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Changes in real estate agent pay impact home buying and selling

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New changes in real estate transactions are altering how agents are paid, impacting both buyers and sellers.When your real estate agent lists your home, the commission is no longer included in the Multiple Listing Service (MLS), the database agents share. Commissions still exist and are negotiable. Sellers can still offer to pay buyer fees, just as they might cover the cost of a home warranty or other expenses.”It’s definitely made agent pay a bigger part of the conversation,” said Krishon Harris, a real estate agent for Reece & Nichols.Agents say high interest rates are keeping homes on the market longer, for 30 to 40 days in some cases.”It is in the offer acceptance process when buyers will find out how much they owe their agent,” Harris said.Sellers can still offer to pay buyer fees, just as they might cover the cost of a home warranty or other expenses.”As a buyer, your biggest change is that you have to have a written agreement with an agent before you go see a house,” Harris said.He says when and how fees are discussed is the biggest change.”When you are a buyer and you make an offer on a house, you’ll include in the offer what you’re asking the seller to pay your agent,” Harris said. “The seller can agree to that. They can counter, reject it, or whatever.”

New changes in real estate transactions are altering how agents are paid, impacting both buyers and sellers.

When your real estate agent lists your home, the commission is no longer included in the Multiple Listing Service (MLS), the database agents share. Commissions still exist and are negotiable. Sellers can still offer to pay buyer fees, just as they might cover the cost of a home warranty or other expenses.

“It’s definitely made agent pay a bigger part of the conversation,” said Krishon Harris, a real estate agent for Reece & Nichols.

Agents say high interest rates are keeping homes on the market longer, for 30 to 40 days in some cases.

“It is in the offer acceptance process when buyers will find out how much they owe their agent,” Harris said.

Sellers can still offer to pay buyer fees, just as they might cover the cost of a home warranty or other expenses.

“As a buyer, your biggest change is that you have to have a written agreement with an agent before you go see a house,” Harris said.

He says when and how fees are discussed is the biggest change.

“When you are a buyer and you make an offer on a house, you’ll include in the offer what you’re asking the seller to pay your agent,” Harris said. “The seller can agree to that. They can counter, reject it, or whatever.”



This article was originally published by a www.kmbc.com . Read the Original article here. .

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Wells Fargo is selling off billions of dollars in commercial mortgages | CNN Business

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CNN
 — 

Wells Fargo is set to sell the majority of its commercial mortgage servicing business to global loan services provider Trimont, the companies said Tuesday.

The move would make Trimont the largest loan servicer in the US industry, according to rankings from the Mortgage Bankers Association.

Wells Fargo’s deal to sell off its non-agency third-party Commercial Mortgage Servicing business comes as the banking sector in the United States faces increasing pressure due to elevated interest rates and challenges in the commercial real estate market.

Founded in 1988, Trimont is a specialized commercial real estate loan services provider that provides services to help lenders manage and grow their commercial real estate loans.

The deal is expected to close in early 2025, pending certain conditions, and will result in Trimont managing over $715 billion in US and international commercial real estate loans.

The “strategically important transaction” will position Trimont to be a key partner to real estate capital providers, said Jim Dunbar, chair of Trimont and partner at Värde Partners.

Commercial real estate markets, particularly in the United States, have suffered a sharp fall in valuations since 2021 after office vacancy rates jumped in the wake of the pandemic, with analysts predicting further challenges for lenders and property owners in the near future.

Last year, Wells Fargo announced a significant shift in its mortgage business, saying it would be focused on serving bank customers and minority homebuyers instead of acquiring new customers.

The lender also said it would exit its correspondent business, which buys loans made by other lenders; and reduce the size of its mortgage servicing portfolio.

Wells Fargo has long been one of the biggest players in the mortgage business, but was dogged by a slew of scandals in 2016 that led to regulatory action and billions of dollars in fines. Its then-CEO, John Stumpf, agreed in 2020 to a lifetime ban from the banking industry and a $17.5 million fine for his role in leading the bank through its massive fake accounts scandal and other sales practice misconduct.



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New real estate rules for selling homes take effect

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MetroCreative

New real estate rules for homebuyers and sellers went into effect last weekend.

