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In real estate, the buyer's agent commission has always been the home seller's responsibility. The buyers didn't have to pay an upfront fee for their agent's service, making a home purchase even more accessible. The average commission is around 2.5-3% of the sale price, hence it factors into the total commission the seller would pay to the listing agent and the buyer's agent. However, recent legal developments and shifts in market practices have recently made this erstwhile standard subject to bargaining.
For decades, the National Association of Realtors (NAR) required that real estate listings on the Multiple Listing Service (MLS) include compensation for a buyer's agent. Later on, it was seen as a near-universal expectation in U.S. real estate transactions. Since more than 86% of home sellers in the U.S. use MLS platforms, this requirement effectively ensured that sellers would pay a commission to the buyer's agent as part of the sale. Litigation and a settlement with the NAR have dramatically changed that. Since August 2024, the selling entity no longer pays for this fee. Instead, the buyers and their agents may negotiate the terms more flexibly, and agents must enter an agreement with the buyer describing services and compensation.
These changes have generated new questions on the part of sellers and buyers alike: Are buyer's agent commissions more valuable to sellers? How can buyers save money by negotiating fees for different uses of buyer's agent services? Understanding these dynamics will enable all parties to make better decisions regarding their approach to negotiating fees by a buyer's agent, whether in terms of cost-cutting, staying competitive, or just simply learning about the new landscape.
What is the Buyer Agent Compensation?
Buyer’s agent commission describes the money paid out to the agent working with the house buyer. Traditionally, this commission is taken off of the total real estate fee, which is usually around 5-6% of the home selling price. Of the total amount, half will go to the listing agent, and half to the buyer's agent. Typically, sellers pay this commission amount as a stimulus for bringing clients to the property increases the chance to sell the house.
However, recent legal developments are changing this long-held practice. In a new settlement, the National Association of Realtors (NAR) ceased demanding that sellers pay the buyer's agent commission at listing on affiliated MLS sites of Realtors, which represents about 86% of home sales in the United States.
New Flexibility: Sellers Might Not Have to Pay Buyer's Agent Commission
Recently, newly introduced changes don’t permit sellers to pay the fee to the buyer's agent. Change opens the seller's fresh negotiation doors and saves the seller from cost-cutting. This also allows the sellers to avoid or eliminate the buyer’s agent commission, especially when the latter agrees to pay his agent's fees or for an unrepresented buyer.
While this is so, many of them still pay some form of compensation to buyer agents, making their properties more competitive. For instance, paying a buyer's agent commission would attract more agents to find possible buyers for the property, which will help speed up the sale of the property.
Can Sellers Refuse to Pay Buyer's Agent Commission?
Sometimes, offering to pay the buyer's agent fees is negotiable. However, this must be clearly stated in the sales contract. For example, in South Carolina, sellers were previously required to fill in the commission percentage for the buyer's agent in the contract section known as "Compensation to Other Brokerages." If this section was left unfilled, the seller was not considered.
On the other hand, not paying for the buyer's agent commission will adversely affect the house's saleability. A buyer's agent might become less motivated to show homes that offer no commission. If you are a seller thinking along these lines, it would usually be wise to speak to a real estate agent or attorney to understand how this will affect your home's sale.
Other Options for Sellers: Clever Ways to Lower Realtor Costs
There are also options for sellers who intend to save on commission costs but not to scrap off the pay for a buyer agent. Cavan Realty is one such platform, where you can trust the experts for every real estate need from residential to commercial properties. The saved amount will then help sellers save money while they have yet to lose the guarantee of attracting some potential buyers because of an amount promised to an agent in terms of commission.
FSBO Sales and Buyer's Agent Commission
You can cut paying the listing agent's commission by selling your home as FSBO – For Sale by Owner. But if you involve an agent, then it’s quite obvious that you have to pay them their fees for taking the buyer for the home tour, negotiating transaction details, and even helping to make a sale.
There are exceptions, however. If the buyer is unrepresented, the seller can avoid paying both the listing and the buyer agent commissions. Although they may be forced to retain a real estate attorney or title company to draw up any necessary paperwork and perform any required formalities. In highly competitive markets, buyers sometimes even agree to pay their agent's commission while negotiating, making their offer more appealing to sellers.
Do Buyers Ever Pay Agent Commissions?
If the seller doesn’t agree, buyers may accept their agent's commission or even if they think the buyer's agent fee isn’t suitable. Typically, most buyer's agency agreements have a provision to ensure that the agent will be paid even if the seller doesn't provide some form of compensation. Sometimes, buyers can cover the difference or negotiate a commission-sharing agreement with the agent.
In low-supply and high-demand housing markets, buyers may even agree to pay these fees to make a stronger offer. The trend is still rare but indicates the flexibility that recent changes in commission structures have introduced.
Key Takeaways for Buyers and Sellers
The commission structures can get pretty complicated, and there's much shuffling involved. Here are some key points to remember for both buyers and sellers:
· For Sellers:
If you wish to avoid paying the buyer's agent fee, be prepared for the potential impacts your action will have on the marketability of your property. You might consider consulting a local agent or attorney to better understand if this suits your situation.
· For Buyers:
Know that the buyer's agent commission may become part of your negotiation process. Read your agency agreement very carefully and ask your agent to discuss commission expectations with you before signing the agreement.
Such changes in the real estate market also open new opportunities for both buyers and sellers to negotiate commission structures that fit better to their financial goals. Whether it is avoiding paying the buyer's agent fee or merely wanting a less expensive transaction, knowing those options can help make better decisions.
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