The Real Scoop On Commissions: New 2024 Rules
You may be familiar with the traditional real estate commission model, where the seller provides the total agent commission, often between 5 and 6 percent of the sale price of the home.
That payment is then split between their listing agent and the buyer’s agent after closing.
Due to a series of lawsuits, settlements, and renewed scrutiny from the Department of Justice, this model has changed significantly, with the onus of paying for the buyer agent’s compensation potentially shifting more to the buyer. As a seller, you no longer have to offer buyer agent compensation as part of your listing agent’s commission to list with the multiple listing service (MLS).
If you’re looking to put your house on the market in the coming months, it’s vital to understand these shifts in the process so you can make informed decisions that work for your specific situation. Check out this guide to common questions regarding buyer agent commission to get a better gauge of how they work, why they matter to you as a seller, and whether it’s in your best interest to offer to pay it as a financial incentive.
How is the process of buyer agent commissions changing?
Previously sellers were required to offer buyer agent compensation as part of their listing on the multiple listing service (MLS). There were no mandates on the amount that had to be offered, meaning you could advertise a $0 commission if desired, but most sellers were advised by thier listinge agents to offer a standard percentage for thier area as an incentive for buyer agents to show and sell their properties to clients. In this sense, the commission was essentially presented as a routine marketing cost for sellers in order to get their property in front of as many qualified buyers as possible via the MLS.
Starting in July, however, sellers will no longer be permitted to mention buyer agent compensation in their MLS listings. Additionally, if their agent is a member of the National Association of Realtors® (NAR), buyers will be required to sign a buyer-broker agreement that states the type and amount of their agent’s compensation; this could be a commission based on the sale price of the home they buy, a flat fee, an hourly rate, or some other form of payment. Together, these two changes may lead to a shift that generally sees the buyer assuming the responsibility for paying their agent’s compensation as opposed to the seller.
Can Sellers still pay the buyer agent commission if they wish?
Yes, there is no hard-and-fast rule about who has to cover the buyer agent’s compensation. Sellers can certainly market their property with an offer to pay buyer’s agent commission in advance—just not on the MLS—as a way to attract more interest from buyer agents and, subsequently, their clients. A buyer may also ask you for help with it during closing, requesting it as a seller concession. In that instance, the seller will have the opportunity to negotiate how much, if any, of the commission they are willing to provide to help facilitate the sales process.
How much is the typical buyer agent commission?
Commissions are not fixed, but in most markets, they traditionally range somewhere between 5 percent to 6 percent of the home’s sale price. That is then split between the buyer and seller agents, meaning that each generally receives between 2.5 percent and 3 percent commission. With the changes following the settlement by the NAR, advocates for the rule change argue that this amount will to go down over time, potentially even by half. Of course predicting the future is not an exact science, so in the end we will just have to wait and see how all this plays out in the market in the coming years.
How does paying the buyer agent commission affect how much I get from the sale?
If you are covering the buyer agent commission, it is typically deducted from the proceeds of the sale before you receive your profit. Be sure to factor this into your calculations when determining how much you expect to earn from the sale of your home. It is always best practice for listing agents to provide thier sellers with a “Seller’s Net Proceeds Worksheet” with their best estimates of the closing costs and the esitimated seller’s net proceeds from the sale of the property.
When should I consider paying the buyer agent commission?
Sellers need to remember, different markets demand different strategies for enhancing their home’s appeal. In a slower market, sellers may feel the need to provide buyer agent compensation to compete against other listings in the same neighborhood. Conversely, in a more seller-friendly market with low inventory and many eager buyers, sellers may be able to offer little or no buyer agent compensation, secure in their home’s potential for a lucrative sale.
As a seller, you deserve transparency around the services that are included in the sale of your home and the way that both agents will be compensated. By working closely with your real estate agent, you can get your questions answered, make more informed decisions, and effectively navigate the logistics of getting your home sold