The rules, which impact the way commissions work, stem from a $418 million settlement between the National Association of Realtors and home sellers earlier this year.

The federal class-action lawsuits claimed that homeowners were being forced to pay artificially inflated real estate commissions when they sold their homes.

The rules boil down to two significant changes.

First, under the new rules, homes listed on a Multiple Listing Service, or MLS, will no longer include a seller’s offer to cover the cost of a buyer’s agent’s services.

“That’s the biggest change for us in Western Pennsylvania. Now, we are not allowed to advertise the buyer’s agent’s commission in the MLS,” said Scott Cavinee, a real estate agent for SWC Realty in Uniontown.

A seller can still allow a commission split, but the agreement cannot be listed on the MLS.

Second, home buyers who want to work with an agent will have to sign an agreement up front that details exactly what commission the buyer will pay the agent – including whether it’s through a commission split with a seller’s agent – before working together or touring homes in person or virtually with their agent.

That’s not entirely new, said Beverly A. Herndon, president of the Washington-Greene Association of Realtors, as about a dozen states already required those written agreements.

“Pennsylvania has had a buyer agency agreement since 1999 – we’ve been doing it for about 25 years – so nothing in regard to that should change,” said Herndon.

Traditionally, an agent for a person selling a home would typically take a 5 or 6% commission on a home sale. It was intended to be shared with the buyer’s agent and was considered a standard, if informal, practice.

Armand Ferrara, a real estate agent with SWC Realty in Belle Vernon, noted commission has always been negotiable.

“Commission has always been negotiable,” he said. “Let’s say I’m going to list your house and I’m going to list for 6% commission, but we want to give the buyer agent a part of that commission, maybe 3%. You might say, ‘I don’t want to give the buyer agent anything and I don’t want to give you 6%. Commission is optional; that’s not new.”

Cavinee said sellers should be aware that buyers can still ask the seller to pay some, or all of the fees of their agent.

“If the only offer coming in is a buyer who asks for the seller to cover “X” percent, the seller will do it if he wants to sell that house,” said Cavinee. “It’s like saying, ‘Will you leave that living room suit?’ It’s part of the negotiations.”

If a seller doesn’t agree to pay the buyer’s agent, the buyer is responsible for it, which can impact first-time and low-income buyers who might not have a lot of cash, Cavinee said.

Herndon said it’s important to have a trusted, licensed agent to navigate the complicated process of purchasing or selling a home, which is often the biggest financial purchase a person will make.

Kim Shindle, vice president of communications for the Pennsylvania Association of Realtors, agreed.

“It’s important for home buyers or those selling their homes to understand the important role Realtors play guiding them through home buying or home selling,” she said. “They lend their knowledge about the local marketplace, where each area is different.”

Herndon said it’s too soon to tell what impact the changes will have, but said ultimately, the purpose is to provide transparency “so the consumer is fully informed as to what is required on both sides.”



This article was originally published by a www.observer-reporter.com . Read the Original article here. .

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Rules for buying and selling a home are changing. Here’s what to know.

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When it comes to buying and selling homes, new rules are about to be put in play, five months after the National Association of Realtors agreed to a blockbuster settlement over how its 1.5 million agents across the U.S. are paid commissions.

The settlement — which resolved litigation stemming from a grand jury finding that the real estate group artificially inflated brokerage commissions — brings sweeping changes to the industry, starting tomorrow.

The adjustments come as prospects brighten for the beleaguered housing market. Mortgage rates earlier this month tumbled to their lowest level since April 2023, offering hope to house hunters priced out of the market given high borrowing costs and home prices that reached a record in June. 

Still, the current rate on the 30-year fixed loan stands at about 6.5%, or more than double the sub-3% rates available in 2020 and 2021. The Federal Reserve in September is widely expected to reduce its benchmark interest rate, a step that should reduce mortgage rates currently high enough to bring turnover in the housing market near 40-year lows. 

In the meantime, real estate agents across the nation will have to adopt to new changes that could potentially reduce the commission that home sellers are asked to pay. 

Many experts are now looking for home prices to fall as the sticker price will no longer include the steep commissions that have for decades been in play.

