OT: Adios 6% Realtor Commission

[PooPopsBaldHead]

For those who haven't seen, the National Association of Realtors settled a lawsuit yesterday and part of the settlement includes not allowing buyers agent comp to be predetermined in the MLS. A lot of moving parts, but it basically eliminates the idea of a standard 6% (it's always been negotiable, but many never knew that).

Ultimately we don't know where it's going to shake out, but sellers won't be paying much if anything to buyer's agents and the talking heads seem to think commissions may be cut in half or even drop down to the 1-2% levels seen in many other countries eventually...

I think good realtors will separate from the crowd and figure out the new model and the soccer mom that has no business being a realtor, but still manages to sells 1-2 houses a year is toast.

 

[BulldogBlitz]

I think good realtors will separate from the crowd and figure out the new model and the soccer mom that has no business being a realtor, but still manages to sells 1-2 houses a year is toast.

...and I can hear my ex wife playing victim already.

 

[patdog]

I know almost nothing about this other than what you wrote. But it sounds to me this will be the end of buyers agents as we know them. You'll wind up with the seller paying his agent 3% and the buyer paying his agent a flat fee (roughly 3%). Sales prices will decline by about 3% and we'll essentially be right back where we've been for years.

 

[garddog]

The problem has always been that for every good agent that actually works hard for you, there are 10 **** agents that do nothing but collect a check and string you along.

 

[PooPopsBaldHead]

I know almost nothing about this other than what you wrote. But it sounds to me this will be the end of buyers agents as we know them. You'll wind up with the seller paying his agent 3% and the buyer paying his agent a flat fee (roughly 3%). Sales prices will decline by about 3% and we'll essentially be right back where we've been for years.

I have sold 3 houses in the last 6 years and have always paid 1.5% to the selling agent. I think the buyer's agent will eventually be more of a flat fee and it's included in the offer...

PatDog selling house for $500,000. PooPop is buying and offers $505,000, but PatDogpays $5000 to buyer agent.

It's a win for people who are selling and those who don't need a buyers agent.

 

[ETK99]

I've never paid over 3%

 

[OG Goat Holder]

Hard for me to believe this matters, as the commissions have always been negotiable. I've seen rates all over the place, and I've had realtors cut commissions for certain sticking points, and pay for other things straight up.

I've also always tried to use good, reputable, experienced agents. Not friends or facebook contacts. It makes a difference when they have the knowledge. Lot of things they can help you with.

 

[Perd Hapley]

I've also always tried to use good, reputable, experienced agents. Not friends or facebook contacts. It makes a difference when they have the knowledge. Lot of things they can help you with.

Do not ever, ever use a friend or a neighbor as your realtor. Its a great way to ruin the relationship. They’ll say they will discount you down to 2% because you are friends. Its not worth it. If you’re buying, you’re better off not using an agent at all if you know how the contracts work. Just take that 3% of the top and let seller’s agent know why.

 

[Leeshouldveflanked]

I thought you picked a realtor on how good looking they are?

 

[Perd Hapley]

I know almost nothing about this other than what you wrote. But it sounds to me this will be the end of buyers agents as we know them. You'll wind up with the seller paying his agent 3% and the buyer paying his agent a flat fee (roughly 3%). Sales prices will decline by about 3% and we'll essentially be right back where we've been for years.

Why would sales prices decline by 3%? I see no chance at all of that happening….especially in hot markets.

Do you think sellers running comps are going to dive into what the agent commissions were on properties going back however long? That’s never listed in the final sales price. They’ll keep their price at or above city / neighborhood comps and still pay less to the agents.

 

[Faustdog]

For those who haven't seen, the National Association of Realtors settled a lawsuit yesterday and part of the settlement includes not allowing buyers agent comp to be predetermined in the MLS. A lot of moving parts, but it basically eliminates the idea of a standard 6% (it's always been negotiable, but many never knew that).

Ultimately we don't know where it's going to shake out, but sellers won't be paying much if anything to buyer's agents and the talking heads seem to think commissions may be cut in half or even drop down to the 1-2% levels seen in many other countries eventually...

I think good realtors will separate from the crowd and figure out the new model and the soccer mom that has no business being a realtor, but still manages to sells 1-2 houses a year is toast.

I’m a broker. I don’t have a huge issue with this. We’ll adjust.

And yes, I agree that we could use a shrinking of our ranks. I’ve been for increasing entry requirements for years.

Only issue is that this will give sellers a pretty significant representation advantage.

Eventually you’re going to see most buyers, especially first time homebuyers and those who can’t afford to both buy a house and pay a buyer’s agent, having to go directly through an agent who represents only the seller’s best interests.

