If you’re in the market to buy or sell a home, you may be wondering about the payment of real estate agents. Traditionally, sellers have covered this cost, but recent changes have introduced new dynamics into the equation.
The National Association of Realtors (NAR) and Multiple Listing Service (MLS) have recently implemented new rules regarding how real estate agents disclose fees. These changes, effective as of August 17, 2024, aim to enhance transparency and competition in the industry.
In this informative Redfin article, we delve into the intricacies of who pays the real estate agent, agent commissions, and the impact of recent changes on these practices.
Understanding Real Estate Commissions
A real estate commission is the payment made by the homebuyer or seller to their agent(s) for assisting in the purchase or sale of a home. This commission is typically a percentage of the final sale price and is settled during the closing transaction.
Who Covers the Real Estate Agent Fee?
Traditionally, sellers have borne the costs of both the buyer and seller’s agent fees from the sale proceeds. However, as of August 17, 2024, buyers are now required to agree to their agent’s fee in writing prior to property viewings. While buyers can still request sellers to cover the buyer’s agent fee when making an offer, the amount paid by the seller to the buyer’s agent may vary depending on the buyer.
Due to this shift, sellers may choose to negotiate buyer agent commission fees as part of the offer process. While sellers are likely to continue covering these fees in many transactions, negotiations regarding these fees are becoming more common.
Here are two approaches sellers can take in navigating the revised commission process:
- Leave the commission open-ended, allowing buyers to include agent compensation in their offers, and negotiate from there.
- Proactively offer a commission or concession that buyers can utilize to pay their agents, which can be communicated to buyers and agents during the showing scheduling process.
Reasons for Sellers to Cover Buyer’s Agent Commission
The decision to offer a buyer agent commission, and the amount thereof, is part of a strategic marketing plan aimed at attracting buyers and achieving the seller’s objectives.
Rather than advertising a selling office commission on the MLS (which is now restricted in most markets), sellers may opt to provide buyers with a concession that they can utilize as needed. Alternatively, sellers could express openness to offers, empowering buyers to decide whether they prefer concessions from the seller or direct payment to their agents.
Impact of NAR Settlement on Agent Commissions
Previously, commission amounts that sellers were willing to offer were displayed in the MLS, allowing buyer agents to know in advance what commission was available for bringing a buyer to a listing. Following the NAR settlement, there has been an increase in the negotiation of commission rates, as well as efforts to enhance transparency and competitiveness in real estate fees.
The settlement also instated rules requiring agents to provide written fee agreements to homebuyers before property tours, emphasizing that all commissions are negotiable.
Some brokerages now mandate a full buyer agency agreement that necessitates exclusive commitment before tours, a practice that Redfin does not enforce. Redfin prioritizes earning a customer’s trust and does not require exclusive commitments for home tours. In most cases, a buyer is not obliged to sign an exclusive agency agreement to view a property.
Negotiating Real Estate Agent Commissions
Real estate agent commissions are negotiable, as there are no set industry rules or laws dictating commission rates. Brokerages often vary in the rates they charge, making negotiation a viable option for buyers and sellers.
Redfin’s Approach to Commissions
At Redfin, we are committed to providing consumers with the best deals. Our listing fees for sellers can be as low as 1%*, while our buyer fees vary by market but remain competitive to help you secure your dream home. We also offer additional savings through our Sign & Save program for buyers who commit to working with us early in the process.
Conclusion
The evolving landscape of real estate commissions offers increased transparency and flexibility for buyers and sellers, aligning with Redfin’s core values. Understanding these changes can empower you to make informed decisions and potentially save money during your real estate transactions.
For more insights on the NAR settlement and Redfin’s commitment to customer satisfaction, feel free to explore the provided links. Connect with a Redfin agent to gain comprehensive knowledge, whether you’re buying or selling a property.
*Listing fee subject to change, minimums apply. Any buyer’s agent fee covered by the seller is not included. Additional terms and conditions may apply. Learn more about our services and fees here.