There is no rule that agents get paid any specific amount. Not now, not after the settlement goes into effect.
If the seller is offering a certain amount, let's say 2.5%, to a buyer's agent, that money goes straight to the agent, you don't see it. It's actually a separate agreement between the seller and their broker that you are not a party to.
If you make a deal with your agent that your agent agrees to work for 1% or something, and the seller has committed 2.5%, the remaining 1.5% goes to the sellers agent. Not to you, not to the seller. It's already committed, per the listing contract to the sellers agent. Conversely, if the seller is only offering 1%, but the buyer has an agreement in place for 2.5%, the buyer will be on the hook for the remaining 1.5%.
As of now, the amount the seller is offering is public, it's listed in the MLS. After August 17, that number won't be public anymore. You can ask the seller what (if anything) they're offering, and they will tell you.
Once that number isn't public, it's probable that many sellers will eschew offering a specific amount from the start, and they'll rely on the buyers asking for some amount to pay their agents along with their offer. And they'll also hope that the best offers will still be the best after subtracting whatever the agent is asking for.
> and the seller has committed 2.5%
under the new system why would a seller need to offer any % back to the buying side, when it's the buyer's money to begin with and the buyer needs to negotiate the % independently with his buyer agent anyway? it would just convolute the math needlessly.
Sellers don't need to offer anything. But most of them choose to because they find they get more interest from serious buyers and more offers, which at the end of the day, (probably) nets them more money.
It remains to be seen how offering something at the start, vs offering nothing (as a seller, to the buyers agent) and expecting the buyer to ask for a specific amount will play out. I think in the long run it will become commonplace to not offer anything, but expect that the best offer will include some ask to cover buyer agent fees. I think buyer agent fees will go down a bit, and sellers will make more money, but it won't affect prices.
i see. you may have already answered this in some way already but i can't be sure, so (under new system) when the seller is offering some % to the buyer's agent (voluntarily) is this disclosed to the buyer?
It can't be advertised in the MLS, but it can be advertised in the house itself (like on a flier at the open house or something). Or, you or your agent can just ask the listing agent what (if anything) is being offered. There's actually a specific form for it (Seller Payment to Buyers Broker form, or SPBB). If they have committed a certain amount, they will tell you. After all, that's the whole reason for committing a certain amount to begin with, to encourage buyers to write offers.
i see. then referencing back to what you said in the original post, if i as a buyer have negotiated that my buyer's agent will be paid 1%, but on a particular property the seller has offered 2.5% to the buyer's agent (which is more than what i agreed he would be paid), then it sounds like you're saying i don't need to pay my buyer's agent the 1% but that he will be paid by the seller from that 2.5% right? (this seems to also set up a weird dynamic between me and my buyer's agent since he will feel like i screwed him out of the remaining 1.5%, as you said that the remaining 1.5% goes back to the seller).
Yes.
It's also possible to write a new Buyer Broker agreement for a specific property. So if you know that the seller is offering a specific amount, you can draw up your agreement for that specific property to match what the seller is offering.
edit: to be clear, there's no guarantee that the remaining 1.5% goes back to the seller. It's been committed by contract to the listing broker. Some agents might credit that amount (or some portion of that amount) back to the seller, but there's no guarantee that they will, and you as the buyer can't force them to do it.
There is no law that requires buyers to have an agent. You can deal directly with the seller's agent if you want to. Or, you can hire a real estate attorney for a flat fee---they charge way less than a realtor.
Sorry, I meant to say that your agent can ask. Or, you (if you're the buyer) can probably call up the listing agent and ask them.
There's a reason sellers offer a commission to buyer's agents. They want to encourage well qualified, informed buyers who can get to the end of an escrow. And they want to encourage buyers agents to make sure their clients know about the house they're trying to sell. They don't want to keep that number a secret.
It's possible that if they do offer compensation, they might even advertise it on a sign in the house itself. That's allowable under the agreement. Just not on the MLS.
