I’ll gladly pay you Tuesday for a hamburger today … or maybe, not at all
You may have read that the National Association of Realtors (NAR) recently settled a lawsuit based on concerns about how real estate commissions are handled. Typically, when a home is sold, the seller pays a commission to their listing brokerage, who then uses those monies to pay both the seller’s agent and buyer’s agent. This commission is usually a percentage of the home’s sale price.
The lawsuit argued that this system was not transparent and could lead to higher costs for consumers. As of Aug. 17, 2024, there will be changes in compensation structure that will impact both buyers and sellers. Here’s a simple explanation of what these changes mean for you.
Key Changes for Sellers
1. Commission Structure: Sellers are no longer required to offer a commission to the buyer’s agent. This can lead to savings for sellers, as they may choose to offer compensation only for their own agent’s services.
2. Competitive Pricing: With buyers more aware of and involved in commission negotiations, sellers might face more competition. They may need to offer more attractive terms to ensure their home gets the attention of buyer’s agents.
3. Clearer Breakdown: Sellers will need to provide a clearer breakdown of commission costs. This transparency ensures that sellers understand exactly what they are paying for.
Key Changes for Buyers
Paying for Their Own Agent: In some cases, buyers might need to pay their agent directly rather than having the seller cover the cost. This change encourages buyers to be more selective and mindful of the services they are paying for.
2. Direct Negotiation: Buyers can now negotiate directly with their agent about the commission. This means buyers have more control and can potentially save money by negotiating a lower commission rate.
3. More Transparency: Buyers will now have more transparency around the costs associated with their real estate transactions. Previously, buyers might not know exactly how much their agent was being paid. Now, they will have a clearer understanding of the commissions involved.
A few thoughts …
Whether you are a buyer or a seller, please work with an agent you know and trust. If you are selling, make sure you understand how the compensation you offer your listing agent will, or will not, be divided up.
Buyers, you may think it's a good idea to work with the listing agent to avoid paying fees to hire your own agent. However, this is truly a buyer beware situation — remember, the listing agent works for the best interest of the seller, not you.
It’s important to understand these new rules, as they may have a major impact on your financial bottom line. For more information, or if you have questions, please reach out to me directly for a no obligation conversation.
Engle & Volkers is a luxury real estate brand connecting clients around the world with the homes of their dreams.