Here’s a rundown of what this means for those looking to buy and sell homes going forward.

Buyers beware

Real estate agents are now required to have buyers sign a form before showing them a home. The agreements are intended to detail exactly how much a buyer will be expected to pay an agent. 

However, “at that stage, the buyer hasn’t had an adequate opportunity to evaluate that agent,” Steve Brobeck, a senior fellow at the Consumer Federation of America, told CBS MoneyWatch. “When you’re touring houses with an agent, the agent is auditioning to be your agent, that’s when you get to know the agent.”

Most buyers would not be comfortable signing a contract with a financial obligation that early in the process, added Brobeck, who noted that the new requirement came at the industry’s behest and was not part of the NAR’s settlement.

Buyers should not sign a contract with a financial obligation until they are ready to make an offer, advises Brobeck. “There are other options for seeing a house,” he noted, including calling the listing agent or attending an open house. 

Another option that is increasingly in use are touring agreements that cover limited amounts of time and come without financial ties, he said, noting that Zillow had developed one. Many model contracts developed by the industry are difficult to read, understand and are otherwise problematic for consumers, Brobeck warns. 

That said, one buyer-broker agreement developed by real estate brokerage eXp Realty is “simple, consumer-centric and meets most of our criteria,” he said. “They’ve made it available for the industry to use.”

Homebuyers should also think about offering a flat fee or paying their agent an hourly rate, the advocacy group advised.

“The dollar value of today’s percentage commissions is often underestimated by buyers. Moreover, buyer agents should not have a financial incentive to be paid more the higher the sale price,” Brobeck said in a report.

Sellers rejoice?

For folks selling their homes, the changing landscape should bring some quick respite, as their agents no longer have to make an offer of commission to buyers’ agents. 

Nearly 9 in 10 home sales are handled by real estate agents affiliated with the NAR, the nation’s biggest trade association. It required that home sellers figure in a commission rate, usually 6%, before listing homes on its property database, known as the Multiple Listing Service, or MLS.

The commission borne by home sellers was then divided between agents for the seller and buyer. While on paper subject to negotiation, the fee was the focal point of the lawsuit lost by the NAR and brought by a group of home sellers, who claimed the trade group and others colluded in driving up the commissions.

In June, the median sale price of a home was $442,451, according to Redfin. Under the previous practices sellers would be paying $26,547 in commissions. That customary rate is no longer the default.

Sellers can now expect to be asked for just one side of the commission pot, or what would now average 2.5% to 3%. 

“For the first time now, buyers will have the opportunity to negotiate the buyer commission,” said the CFA’s Brobeck. “We suggest setting a target of 2% or less,” the advocate said. Matched with the buyer agent’s commission that would mean paying overall commission closer to 4% rather than the current standard of 5% to 6%, he added.

In a separate but related development, almost any American who sold a home in the last fives years is covered by the class-action settlement with NAR and other brokerages. How much anyone is entitled to depends in part on how many sellers submit claims, and other factors including where one lives and when your home was listed. 

To see if you’re eligible, check here. 

More from CBS News

Kate Gibson

Kate Gibson is a reporter for CBS MoneyWatch in New York, where she covers business and consumer finance.



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Realtors’ new rules take effect Saturday. How buying, selling a home might be affected

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Chicago members of the National Association of Realtors say they’re prepared for the changes that some housing experts describe as the industry’s largest shift in how homes are bought and sold.

NAR, a professional organization of real estate agents whose members are known as Realtors, will be implementing two major changes starting Saturday as part of a $418 million antitrust settlement.

The changes upend more than a decade of industry procedures and could affect how buyer agents have traditionally been paid. It could also open up more opportunities for homebuyers and sellers.

“What we’re really going through is a seismic shift,” said Matt Silver, a partner and senior broker in Corcoran Urban Real Estate.

The NAR doesn’t expect home prices or sales to fall but says the changes could make it harder for first-time homebuyers in a frenzied real estate market.

What’s the biggest change?

Offers of broker compensation no longer will be displayed on the Multiple Listing Service, a database used by licensed brokers and agents to share information about properties for sale as well as commissions.