 

[The Peeper]

I've sold 2 in the last 8 years and only paid the same agent for a listing basically. Paid her a flat $1000 to take still and movie shots with her fancy panoramic camera and put it on MLS and Zillow. That was her only involvement, no questions, no showing, no negotiating with buyers. Both of those buyers agreed to use the same attorney I've always used for closings and it was smooth sailing on both transactions. I felt like both of us benefitted, basically an advertised FSBO with an attorney taking care of legalities.

 

[aTotal360]

The issue is people (and the courts) don't understand that the buyer is actually paying all of the commissions. Not the sellers. For some odd reason, the seller dictates the terms. Without the buyer, the seller doesn't get paid and commissions don't get paid.

IMO, the fix is easy. Put the commission agreement on the buyer-brokerage agreement. Not on the listing agreement.

Also, the data shows that unrepresented buyers and sellers typically get a worse deal financially because they don't know the in's and out's of a contract and have to leverage certain points. I know all SPSers contributed to the foreword of Grant Cardone's latest book, but the average person is playing with fire going unrepresented.

 

[aTotal360]

Hard for me to believe this matters, as the commissions have always been negotiable. I've seen rates all over the place, and I've had realtors cut commissions for certain sticking points, and pay for other things straight up.

I've also always tried to use good, reputable, experienced agents. Not friends or facebook contacts. It makes a difference when they have the knowledge. Lot of things they can help you with.

You are correct. It's just a talking point for people who fancy themselves RE investors. It's always a negotiating point. Not once have I done a deal that needed a commission reduction to get it to closing and declined to do it.

 

[greenbean.sixpack]

For those who haven't seen, the National Association of Realtors settled a lawsuit yesterday and part of the settlement includes not allowing buyers agent comp to be predetermined in the MLS. A lot of moving parts, but it basically eliminates the idea of a standard 6% (it's always been negotiable, but many never knew that).

Ultimately we don't know where it's going to shake out, but sellers won't be paying much if anything to buyer's agents and the talking heads seem to think commissions may be cut in half or even drop down to the 1-2% levels seen in many other countries eventually...

I think good realtors will separate from the crowd and figure out the new model and the soccer mom that has no business being a realtor, but still manages to sells 1-2 houses a year is toast.

Why all is said and done, realtor fees probably won't change much.

 

[patdog]

It's a win for people who are selling and those who don't need a buyers agent.

You may have a good point here. A lot of people may just say screw it, I don't need a buyer's agent at all.

Why would sales prices decline by 3%? I see no chance at all of that happening….especially in hot markets.

Do you think sellers running comps are going to dive into what the agent commissions were on properties going back however long? That’s never listed in the final sales price. They’ll keep their price at or above city / neighborhood comps and still pay less to the agents.

Current selling prices include a 6% commission paid by seller. If buyer now pays buyer agent & seller is only paying 3%, the price will be about 3% less than if seller was paying full 6%. Everyone winds up same as they were in the old system. Seller, buyer & both agents.

 

[patdog]

I’m a broker. I don’t have a huge issue with this. We’ll adjust.

And yes, I agree that we could use a shrinking of our ranks. I’ve been for increasing entry requirements for years.

Only issue is that this will give sellers a pretty significant representation advantage.

Eventually you’re going to see most buyers, especially first time homebuyers and those who can’t afford to both buy a house and pay a buyer’s agent, having to go directly through an agent who represents only the seller’s best interests.

Agree. You’ll see buyers who think they can just do it themselves. Some may be ok. But a lot of those will get hurt (and often not even realize it). I don’t care how much you think you know, a good realtor just has so much more knowledge of the market & negotiating tactics in these situations. Key being a good agent. A bad one is worse than worthless.

 

[aTotal360]

Agree. You’ll see buyers who think they can just do it themselves. Some may be ok. But a lot of those will get hurt (and often not even realize it). I don’t care how much you think you know, a good realtor just has so much more knowledge of the market & negotiating tactics in these situations. Key being a good agent. A bad one is worse than worthless.

I foresee a lot of buyers losing earnest money…

 

[Perd Hapley]

I know all SPSers contributed to the foreword of Grant Cardone's latest book, but the average person is playing with fire going unrepresented.

I literally represented myself better than my last buyer’s agent represented me. Last housing market endeavor was a total fiasco that cost me about $2,000 or more - all directly linked to our agent 17ing something up and getting played by the sellers agents she was dealing with or being generally unknowledgeable….and oh yeah I didn’t get a new house or sell mine either.

Realtors aren’t attorneys. They have pretty much an unrestricted free reign to 17 up without it affecting their ability to continue to operate and keep their license. And the barrier of entry to becoming a realtor is probably a half a tick above janitor or substitute teacher. Doesn’t mean there aren’t good ones who are skilled and work hard, but that’s not always the case. You’re taking a tremendous risk assuming you are “represented” just because you have a buyer’s agent. You’re still the one signing everything and on the hook for the fall-out if its not as advertised.