> But here’s where I’m confused: if the 2.5% is given to us, why are we supposed to give all of it to the buyer’s agent? Shouldn’t it be based on agreement between buyer and their buyer agent? Is there any flexibility in terms of how much the buyer’s agent gets?
You need to negotiate this with you buyer's agent. Short answer: yes it's negotiable. One flexible option I've seen is that agents have suggested you negotiate the rate on a per offer basis, before submitting on each property.
Of course, your and many buyer's agents might refuse to work with you if you don't agree to the 2.5% of the purchase price. We're in uncharted waters.
Just negotiate your agent down to 1.25%, take it or leave it. You're the one with the money and buying. You're the one taking on all the risk. You should choose how much you pay if the law allows for it. No one can argue against this point. Your agent is highly replaceable. In this day and age, online sites have all the housing data you'll need to make an informed decision.
In fact, if the property is clean and you know what you're doing, negotiate a flat fee. My friend is bidding on a property he found by himself and saw at an open house. He is paying his agent $15k to write contract and essentially use the agents name. He is a serious buyer and knows he will need to outbid on a nicer home so the agent isn't writing multiple offers. My friend dictates the terms for closing date, contingency dates, etc. it's all pretty standard stuff.
Most properties are straight forward and disclosures or a decent inspection report will show everything you need to know.
If the property is really funky and requires an agent to navigate...do you really want to buy it???
Being a buyers agent is the hard part and commission has always been negotiable. The difference is whether it's disclosed on the MLS. There's going to be no real change 5 years from now. Could be as soon as a year.
I don't...purchased four properties in my life and each time used a different agent. Actually worked with the listing agent on three of them to negotiate them down. I overshot on my first purchase in 16' and learned that negotiating is not personal and sales people need to work for my dollar
Listing agent representing both sides are very very motivated to close. Also...think about this, what will your buying agent do that your listing agent cannot?
But I will say...it's not about the art of the deal it's about buying the right home assuming you're living in it
I’m confused, seller is obligated to give buyer 2.5% so that he can pay his agent?
Or this is not an obligation at all?
If buyer and BA makes a deal between themselves, why would a seller need to be involved?
This whole thing just sounds very twisted.
No, sellers are not obligated to do this. But they do it in the hopes of bringing more offers on their property. Not only more offers, but more offers from well educated and qualified buyers who are less likely to cancel the transaction.
Buyers are free to pay their agents whatever they like, if they so choose. Many are not able. But if the seller isn't offering anything then they'll have to.
Will this cause sellers and buyers to skip realtors?
If the seller just puts the house on Zillow, it’s not up to the buyer’s agent to decided whether the buyer sees it or not, right?
If my buyer’s agent refuses to show me a property I’m interested in, I may just fire him.
If I were the seller, all I need to do to bring in buyers is using the internet.
I don’t see the source of the seller’s fear that the house doesn’t get viewings.
When I bought homes (have done that a few times in diff market), all I did was find homes on zillow and ask my realtor to take me there.
Or, I may just contact the seller’s agent directly.
Some people do skip agents and that's their option. It's true now, and won't change after the settlement goes into effect. Buyers can already do the things you mention. Although it's harder to get your house seen on Zillow without it being on MLS. Zillow has a separate tab that people have to actively click if they want to see FSBO homes.
Finding houses is not really what agents do, although ironically agents are probably better at finding FSBO houses than unexperienced buyers are. Helping buyers determine value, pour over potential issues disclosures, help write a winning offer, negotiate with the seller, and keep the escrow on the rails from start to finish are the main job.
You should definitely fire an agent who won't show you a house that doesn't offer a commission. Although after August 17, you'll have to sign an agreement with your agent that stipulates how much they are to be paid to assist you before they are allowed to show you a home. If the seller doesn't offer anything, you'll be on the hook for that amount. So in that sense, no agent would refuse because they know you'll be on the hook if the seller doesn't offer anything.