Historically, broker commissions have been paid by sellers. Seller’s agents usually agree to split their commission with the buyer’s agent. That means homebuyers often don’t incur an extra cost when working with a real estate agent — a big relief for first-time buyers — as their agent’s commission is covered by the seller.

Commissions typically range from 5% to 6%.

Compensation offers will still be an option consumers can pursue off MLS through negotiation and consultation with real estate professionals, according to NAR, which says broker commissions have always been negotiable.

How agents are compensated is “the biggest change our industry has had to deal with in easily 100 years,” according to Laura Ellis, Baird & Warner’s chief strategy officer, executive vice president and president of residential sales, who has been with the firm since 1998.

Ellis said the change will create more conversations between real estate agents and clients, requiring agents to use different skills than they might be used to.

Laura Ellis of Baird & Warner at the company’s Gold Coast office.

Barry Brecheisen/For the Sun-Times

“We did a big push on educating our agents about the fact that most buyers thought that the process or the service to them was free because … the seller technically paid the commission,” Ellis said. “Transparency in that alone is a big difference.”

Many real estate agents have been letting clients know in advance about the changes. And trade groups have been sharing updates for months with their members ahead of Saturday’s deadline.

Why is this happening now?

The changes stem from a series of class-action lawsuits filed by homeowners, who accused the NAR of fixing broker commissions at high rates and discouraging sellers from seeking better terms. The association has 1.5 million members and broad control over access to the MLS system.

The NAR agreed to settle the lawsuit in March., ending litigation that could have resulted in a $1.8 billion verdict against the association and tripled under antitrust law.

In April, a federal judge in Missouri granted preliminary approval to the settlement. A final approval hearing is scheduled in November.

The NAR has denied any wrongdoing.

Are other changes coming?

The settlement also requires all real estate agents working with a buyer to enter a written agreement outlining compensation before touring homes.

Some Chicago real estate agents say the written agreement requires less of an adjustment for them because they already use buyer-broker agreements.

Erika Villegas, a real estate agent for more than 20 years, said she’s always used buyer-broker agreements even though her firm, Oak Park’s RE/MAX In the Village, never required them. Villegas said requiring the document industrywide will be beneficial.

“I think it’s a great opportunity for us to make sure that we are providing the best tools, best services and we [are] making it very clear and transparent of the work that we do for buyers,” Villegas said.

Illinois real estate laws will change in 2025, including the requirement for written brokerage agreements.

What this means for you and the industry

While broker compensation no longer will be displayed on the MLS, Ellis doesn’t expect a change in how brokers are compensated. She predicts buyers will ask sellers for a “closing cost credit,” which buyers then use to pay their agent. Homebuyers also can ask the seller to pay their broker — reverting to the traditional model.

Both those scenarios emphasize that the buyer commission comes from the home transaction, Ellis said.

“It doesn’t mean that [buyers] are going to have to come out of pocket with money that they never did before,” she said.

Buyers and sellers also could elect to separately pay their own broker, raising concern among some real estate agents about how the rules could affect first-time buyers.

How will first-time buyers be affected?

First-time buyers, including those from underrepresented groups, can have trouble with financing their first home and having to pay a broker’s commission could act as an extra hurdle, according to Brian Kwilosz of EXIT Realty. Kwilosz said EXIT is watching the impact the changes will have on first-time buyers.

Lutalo McGee, owner of the real estate firm Ani World, plans to stress that cooperative compensation remains an option for new buyers even if it’s negotiated differently. Ani Real Estate, under the umbrella of McGee’s Ani World, has the bulk of its sales on the South Side.

“A lot of clients, at least that I service and my brokers [service], are those that have struggled with down payments and closing costs in the past,” McGee said. “We’re going to be actively monitoring to see what the impact of these changes are going to be.”

Several real estate agents said they don’t think the changes will affect home prices. The housing market is driven by supply and demand, Silver said, and with a dearth of housing across the region, he doesn’t think home prices will go down “anytime soon.”

It’s possible buyer commission rates could drop as agents and their clients have more conversations about compensation. But Ellis predicts agents will complete more transactions after Saturday’s changes take effect.

