How the New Legislation Will Affect Sellers

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 Real Estate Agent to represent them, it is required that the buyer and their Real Estate Agent 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 Real Estate Agent fees can be an extremely powerful tool when selling a home. Doing this will incentive Real Estate Agents and buyers to pursue the purchase of a listing since it will avoid the buyer needing to pay their Real Estate Agent'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 Real Estate Agent 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.