their home. This fee would cover the listing agent's services, and a portion of it would be offered to the buyer’s broker as compensation for bringing in a buyer. This arrangement was publicly advertised on the Multiple Listing Service (MLS) to encourage other agents to show the home to their clients.
When hiring an agent, commissions are still negotiable. However, sellers will now only agree on a fee for the listing agent's services and are no longer required to commit to paying a commission to the buyer’s agent before receiving an offer. This doesn't mean sellers won't pay for buyer’s agents' commissions; it just isn't mandatory. Sellers can choose not to offer a commission to cooperating agents, which might be a strategy to help sell the home at a higher price. However, sellers should understand the implications this could have on a prospective buyer’s ability to purchase.
Technically, buyer’s agents are paid by the buyer. However, sellers can provide a concession to help cover the buyer’s obligation to pay their agent’s commission, which can reduce the buyer’s out-of-pocket expenses. It is important for sellers and their listing agent to discuss buyer’s agent commissions before offering the home for sale. This ensures the seller understands what to expect and allows them to agree on a strategy to achieve the best results.
It is extremely important for sellers to select an agent that understands and can properly articulate to their client what should be expected as sellers when listing their home for sale. While a predetermined commission to be paid to buyer’s agents is not established up front contractually, nor is it advertised on the MLS, sellers should expect that the majority of buyers who are represented by an agent will request that the seller provide a seller concession in which the buyer will use to pay for their agent’s fee for representation. Buyers who opt to use a Realtor to represent them, it is required that the buyer and their Realtor contractually agree to their agents fee for representation prior to that agent ever showing them any homes. In short this means, if the seller of the home that the buyer purchases is unwilling to provide a concession covering the buyer’s agent commission, then the buyer would have to come out of pocket to cover this cost.
It is crucial for sellers to understand buyer agency to effectively market their home and achieve the best possible results. While it may seem counterintuitive for sellers to pay a buyer’s agent commission, doing so can sometimes lead to a more competitive offer that results in a higher net profit for the seller. If an offer includes higher fees but ultimately provides a better net outcome, it can be a win for the seller.
The amount a seller is willing to pay toward buyer agent commission is determined during the negotiation period after an offer is submitted on a property. In consideration of this, sellers can now choose
Offering a concession to buyers to use toward their Realtor fees can be an extremely powerful tool when selling a home. Doing this will incentive Realtors and buyers to pursue the purchase of a listing since it will avoid the buyer needing to pay their Realtor’s fee with cash.
Instead of a seller agreeing to pay a predetermined commission to buyer’s agents, this fee now becomes negotiable at the time of the offer. Sellers and their agents can now use this fee to encourage buyers and their agent to submit a stronger offer. In the event that a buyer submits a low offer, instead of negotiating the price and terms, the seller can now also opt to negotiate the buyer agent’s requested fee.
Although buyer agent commissions have always been negotiable, now sellers have the opportunity to do the negotiation only once they have all of the information. Rather than negotiating the fee prior to ever knowing what the offer amount is.
While there is no place in the CAR listing contract for sellers to offer this, It is important for sellers and their agent to discuss the buyers agent fee prior to listing the home for sale. If a seller is willing to pay the cooperating agents compensation, the listing agent can use this as leverage when discussing the listing with other agents and buyers in order to encourage prospects to write a [strong] offer.
Commissions have always been negotiable between a Realtor and their clients and this remains the same today. However, with the recent publicity around commissions, consumers are now becoming more aware and are asking more questions. It is important that sellers and buyers understand all of the numbers associated with a real estate transaction and how it effects them. Now, more than ever, it is extremely important to hire an agent who provides complete clarity and transparency around real estate commissions and is able to articulate what these new industry changes are and how it will impact you.
- No MLS Commission Listings: Commission details for the buyer’s agent will no longer be listed in MLS. Sellers will need to negotiate and explicitly agree on the commission with their agent and the buyer’s agent outside of the MLS system.
- Seller’s Choice: Sellers now have the option to decide whether or not to offer a commission to the buyer’s agent. If they choose not to offer a commission, buyers will need to negotiate their agent’s fee directly with them, potentially affecting how attractive the property appears to potential buyers.
- Direct Negotiations: Since commission rates for the buyer’s agent will no longer be pre-determined and disclosed in MLS, sellers will have to engage in direct negotiations with agents regarding commission structures. This may lead to more personalized and flexible arrangements but also requires sellers to be more proactive in managing these discussions.
- Potential Buyer Reluctance: Some experts predict that without the standard practice of sellers covering both agents’ commissions, buyers might be deterred from properties where they need to pay their agent’s fee out of pocket. Sellers may need to consider offering competitive commissions to attract more buyers, despite the new regulations.
We encourage our clients to call, text or email whenever they need, no matter how big or small the request is to ensure peace of mind throughout the home buying/selling process.