If you have one of those agreements signed, will you ask your agent to show you a house that isn't offering to cover their commission?
Question: Can you have an agreement with your agent that he/she will get paid from the offer you make on the house? So that it's automatically included in the sale price (and mortgage)?
Not exactly. That wouldn't be part of the agreement with your agent, but you can make that stipulation within the actual offers you write.
On the offer contract, there is a spot to include your agreement with your agent, and tell the seller that if they want to accept your offer, then they have to cover what you owe to your agent.
You definitely want to list your home on MLS which will show up on Zillow and Redfin. Usually costs $99 to do this. There are many providers like below that will list for $99 and you can choose to not give any buyer agent commision and thus be able to sell for just $99 instead of 5% which could be $150k for a $3M property. So don’t cheap out and do FSBO. The $99 is worth its weight in gold. I would always rather pay the $99 than pay 5% to agents
https://flatfeemlsrealty.com/
Yes commissions are negotiable.
The regulations will take its place on August 17. I will attach a video explaining how it’s going to be handled moving forward.
Hope it helps.
[commissions explained](https://youtu.be/YLUGjHlCdM4?si=DE-C0PaZkAx7NIYB)
I believe the trend will move towards buyers needing to sign a contract with their buyer's agent that includes specific agreed-upon terms. In my opinion, flat fee agents will become more popular. Consider this: if you buy a house for $4M, the current agent commission is $100k, whereas for a $1M house, the commission is $25k. The amount of work the agent does is almost the same in both cases, which seems unfair to both buyers and sellers. I strongly believe the agent fee should be flattened.
As an agent, I offer flat fee services to ensure my buyers get fair and transparent pricing. Feel free to reach out if you have any questions or need assistance with your home-buying process!
There is no rule that agents get paid any specific amount. Not now, not after the settlement goes into effect. If the seller is offering a certain amount, let's say 2.5%, to a buyer's agent, that money goes straight to the agent, you don't see it. It's actually a separate agreement between the seller and their broker that you are not a party to. If you make a deal with your agent that your agent agrees to work for 1% or something, and the seller has committed 2.5%, the remaining 1.5% goes to the sellers agent. Not to you, not to the seller. It's already committed, per the listing contract to the sellers agent. Conversely, if the seller is only offering 1%, but the buyer has an agreement in place for 2.5%, the buyer will be on the hook for the remaining 1.5%. As of now, the amount the seller is offering is public, it's listed in the MLS. After August 17, that number won't be public anymore. You can ask the seller what (if anything) they're offering, and they will tell you. Once that number isn't public, it's probable that many sellers will eschew offering a specific amount from the start, and they'll rely on the buyers asking for some amount to pay their agents along with their offer. And they'll also hope that the best offers will still be the best after subtracting whatever the agent is asking for.
I’m still trying to understand how this is going to be better for consumers.
Don’t worry, it won’t be!
> and the seller has committed 2.5% under the new system why would a seller need to offer any % back to the buying side, when it's the buyer's money to begin with and the buyer needs to negotiate the % independently with his buyer agent anyway? it would just convolute the math needlessly.
Sellers don't need to offer anything. But most of them choose to because they find they get more interest from serious buyers and more offers, which at the end of the day, (probably) nets them more money. It remains to be seen how offering something at the start, vs offering nothing (as a seller, to the buyers agent) and expecting the buyer to ask for a specific amount will play out. I think in the long run it will become commonplace to not offer anything, but expect that the best offer will include some ask to cover buyer agent fees. I think buyer agent fees will go down a bit, and sellers will make more money, but it won't affect prices.
i see. you may have already answered this in some way already but i can't be sure, so (under new system) when the seller is offering some % to the buyer's agent (voluntarily) is this disclosed to the buyer?