If you want your best interests represented and don’t feel comfortable doing it yourself, hire an attorney specializing in real estate or contract law to simply review the paperwork side. They can explain exactly what it legally means for you and whether it is more advantageous to you or the seller. Much cheaper than a buyer’s agent, and no conflict of interest from someone who wants the deal to close.

 

[OG Goat Holder]

Current selling prices include a 6% commission paid by seller. If buyer now pays buyer agent & seller is only paying 3%, the price will be about 3% less than if seller was paying full 6%. Everyone winds up same as they were in the old system. Seller, buyer & both agents.

That may get built into the comps over time but it won’t happen immediately. No one is thinking about realtor commissions when listing their house.

 

[dog12]

I’m a broker. I don’t have a huge issue with this. We’ll adjust.

And yes, I agree that we could use a shrinking of our ranks. I’ve been for increasing entry requirements for years.

Only issue is that this will give sellers a pretty significant representation advantage.

Eventually you’re going to see most buyers, especially first time homebuyers and those who can’t afford to both buy a house and pay a buyer’s agent, having to go directly through an agent who represents only the seller’s best interests.

We are planning to sell our primary home sometime within the next 2-4 months. Thus, we've been following this story.

Questions: do you have any advice on what sort of sales commission we should negotiate with a potential sales agent? 2% to the seller's agent, zero to the buyer's? 2%, 1%?

We live in Northern Virginia (about 30 miles west of DC), so the real estate market is fairly healthy. (Not sure whether that makes any difference, but I think it might.)

 

[Perd Hapley]

Current selling prices include a 6% commission paid by seller.

Current selling prices actually include a commission anywhere between 0% and 6%. Many on here have already commented already on this, but its widely known to be negotiable. But regardless, the final commission arrangement from the closing is not going to be published in databases that are used to perform price comps and market analysis which are used to set listing prices. You have to dig a lot deeper into each specific closing document to get that info.

If buyer now pays buyer agent & seller is only paying 3%, the price will be about 3% less than if seller was paying full 6%.

Again, you’re assuming a pricing transparency that’s not there. I decide to sell my house. I ask my agent to recommend a price to list at that best reflects the combination of my needs from the sale, as well as market value. She’s going to run comps and say “the last 3 months, the average sales price of comparable homes had been XYZ, so we’ll list just a bit above or below that, depending on your timetable”. They aren’t going to say “oh wait, that was before that settlement agreement where commissions started changing….we need to knock 3% off that”. That’s not good for you or the agent. So that 3% reduction, if it even happens on average across the board, is going to get returned to sellers in the form of equity.

 

[idog]

it should be a flat fee and not a percentage. I don’t see how selling a 200k or 500k house requires any statistically significant difference in time/effort.

 

[HWY51dog]

The only thing this benefited was the attorney that filed the lawsuit.

Just like every professional career you, have good and bad agents. Never was a standard commission rate, it’s always negotiable. Depending on how it shakes out, this will hurt a lot of first time home buyers and people affording the lower price homes. It’s not going to lower prices at all, if you believe that I have some ocean front property in Arkansas for you.

Agents did a bad job explaining commission over the years and NAR really screwed agents, they didn’t take the lawsuit seriously. I was at an attorneys office yesterday and he was complaining about a For Sale By Owner and the deal fell apart because the seller didn’t know what they were doing. I think it will decrease some of the part time agents and that jumped in the last few years but it’s also opening things up to a lot more fraud.

 

[HWY51dog]

it should be a flat fee and not a percentage. I don’t see how selling a 200k or 500k house requires any statistically significant difference in time/

 

[OG Goat Holder]

I was at an attorneys office yesterday and he was complaining about a For Sale By Owner and the deal fell apart because the seller didn’t know what they were doing.

I’m guessing the buyers didn’t realize they had to pay their realtor in that case?

 

[idog]

More effort to take pictures, list it on the same mls website, or walk through it?

 

[karlchilders.sixpack]

What I think you start seeing....
They will charge you a flat fee to list the house, up front. They have advertising, and office expenses to cover.
Then they will seek a percentage of the sale.
Just my guess.

 

[PooPopsBaldHead]

Why all is said and done, realtor fees probably won't change much.

Depends on where you are... In a market where the average home price is $400k or lower, probably not much. In a market where houses are $800k and up, they'll probably get cut in half.

 

[Barkman Turner Overdrive]

I thought you picked a realtor on how good looking they are?

There are a lot of dimes selling real estate.