“I think that good real estate agents will actually increase their income,” Ellis said. “We’ve got to do what’s right for the consumer and what they want and bring real, tangible value to them.”





This article was originally published by a chicago.suntimes.com . Read the Original article here. .

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Real Estate Agent Fees And Realtor Commissions | Bankrate

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In this do-it-yourself digital age, home sellers and buyers alike might wonder if they need Realtors — or, more precisely, to pay Realtor fees. Just how crucial are these agents to a successful real estate transaction?

Well, a good agent is really pretty useful. Especially if you’re buying a home: Agents have access to information you don’t, and it takes time and expertise to research properties, find the best ones for you and put together a strong offer. But sellers see many benefits, too, especially when figuring out the best asking price. Your home will still need to be staged, listed on the market and shown, too. Here, we’ll take an in-depth look at how real estate agent fees work and what you get for the money.

One important note first: Changes to the way commissions work went into effect on August 17, as a result of a long legal battle settled by the National Association of Realtors and several major brokerages. The commission system, and how it has changed, is outlined below.

The NAR lawsuit

In October 2023, a federal jury found that the National Association of Realtors (NAR), along with several large brokerages, conspired to inflate Realtors’ commissions. All of the brokerages settled out of court, and as of March 15, 2024, NAR did the same.

As a result, the longstanding traditional real estate commission model — that is, sellers footing the bill for both their own agent and their buyer’s, typically totaling 5 to 6 percent of the home’s sale price — is upended. Now, sellers’ agents may no longer make offers of compensation to buyers’ agents on the MLS (multiple listing service, a vast database of for-sale homes accessible only to industry pros). Home sellers might no longer need to pay the agent who represents their buyer, which could open the door to much more competition among buyer-side agents, and even more potential for fee negotiation.

How much are Realtor commissions?

Let’s recap the traditional commission model, before the rule changes took effect.

Only a very small portion of Realtors work on salary — working on commission is much more common. For years, the typical going rate was 6 percent, split down the middle between the buyer’s agent and seller’s agent. But it began to fluctuate with the advent of discount brokers and the rise of online, publicly accessible listings.

Of course, real estate commissions can be negotiated, and nowadays they typically run somewhere closer to 5 percent of a home’s sale price. That means the means the more expensive the home, the more money the agents make. The exact terms of an agent’s commission vary from sale to sale, and can depend on the region and which firm they work for.

Let’s look at an example. A 5 percent commission on a $250,000 home sale would come to $12,500. But on a $1M sale, a commission at the same rate would come to $50,000.

Assuming a 5 percent total commission under that model, here’s roughly what sellers could expect to pay based on the price their home sells for:

Home’s sale price
Seller’s agent commission (2.5%)
Buyer’s agent commission (2.5%)
Total commission (5%)

$250,000
$6,250
$6,250
$12,500

$500,000
$12,500
$12,500
$25,000

$750,000
$18,750
$18,750
$37,500

$1,000,000
$25,000
$25,000
$50,000

Seller vs. buyer commission

Sellers sign a listing agreement with a Realtor in which they agree to pay a commission fee after the transaction closes. If it’s an “exclusive right to sell” arrangement, they pay the fee even if they found the buyer on their own.

Commissions for both Realtors in the transaction have traditionally been paid by the home seller: Both the buying and selling agents are paid with proceeds from the sale of the home. These two agents typically split the total commission — so for a 6 percent commission, the selling agent would receive 3 percent and the buying agent would receive the other 3 percent. Now that the new rules have kicked in, that is changing.

It also changes in the case of dual agency, when one agent represents both the buyer and seller in a transaction. Laws about this vary by state; in some states, dual agency is not permitted. In this type of scenario, pay particular attention to the home appraisal to ensure you’re getting a fair price. While agents have a fiduciary duty to their clients, with dual agency, the lines can get blurred.

As Samantha Fish, an agent with Wesely & Associates in Grass Valley, California, points out, agents are still required to act in their clients’ best interest. “It’s in our ethics; it’s in our contract,” she says. “If someone comes into my open house and they like it, but they don’t have an agent, at that point I can say, ‘let me get you an agent from my office’ so they feel like they’re being represented 100 percent as well.” Still, buyers working directly with a listing agent may have more room for negotiation because the seller may agree to a lower selling price if the agent agrees to lower their fee.