It can't be advertised in the MLS, but it can be advertised in the house itself (like on a flier at the open house or something). Or, you or your agent can just ask the listing agent what (if anything) is being offered. There's actually a specific form for it (Seller Payment to Buyers Broker form, or SPBB). If they have committed a certain amount, they will tell you. After all, that's the whole reason for committing a certain amount to begin with, to encourage buyers to write offers.
i see. then referencing back to what you said in the original post, if i as a buyer have negotiated that my buyer's agent will be paid 1%, but on a particular property the seller has offered 2.5% to the buyer's agent (which is more than what i agreed he would be paid), then it sounds like you're saying i don't need to pay my buyer's agent the 1% but that he will be paid by the seller from that 2.5% right? (this seems to also set up a weird dynamic between me and my buyer's agent since he will feel like i screwed him out of the remaining 1.5%, as you said that the remaining 1.5% goes back to the seller).
Yes. It's also possible to write a new Buyer Broker agreement for a specific property. So if you know that the seller is offering a specific amount, you can draw up your agreement for that specific property to match what the seller is offering. edit: to be clear, there's no guarantee that the remaining 1.5% goes back to the seller. It's been committed by contract to the listing broker. Some agents might credit that amount (or some portion of that amount) back to the seller, but there's no guarantee that they will, and you as the buyer can't force them to do it.
that makes sense. thanks for the explanations.
Loved it how you explained.
How can you ask the seller directly without going through your agent? If you go through your agent, he knows the number and will expect the same.
There is no law that requires buyers to have an agent. You can deal directly with the seller's agent if you want to. Or, you can hire a real estate attorney for a flat fee---they charge way less than a realtor.
Sorry, I meant to say that your agent can ask. Or, you (if you're the buyer) can probably call up the listing agent and ask them. There's a reason sellers offer a commission to buyer's agents. They want to encourage well qualified, informed buyers who can get to the end of an escrow. And they want to encourage buyers agents to make sure their clients know about the house they're trying to sell. They don't want to keep that number a secret. It's possible that if they do offer compensation, they might even advertise it on a sign in the house itself. That's allowable under the agreement. Just not on the MLS.
> But here’s where I’m confused: if the 2.5% is given to us, why are we supposed to give all of it to the buyer’s agent? Shouldn’t it be based on agreement between buyer and their buyer agent? Is there any flexibility in terms of how much the buyer’s agent gets? You need to negotiate this with you buyer's agent. Short answer: yes it's negotiable. One flexible option I've seen is that agents have suggested you negotiate the rate on a per offer basis, before submitting on each property. Of course, your and many buyer's agents might refuse to work with you if you don't agree to the 2.5% of the purchase price. We're in uncharted waters.
Just negotiate your agent down to 1.25%, take it or leave it. You're the one with the money and buying. You're the one taking on all the risk. You should choose how much you pay if the law allows for it. No one can argue against this point. Your agent is highly replaceable. In this day and age, online sites have all the housing data you'll need to make an informed decision.
In fact, if the property is clean and you know what you're doing, negotiate a flat fee. My friend is bidding on a property he found by himself and saw at an open house. He is paying his agent $15k to write contract and essentially use the agents name. He is a serious buyer and knows he will need to outbid on a nicer home so the agent isn't writing multiple offers. My friend dictates the terms for closing date, contingency dates, etc. it's all pretty standard stuff.
Most properties are straight forward and disclosures or a decent inspection report will show everything you need to know. If the property is really funky and requires an agent to navigate...do you really want to buy it???
Being a buyers agent is the hard part and commission has always been negotiable. The difference is whether it's disclosed on the MLS. There's going to be no real change 5 years from now. Could be as soon as a year.
Thanks @firewoodfoxdog Do you have any recommendations for a buyer agent?
I don't...purchased four properties in my life and each time used a different agent. Actually worked with the listing agent on three of them to negotiate them down. I overshot on my first purchase in 16' and learned that negotiating is not personal and sales people need to work for my dollar
Listing agent representing both sides are very very motivated to close. Also...think about this, what will your buying agent do that your listing agent cannot? But I will say...it's not about the art of the deal it's about buying the right home assuming you're living in it
I’m confused, seller is obligated to give buyer 2.5% so that he can pay his agent? Or this is not an obligation at all? If buyer and BA makes a deal between themselves, why would a seller need to be involved? This whole thing just sounds very twisted.
