New Rules for Realtors

[OldShooter]

What if as a seller I want to offer a buyer agent a commission to induce the buyer agent to show my listing to their client over listing that don't have such an inducement?

Or would we shift to a model where the seller pays a commission to the selling agent and the buyer pays a commission to the buyer agent?

Even so, as a seller I might want to juice traffic on my listing by offering an inducement to the buyer's agent to gain an advantage.

All possible IMO. One story I read, though, said that the MLS listings can no longer indicate commissions, the idea that if a low commission is shown (as is true now) then agents will avoid showing the house. So how do you offer the carrots to agents if you can't do it in the MLS advert?

One thing about this thread that I don't understand, though, is the focus on commissions and rates. An attorney doesn't get paid based on the size of the deal he's helping with and a tax preparer CPA doesn't get paid based on the client's AGI. Both are working with a fee for services model (except for PI and class action attorneys.) So why won't real estate services (like RE closing costs now) move towards a fee for services model? I'll probably never again sell a house but if it happens the first thing I'll do is expect an agent's fees to be traceable to specific services he/she is offering to provide.

 

[Rianne]

I would rather just pay a buyers agent. I can take pictures of my house, stage it, set the price based on recent home sales similar to mine. Our neighborhood is popular and houses sold with teaser signs "Coming Soon" before they went on the MLS. So the agents were bringing clients by word of mouth rather than MLS listing.

Our neighbor put a FSBO sign with his phone number written with magic marker. Impossible to see driving by. You had to stop, get out and look close to see the number. A smart buyers agent called him and said she had a buyer for 3% commission. He got his price. The seller and buyers agent handled everything. No selling agent involved. It all depends on how much you want to get involved. Neighbors didn't post pics, stage, or do anything out of their comfort zone. They had their own RE attorney. We still keep in touch with them.

 

[MichaelB]

Or would we shift to a model where the seller pays a commission to the selling agent and the buyer pays a commission to the buyer agent?

This makes most sense to me. The buyers agent is hired by and works for the buyer, so the buyer should be the one paying for their service.

 

[Masquernom]

I heard a local real estate agent's ad on the radio recently. They now offer 1% selling agent commission and recommend 2.5% buying agent commission. No idea what that gets you other than the MLS listing. But other than some photos of the house, I never had a listing agent do much else anyway.

 

[tryan]

Seems to me this is the end of the buyers realtor .... and a boom for the selling broker. The buyers will contact the selling broker directly and the entire commision stays in the selling realtors office.

Commissions will come down because there is one less realtor feeding off the sale.

 

[wolf]

Is this a state by state thing?

Here in pricey San Diego 2.5% to each side has been the norm for a decade at least... with less if you use a discount selling agent like Redfin (they charge 2%). I've seen listing that will specify the buyer's agent percentage in the listing if it's anything other than 2.5%.

Median price of all homes (condos, townhouses, and single family) was $940k in February. Single family was $1.22M. Even 2% of that size sales price is a good paycheck. We've earned the title 'most expensive place to live in the US"... Fortunately, we don't have a mortgage, and didn't pay current market when we bought 20+ years ago.

Currently, in the process of selling Mom's home.

San Francisco, Bay Area. Desirable location. Homes still sell in less than
a week. $3 million range.

So Realtor's commision does make a huge difference.

Currently we are negotiating. Seller agent 2% OK'd by seller agent.
Buyer agent, was 2.5% (MLS)

Pushing for 2%, Our Seller agent, said norm is 2.5 %, he's seen a couple
on MLS at 2.25%.

 

[CaptTom]

Do people really go to a realtor to look for homes any more?

I suspect most people start out on Zillow, Realtor.com, Facebook Marketplace, FSBO, Craig's List and whatever else a search brings up.

When and if they find something interesting, the ad might point toward a listing agent. Or the owner. As a buyer, I don't really care how it's listed. Low or no commission would be a selling point.

 

[tryan]

... realtors control the MLS hence the need for the selling realtor. But if the internet makes the MLS obsolete ... THAT would interesting.

 

[OldShooter]

Do people really go to a realtor to look for homes any more? I suspect most people start out on Zillow, Realtor.com, Facebook Marketplace, FSBO, Craig's List and whatever else a search brings up. When and if they find something interesting, the ad might point toward a listing agent. Or the owner. As a buyer, I don't really care how it's listed. Low or no commission would be a selling point.

