In the not-so-distant past, real estate commissions operated under a different set of rules. Before August 17th, 2024, listing agents would list a property on the multiple listing service (MLS) with a specified commission for the buyer’s agent. This commission was paid by the home seller out of the sales proceeds, along with the listing agent’s fee. The offer of compensation ensured that both agents would be paid for their services and representation.
However, this setup was not without its flaws. Some argued that it allowed agents to collude with one another and keep commissions inflated. Additionally, buyers were often told that the buyer’s agent services were „free,“ as they did not have to pay anything out of pocket. In reality, the cost was often absorbed into the sales price of the home.
To address these issues, changes were made to the rules governing real estate commissions. The compensation fields on the MLS were removed, and a new field called „Concessions Considered“ was introduced. This field indicated whether the seller was willing to negotiate and cover the buyer’s agent’s compensation.
Buyer’s agents were now required to set their compensation in advance and stick to it. This was to ensure that their fees were not influenced by the seller or listing agent. Buyers and agents would agree on a set fee for services before touring homes, and this fee would remain fixed regardless of what the seller offered in terms of compensation.
Buyer’s agents could be paid through various means, including a fixed fee by the home buyer, cooperative commission from the listing agent, or seller concessions. Seller concessions would result in a higher sales price to cover the agent’s fee, but it was important to note that real estate agent commissions could not be financed in the loan amount.
Overall, the key takeaways from the changes to real estate commissions were that they are negotiable, and buyers and sellers have options for how they are paid. It was crucial for buyers to negotiate their agent fee upfront and be aware of any changes to the agreed-upon commission. By understanding these new rules, both buyers and sellers could navigate the real estate market more effectively.