Understanding the Impact of Realtor Commission Changes: What Home Buyers and Sellers Need to Know

The cost of working with a real estate agent to buy or sell your home is changing as are the rules dictating the way a realtor’s commission is structured. The restructuring is part of a settlement reached by the National Association of Realtors (NAR) in response to multiple class-action lawsuits filed on behalf of home sellers across the country. Currently, an agent or broker representing a seller splits the commission – typically 6% of the home’s sale price – with the buyer’s agent. This arrangement, known as cooperative compensation, is essentially how the agents are paid for the service they provide. Under the settlement agreement, an agent representing a seller would no longer be allowed to include a blanket offer of cooperative compensation to a prospective buyer’s agent when advertising a property on Multiple Listing Services. 

While the fallout of this change is not completely known, it adds greater complexity to a housing market already straddled by high interest rates and low re-sale inventory. As home buyers navigate the process of buying and selling a home, it's essential to understand how the NAR settlement may affect the buying experience and financial considerations. In our latest blog, we sort through the key aspects of the NAR commission changes and how home buyers may be affected. The intent is to remove any incentive from a buyer's agent to steer their client away from home listings that don't include a cooperative compensation offer.

A More Balanced Relationship

The changes focus on addressing concerns of a lack of transparency in the real estate industry. Among the primary changes buyers can expect is increased negotiation power, allowing the buyer to have a greater voice in the commission structure. By allowing the buyers’ agent to openly discuss and negotiate the commission rate, home buyers gain a better understanding of the cost associated with working with a realtor. As a more informed consumer, the home buyer can advocate for their best interests. 

Money Matters

The ability to negotiate commission rates with buyers' agents could translate into cost savings for the homebuyer. By negotiating a lower commission rate, homebuyers may reduce their overall expenses associated with purchasing a home, allowing them to put more money towards the down payment, closing costs, or home upgrades. However, it's essential for homebuyers to carefully consider the services and expertise offered by their chosen agent to ensure they receive value for their investment. Keep in mind, that negotiating a lower commission rate may result in reduced services or support throughout the home-buying process. Much like selecting a quality builder, it's important that homebuyers evaluate the expertise, experience, and track record of an agent before agreeing to work with them. 

Market Dynamics

The implementation of NAR commission changes may also influence market dynamics and negotiation power between buyers and sellers. While buyers may have greater leverage in negotiating purchase offers, including asking the home seller for a concession that includes money to help cover their agent’s commission, sellers may also adjust their pricing strategies leading to potential shifts in market dynamics and negotiation outcomes. If a seller chooses not to cover the buyer’s agent commission, the home buyer may need to shop around for an agent they can afford. To become effective, the court needs to sign off on the settlement. If that happens, the NAR expects to implement the rule change in mid-July. 

Building or buying a move-in-ready home is a big investment. That’s why Garman Builders is here to help you navigate the process. If you have questions about how the changes in the housing market will affect you, feel free to ask one of our sales agents, or we can connect you with one of our lending partners.