 

[SyonaraStanz]

Sounds fair to me. My realtor got 6% when I sold my house in Gluckstadt back in 2012. She literally did nothing, including not telling me when potential buyers were coming by at 9:00 AM one Saturday morning while I was in the shower.

 

[HRMSU]

I’m a broker. I don’t have a huge issue with this. We’ll adjust.

And yes, I agree that we could use a shrinking of our ranks. I’ve been for increasing entry requirements for years.

Only issue is that this will give sellers a pretty significant representation advantage.

Eventually you’re going to see most buyers, especially first time homebuyers and those who can’t afford to both buy a house and pay a buyer’s agent, having to go directly through an agent who represents only the seller’s best interests.

^ THIS

 

[MSUDAWGFAN]

Sounds fair to me. My realtor got 6% when I sold my house in Gluckstadt back in 2012. She literally did nothing, including not telling me when potential buyers were coming by at 9:00 AM one Saturday morning while I was in the shower.

I had an agent get 2 offers and only tell me about one because she didn't like the other buyer. I have a real problem with that. Also, when buying she tried to help the seller get a higher price. When selling, she tried to get me to lower mine.

Lots of agents are dishonest.

 

[Faustdog]

I had an agent get 2 offers and only tell me about one because she didn't like the other buyer. I have a real problem with that. Also, when buying she tried to help the seller get a higher price. When selling, she tried to get me to lower mine.

Lots of agents are dishonest.

The first thing you said would be a blatant code of ethics violation among other things potentially. If reported, she could have faced license suspension. Presentation of all offers is a basic and one of the first things taught.

The latter two would be violations well it they were as you described, but good luck proving those.

I’ve certainly seen buyers and sellers mistake an agent conveying the reality of a given situation for trying to advance the interest of the other party.

 

[ezsoil]

Well Mississippi needs to join rest of the civilized world and do away with "dual agency" this allows one realtor to represent both sides of the transaction ...so Even if a buyer didn't have an agent, the selling agent would get both ends of the commission...I know the buyer would have to sign an acknowledgment but very few people actually realize what they are giving away ...regardless of what anyone says ...there is only one side actually writing a check so the buyer is paying the freight whether they need it or not.

 

[Faustdog]

Well Mississippi needs to join rest of the civilized world and do away with "dual agency" this allows one realtor to represent both sides of the transaction ...so Even if a buyer didn't have an agent, the selling agent would get both ends of the commission...I know the buyer would have to sign an acknowledgment but very few people actually realize what they are giving away ...regardless of what anyone says ...there is only one side actually writing a check so the buyer is paying the freight whether they need it or not.

Dual agency is legal in 42 states.

 

[BHAMDawg33]

it is a shame this just didn't end real estate agents all together. 80% of them are worse than used car salesmen.. If it does end up with less fees being paid the cocaine market might drop as well.

 

[Perd Hapley]

Well Mississippi needs to join rest of the civilized world and do away with "dual agency" this allows one realtor to represent both sides of the transaction ...so Even if a buyer didn't have an agent, the selling agent would get both ends of the commission...I know the buyer would have to sign an acknowledgment but very few people actually realize what they are giving away ...regardless of what anyone says ...there is only one side actually writing a check so the buyer is paying the freight whether they need it or not.

If you are a buyer without a buyer’s agent, your first move is to knock at least 3% off list for every offer you make, communicate to seller’s agent that its still a full price offer as far as they and the seller are concerned. Both would be getting the exact same cut as they would if you were represented and made an offer at full list. Obviously if its been on the market awhile or otherwise doesn’t have a ton of interest, or if its a really hot one that’s gonna go fast - adjust accordingly. But make sure the seller’s agent knows his/her cut and their sellers’ cut isn’t changing.

Get it done in principle with seller’s agent first before sending over the paperwork. If they try to balk at it or try to give you some line of BS, just move on. That’s literally the sole reason to not have a buyer’s agent….the discount it provides to the buyer.

 

[aTotal360]

Well Mississippi needs to join rest of the civilized world and do away with "dual agency" this allows one realtor to represent both sides of the transaction ...so Even if a buyer didn't have an agent, the selling agent would get both ends of the commission...I know the buyer would have to sign an acknowledgment but very few people actually realize what they are giving away ...regardless of what anyone says ...there is only one side actually writing a check so the buyer is paying the freight whether they need it or not.

Shouldn’t really matter. The seller agrees to pay it. Whether they sell it to one kid their clients or to the Queen of England. The seller approves it. They don’t have to accept the offer. After all, part of the list agents job is to bring a willing and able buyer to the table. If you are envious of the paycheck, that’s a different story…

 

[Mr. Cook]

The problem has always been that for every good agent that actually works hard for you, there are 10 **** agents that do nothing but collect a check and string you along.

#FACTS