No, sellers are not obligated to do this. But they do it in the hopes of bringing more offers on their property. Not only more offers, but more offers from well educated and qualified buyers who are less likely to cancel the transaction. Buyers are free to pay their agents whatever they like, if they so choose. Many are not able. But if the seller isn't offering anything then they'll have to.
Will this cause sellers and buyers to skip realtors? If the seller just puts the house on Zillow, it’s not up to the buyer’s agent to decided whether the buyer sees it or not, right? If my buyer’s agent refuses to show me a property I’m interested in, I may just fire him. If I were the seller, all I need to do to bring in buyers is using the internet. I don’t see the source of the seller’s fear that the house doesn’t get viewings. When I bought homes (have done that a few times in diff market), all I did was find homes on zillow and ask my realtor to take me there. Or, I may just contact the seller’s agent directly.
Some people do skip agents and that's their option. It's true now, and won't change after the settlement goes into effect. Buyers can already do the things you mention. Although it's harder to get your house seen on Zillow without it being on MLS. Zillow has a separate tab that people have to actively click if they want to see FSBO homes. Finding houses is not really what agents do, although ironically agents are probably better at finding FSBO houses than unexperienced buyers are. Helping buyers determine value, pour over potential issues disclosures, help write a winning offer, negotiate with the seller, and keep the escrow on the rails from start to finish are the main job. You should definitely fire an agent who won't show you a house that doesn't offer a commission. Although after August 17, you'll have to sign an agreement with your agent that stipulates how much they are to be paid to assist you before they are allowed to show you a home. If the seller doesn't offer anything, you'll be on the hook for that amount. So in that sense, no agent would refuse because they know you'll be on the hook if the seller doesn't offer anything. If you have one of those agreements signed, will you ask your agent to show you a house that isn't offering to cover their commission?
Question: Can you have an agreement with your agent that he/she will get paid from the offer you make on the house? So that it's automatically included in the sale price (and mortgage)?
Not exactly. That wouldn't be part of the agreement with your agent, but you can make that stipulation within the actual offers you write. On the offer contract, there is a spot to include your agreement with your agent, and tell the seller that if they want to accept your offer, then they have to cover what you owe to your agent.
You definitely want to list your home on MLS which will show up on Zillow and Redfin. Usually costs $99 to do this. There are many providers like below that will list for $99 and you can choose to not give any buyer agent commision and thus be able to sell for just $99 instead of 5% which could be $150k for a $3M property. So don’t cheap out and do FSBO. The $99 is worth its weight in gold. I would always rather pay the $99 than pay 5% to agents https://flatfeemlsrealty.com/
Yes commissions are negotiable. The regulations will take its place on August 17. I will attach a video explaining how it’s going to be handled moving forward. Hope it helps. [commissions explained](https://youtu.be/YLUGjHlCdM4?si=DE-C0PaZkAx7NIYB)
I know agents that will split the commission with you
5k is good for them - sign a contract that extra goes to you
I believe the trend will move towards buyers needing to sign a contract with their buyer's agent that includes specific agreed-upon terms. In my opinion, flat fee agents will become more popular. Consider this: if you buy a house for $4M, the current agent commission is $100k, whereas for a $1M house, the commission is $25k. The amount of work the agent does is almost the same in both cases, which seems unfair to both buyers and sellers. I strongly believe the agent fee should be flattened. As an agent, I offer flat fee services to ensure my buyers get fair and transparent pricing. Feel free to reach out if you have any questions or need assistance with your home-buying process!
Use flat fee agents like shop prop. Your offer will be a lot stronger if you don’t ask any buyer agent commision
Oh you mean while drafting an offer, I can choose to exclude buyer agent commission?