One of my favorite words is "disintermediation." There is a massive class of people who have had jobs basically as intermediaries who control information and charge for providing it. Insurance agents are an early example of someone getting disintermediated. Term life, property and casualty, etc. can be researched and purchased on the internet without involvement of an intermediary. Many other examples exist. Here we are talking about the disintermediation of real estate agents. While they still may have skills that they can use to make a living, the internet history and this settlement have made it clear that simply being an intermediary controlling access to real estate market information is no longer possible. Viewing markets with an eye for vulnerable intermediaries can be at least interesting and possibly even profitable.

 

[karen1972]

I certainly think they have some logistics they need to work out. If people are going to have to pay for a buyers agent, many will skip that so then sellers agents are going to have to field a lot of calls and arranging of meets since there will be no buyer agent to let them in and make sure they are not just someone casing the joint.

I certainly think it will make it a lot harder to get multiple offers and sell quickly but we shall see.

 

[DrRoy]

I have been very fortunate to never pay a RE agent's fee. Every move I made was a megacorp transfer so the fee was a covered expense. Not planning to move again.

 

[audreyh1]

So I suppose NAR didn’t win their appeal?

From 2023. May be behind paywall but folks usually get a few free articles per month: https://www.nytimes.com/2024/03/15/...that has,eliminating its rules on commissions.

 

[marko]

When we sold our home, our realtor said we should ask FORTY PERCENT more than we thought of asking, considering what others in the neighborhood sold for and what Zillow recommended.

We thought he was crazy but agreed to try it. The house sold in 45 minutes, $30k over that 40%! The guy even had his kids come over with their truck to move our snowblower that had been left behind by the movers.

Our buying agent was SIL who was paid by the builder, but it sounds that that is the change of practice now.

 

[ShokWaveRider]

If a home is NOT "For Sale by Owner", we ALWAYS go directly to the seller's realtor. Hiring a buyer's realtor is only really viable for out-of-town buyers who are not in the locale they are looking.

As far as selling, in desirable areas a sign and a few pics could seal a deal for a move in ready home. In that case if it were me, I would gladly pay a buyer's realtor.

In the UK, the Real Estate fees were a whopping 1% when I lived there (80's), they did just fine. I am not sure what they charge now, but it is a lot more realistic with today's home prices.

 

[4legsgood]

I'm looking for a house to buy right now so I'm thinking about this issue. I've been working with an agent but haven't signed a contract with him.

I'd find it strange to sign a contract that's based on a percentage of the house price when I'd be hoping the agent would negotiate a lower price for me. I'm hoping a buyer agent will offer a fixed price arrangement, or one can skip the buyer agent altogether.

 

[Ready-4-ER-at-14]

From what I have been reading, at least a handful of cities have been upping the real estate transfer tax by an amount that could reach significant percentages on housing sales. Many times, sellers pay that fee. Chicago says buyer pays, but wants to dump all of that on the seller if the buyer is in a protected class. In Chicago, it is on the ballot to have a sliding scale based on house or building prices. below a million, 1million, 1.5 million and more.

News suggest they are publicly secretive about how the money will be spent but the administration has what seems to be a disadvantaged agenda or an income discrepancy agenda based on where you read an article. Money will be spent on homelessness, maybe migrants, disadvantaged youth work programs, teen programs and revitalize neighborhoods primarily in wards most supportive of the mayor. Maybe support reparations directly. Wonder if Irish or Native Americans will get any? ; )

In the past I have heard allegations that large commercial buildings got favored appraisal rates using politically connected law firms to intercede for decades. Supposedly per foot tax rates were higher for homeowners than some skyscrapers. Maybe this is a needed fix for that or maybe that has been fixed.

I'm just thinking this opens up another revenue stream for cities and will probably end up inflating back or above any temporary savings.

 

[NgineER]

I doubt this change will make houses more affordable. I do think it is a step in the right direction to reduce the ridiculous commissions on homes. 15-20 years ago you couldn't access the MLS listings without a realtor, but now you can. Our realtor merely opens doors for us, and helps facilitate the transaction, but there is little value in her services otherwise. We have purchased three properties with her, so don't have any qualms when it comes to a free Christmas tree and such things.

 

[street]

So, what happens to the money they are suing for? Will it go back the past buyers that bought homes and how far do they go back for payments in years?

