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Professional Insights: Changes in commissions?

by | Dec 19, 2024 | Business,

As most have heard, changes with how real estate commissions are structured for buyer agents have “changed.” Well, not really.

In 2019, Midwest anti-trust lawsuits claimed sellers were paying inflated costs, that the National Association of Realtors (NAR) was requiring the Multiple Listing Service (MLS) to show the offering of a commission to a buyer agent’s company and sellers were not given the option to pay toward said commission. Other class-action lawsuits followed country-wide. The NAR responded that members didn’t violate anti-trust laws but chose not to continue to fight all these lawsuits in court in fear of going bankrupt. Settlements were reached, NAR members were released of litigation on these matters, and NAR maintains that cooperative compensation is still in the best interest of consumers.

The Massachusetts Association of Realtors (MAR) has for years spelled out in its listing contracts that sellers were given an option if they wanted to contribute sale proceeds to the buyer’s agency. There has never been a “standard” rate of commissions. After years of stress for many real estate professionals of what the future would hold, some but not much has changed. Changes include: Real estate offices updated listing contracts that more specifically outline choices to sellers if they choose to offer compensation to the buyer agency, MLS and NAR changed their rules, including homes can go into MLS without offers of compensation to the buyer agency, and buyer agency contracts are now required between Realtors and buyers for services provided. In addition, the MAR Offer to Purchase forms now have a section indicating if a buyer’s offer price includes a buyer agency commission to be credited from the seller proceeds. In many cases, it’s business as usual.

Not much has changed. In years past, buyer agents helping buyers purchase a For Sale By Owner (FSBO) home would need to write commissions in the offer, often rolling the buyer agency commission into the offer price and asking for a credit of it back from the seller to the buyer agency at closing so the bank would allow the commission to be financed. Now this simply will become the norm for most transactions.

As home buying has become more difficult with the high cost of homes due to inflation, high demand and high interest rates, it has become challenging for buyers to save for down payments. To pay commissions out of pocket on top of the down payment would be even more challenging for a buyer. The buyer is technically paying for their buyer agency’s commission, as it’s rolled into their offer to the purchase price. Now the commission simply needs to be spelled out in the offer as a seller credit in order for a bank to finance the commission into a buyer’s loan. The advantages to sellers to continue to credit a buyer agency commission is buyers can finance the commission into their home loan, thereby reducing stress on the buyers and incentivizing stronger offers, which could help lead to multiple offers and quicker sales for their homes. Be fair to your agents and incentivize them by paying them fairly to work hard for you!

Kim FoemmelKim Foemmel
Foemmel Fine Homes
1 Lumber Street, Suite 207C
Hopkinton, MA
(508) 808-1149
Kim.Foemmel@gmail.com
FoemmelFineHomes.com

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