The brokerage’s cut

Real estate brokerages may get a cut of the commission as well. The brokerage RE/MAX, for example, has a split commission setup by which its agents receive 95 percent of the full commission from the sale, and 5 percent goes back to the company.

“The broker has to set the policy and oversee, monitor and supervise everything the agent does,” says Patrick Duffy, broker/owner of Duffy Realty in Miami. “And if the agent does something fraudulent or unprofessional, the broker gets sued.”

What do real estate agent fees cover?

You might wonder, what services does this commission fee buy me? One of the biggest ways buyers benefit from working with a Realtor is gaining access to the MLS, the database Realtors use to see and list properties for sale.

The fee compensates the agent for time spent answering questions and helping you through the process. An agent is also able to utilize their skills and contacts to negotiate, find properties and take you on tours of multiple homes.

A Realtor’s fee covers a wide range of costs for sellers as well, including marketing materials, staging and showing the property, coordinating open houses and contacting agents of potential buyers. When an offer comes in, the listing agent negotiates on behalf of the seller, often presenting one or more counteroffers. A lot goes into listing a home, such as:

Creating a comparative market analysis to establish a competitive price
Arranging for photo shoots, sometimes including aerial shots via drone
Writing descriptive listing copy to attract interest from other Realtors and potential buyers
Providing staging guidance
Showing the property multiple times to prospective buyers
Hosting open houses, often on weekends
Providing yard signage
Making sure listings are populated on all major property search websites
Helping the seller review and negotiate buyer offers

As with most of the other expenses related to real estate transactions, a Realtor’s fee isn’t paid until the sale closes.

Average real estate commissions by state

Overall, the national average Realtor commission in 2023 was 5.49 percent, according to data from Clever. In all but a few states, the average commission ranged between 5 and 6 percent.

Keep in mind, though, ​​that Realtors may accept a lower commission for high-priced homes to earn a higher amount overall: Their piece of the pie may be smaller, but it’s a richer slice. “For example, if I’m listing a $4 million home at 6 percent, that’s a lot of money,” Duffy says. “In a situation like that there is greater flexibility to negotiate the commission — if you get $100,000 or $80,000 instead of $120,000, it’s still a good payday.”

Here are the average real estate commissions by state, according to Clever:

State
Average commission rate

SOURCE: Clever

Alabama
5.45%

Alaska
6.00%

Arizona
5.44%

Arkansas
5.99%

California
5.11%

Colorado
5.62%

Connecticut
5.47%

Delaware
4.88%

District of Columbia
5.49%

Florida
5.37%

Georgia
5.81%

Hawaii
4.78%

Idaho
5.50%

Illinois
5.35%

Indiana
5.56%

Iowa
5.67%

Kansas
5.58%

Kentucky
6.00%

Louisiana
5.56%

Maine
5.17%

Maryland
5.34%

Massachusetts
5.45%

Michigan
5.92%

Minnesota
5.82%

Mississippi
6.07%

Missouri
5.58%

Montana
5.50%

Nebraska
5.25%

Nevada
5.80%

New Hampshire
5.25%

New Jersey
5.21%

New Mexico
5.90%

New York
5.39%

North Carolina
5.52%

North Dakota
5.00%

Ohio
5.99%

Oklahoma
5.95%

Oregon
5.03%

Pennsylvania
5.48%

Rhode Island
5.50%

South Carolina
5.62%

South Dakota
5.49%

Tennessee
5.58%

Texas
5.73%

Utah
4.90%

Vermont
5.49%

Virginia
5.45%

Washington
5.25%

West Virginia
6.67%

Wisconsin
5.15%

Wyoming
6.00%

How to avoid paying Realtor fees

Selling your home without the help of a real estate agent — called “for sale by owner” or FSBO for short — is certainly possible. Between July 2022 and June 2023, 7 percent of home sales were sold by owners without the help of an agent, according to NAR data. But selling without an agent’s help is a lot of work to do on your own, much of it complicated.