 

[brucethebroker]

1. Media is running with "6%" commission rate while explaining changes. Fixing commissions between different brokers has been an anti-trust (illegal) issue for decades with huge penalties levied from DOJ. Read the early posts and you will see many various "typical" commissions country wide.
2. My first impression is that sellers (and seller/listing agents) will be the winners. Buyer agents will have to be paid by buyers, or negotiate commission directly from seller. Most first time buyers will not have $ to pay a buyer agent since they struggle with coming up with a down payment. Until now, buyer agents were not allowed to negotiate directly with a seller for an MLS listed home-it was a National Assn. of Realtors ethics violation. Buyer agents had to take the "advertised" commission listed on the MLS by the seller agent. But not now. Imagine your buyer agent haggling with the seller during an offer presentation-conflict of interest for buyer getting the best deal? Who knows?

BTW, buyers going directly to the listing agent for the sale may leave buyers with less than ideal representation-the listing agent represents his/her seller, unless all parties agree to joint representation in writing. First time buyers might not be aware of that.

Not defending the old way of doing things, just providing some current info.

 

[ShokWaveRider]

Wouldn't a fixed fee as opposed to a percentage be the way to go? Then there would be no incentive to keep prices high. The only incentive would be to work for the party that is paying, and to get the best deal for them. Buyer's or seller's. Each party should still get a RE lawyer or whoever to review the contracts on behalf of whoever is paying them. Escrow and Title companies would not change.

 

[Aerides]

Wouldn't a fixed fee as opposed to a percentage be the way to go? Then there would be no incentive to keep prices high. The only incentive would be to work for the party that is paying, and to get the best deal for them. Buyer's or seller's. Each party should still get a RE lawyer or whoever to review the contracts on behalf of whoever is paying them. Escrow and Title companies would not change.

If I were a realtor, then I'd take the lowest price listings, and push you as a seller to keep the prices as low as possible. No incentive for the realtor to take on the pricier homes, or to get the seller the best price. No need to work on bids. Why bother trying to get the $800k houses when I can churn through the $200k ones and make the same for less work?

For most homes, (SFH bracket, which I know can vary), it might seem simpler. But higher end homes require a lot more effort than an open house and some MLS pics. Staging, more rooms=more photos. A $10m listing isn't selling without a lot more PR work.

Sure, plenty of houses can sell themselves. Plenty of people think that about their own home. But plenty more need a trained eye to get right.

 

[brucethebroker]

Wouldn't a fixed fee as opposed to a percentage be the way to go? Then there would be no incentive to keep prices high. The only incentive would be to work for the party that is paying, and to get the best deal for them. Buyer's or seller's. Each party should still get a RE lawyer or whoever to review the contracts on behalf of whoever is paying them. Escrow and Title companies would not change.

Just a guess, but fixed fees might become very popular. This lawsuit/settlement is going to be the biggest change to selling real estate in the US in decades. It should be interesting.

 

[sengsational]

The "6%" is and has been BS for decades. As seller, you always had the option to set any commission structure you want. I hired a guy to put a house in the MLS for $300. I wrote the listing myself and set the buying agent rate at 2%. The agents said "you can't do that", but I did. The house was in a hot market and as discussed above, people were finding it online and asking their agent about it. The agents were probably making up all kinds of lies about why their clients should avoid looking at the house, and leaving out the real reason of a lower commission. But it sold for a great price in a short amount of time anyway.

 

[CaptTom]

...BTW, buyers going directly to the listing agent for the sale may leave buyers with less than ideal representation-the listing agent represents his/her seller...

That's an interesting angle. So many ways to look at this!

Putting my buyer's hat on, I don't think I'd really care whether I'm dealing with the seller directly, or with a realtor who "represents" them. The latter may be less emotionally involved, which I see as a good thing. They wouldn't be personally insulted by a low-ball offer, for example.

I like to think, as a buyer, I'd be capable of figuring out what a property is worth to me, and making an offer. I'd have good reasons backing that up. Comps, the cost of any required repairs or updates, etc.

I can see needing a buyer's agent if, say, you're relocating for work, someone else is paying the tab, and you just don't have time to look for yourself. Still, with something as personal as a home, or for that matter, travel, I like to do my own searching and make my own decisions.

 

[OldShooter]

... I'm hoping a buyer agent will offer a fixed price arrangement, or one can skip the buyer agent altogether.

As they say, hope is not a strategy. Tell your agent that you'd like to work out a fixed price deal.