Who Pays Commission Now?

Real Estate Agent Compensation and How It Impacts Buyers and Sellers

• Compensation to agents comes in the form of a commission.
• This commission is negotiable and always has been.
• Property managers, agents representing writers, actors, musicians, and athletes are often paid on a percentage basis of the contract. The structure is not unique to real estate.
• Some agents will work for a flat fee. This is not common.
• Agents can set a rate for their services. While the rate is negotiable, real estate agents need to make a living. I do not expect to see much of a change in rates.
• Until recently, sellers included compensation commission for the buyer’s agent in their Listing Agreement and MLS listing. Sellers almost always chose to pay this “cooperating agent commission”. That aspect of the real estate structure has been called into question.
• The cooperating commission for the buyer’s agent will no longer be included in the Listing Agreement. Sellers will indicate to their agents if they are willing to pay the commission for the buyer’s agent, but that information will not be available through the MLS.
• Why pay the buyer’s agent? Buyers are already saddled with many closing costs, including financing costs, title insurance, and other escrow costs. They are usually taking on a house with a new and much higher tax rate as well. Paying the Buyer’s Agent commission may reduce the number of buyers who can afford to buy the home.
• Offers from buyers will now often include a request to have the seller pay the buyer agent commission. This will be an added aspect of the offer process and ensuing negotiations.
• Buyers can bring an offer without an agent. They are known as Unrepresented Buyers. Your agent may or may not agree to work with an unrepresented buyer without compensation. The MLS form refers to this as“managing unrepresented buyers”.
• Agents may not want to do this as it creates a dual-agency-like relationship, exposing the agent to risk. The transaction itself may be compromised as the buyer may not be familiar with local laws, ordinances, and their full responsibilities in the contract.
• The Listing Agreement that a seller signs when they engage a listing agent will include how much they will pay their agent for managing unrepresented buyers.

• To view a property with an agent, buyers will need a Buyer Broker Agreement with their agent. The maximum length of time is 3 months, renewable for as many times as the buyer and agent agree.
• A buyer can also sign a single showing agreement if the agent is agreeable.
• The Buyer Broker Agreement will indicate the compensation for the agent. Usually, this is expressed as a percentage rate.
• The Buyer Broker Agreement also clarifies that should the Seller pay the Buyer’s Agent Commission, then the buyer will not need to pay. There is no double-dipping.
• When creating a Comparable Market Analysis in the past, agents could be fairly confident they were comparing apples to apples. Now that the commission may not be included, it is harder to compare. We do our best by calling the listing agents on past sales to ascertain whether the buyer or seller paid for the Buyer’s Agent commission.
• Looking at public information on Zillow or other sites will not reflect the true sales price since, in some cases, it will include a Buyer Agent Commission, and sometimes it will not.
• On a $1,000,000 home, the commission is usually $25-30K. It is crucial to know who paid for the commission, so buyers and sellers are comparing real home values.