If you don’t want to go it alone, ask agents from the outset what their commission is and compare the terms of each person you talk to. If you think the fee is too high, talk to them about lowering it. If the transaction is being handled on both sides by agents from the same brokerage, you might have more leverage to negotiate as well.

Alternatively, you could consider working with a low-commission real estate agent, who will likely charge much less than a traditional agent would (usually 1 to 1.5 percent of your home’s sale price). However, since they’re receiving a smaller commission on each property, these agents are typically focused on volume. As a result, you might not receive as much personal attention as you would with a traditional Realtor.

There are also brokerages and agents who work on a flat-fee basis. In other words, no matter how much your home sells for, they’ll receive a set amount rather than a percentage of the sale price.

If you want to avoid Realtor fees and sell your house quickly, another option could be selling to an iBuyer or a company that buys houses for cash. Both options will allow you to finalize your home sale fast, without paying any agent commissions. But the offers from these buyers will be less than you’d likely fetch in a traditional sale, and some charge service fees that are equivalent to what you’d pay in commission anyway.

Finally, remember that even if you’re not paying Realtor fees, there are still plenty of other closing costs associated with selling your home. For instance, you may be on the hook for things like title transfer fees, attorney fees, property taxes and more. And even if you sell without an agent of your own, you may still be on the hook to pay your buyer’s agent.

FAQs

What percent commission do most real estate agents charge?

Typically, each agent involved in the transaction (one for the buyer, one for the seller) earns somewhere between 2.5 and 3 percent of the home’s sale price as their commission fee. However, the amount is negotiable — and new rules as of August 17, 2024, mean the seller may no longer be obligated to pay their buyer’s agent’s fee.

Do sellers or buyers pay fees to the real estate agent?

Traditionally, sellers have been the ones who covered real estate agent commissions — both for their own agent and for the buyer’s. That changed on August 17, 2024, as a result of the NAR lawsuit settlement. Now, buyers may (or may not) be responsible for paying their own agent directly. The details of each transaction will be different.

How much commission do you pay on a $500,000 home?

It depends on the specific terms of each agent’s commission. Commissions usually total somewhere between 5 and 6 percent of the home’s purchase price — on a $500,000 transaction, 5 percent comes out to $25,000 and 6 percent comes to $30,000.



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Will New Rules for Real Estate Commissions Lower the Cost of Selling a Home?

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Homebuyers face a changing housing market this weekend as major shifts to how real estate agents are paid take effect.

The National Association of Realtors (NAR) groundbreaking new commission-sharing agreement will end the common practice of home sellers automatically covering the fees for real estate agents on both sides of the transaction. The new rules start on Saturday.

The agreement is the result of the settlement of a series of lawsuits brought over the past few years challenging the long-held practice of splitting the sales commission between the seller and buyer agent. Plaintiffs in the legal battles, primarily home sellers who paid both agents, claimed commission sharing, also known as cooperative compensation, artificially inflated the cost of a home sale.

Although the NAR was the main defendant in several cases, other major brokerages, including Keller Williams and RE/MAX, were also named co-defendants. With the NAR settlement, however, most of these lawsuits will have been settled, clearing the way for a change in how realtor fees are negotiated.

Now, real estate agents are prohibited from advertising shared commissions on local databases, called multiple listings services (MLS), and buyers will instead have to negotiate their agent’s fees before they start viewing homes.

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How will the NAR agreement change agent commissions?

Even though these fees have always been negotiable, most homeowners entering into a listing agreement with a realtor have typically paid between 5% and 6% commission on the sales price, which was split between the agents representing the seller and buyer. The ultimate goal of the lawsuits was to reduce this percentage, thereby saving sellers money.

Since the settlement announcement in March, there has been a slight decrease in the typical percentage paid to buyers’ agents. According to a report from Redfin, the typical seller is paying the buyer’s agent a 2.55% commission through the period ending in mid-July. By comparison, the typical commission paid in January was 2.62%. The question is whether the new commission model will accelerate the decline in fees paid.

Marty Green, principal at the Texas-based law firm Polunsky, Beitel, Green, believes that once the agreement goes into effect, commission changes will remain modest — at least for now.

“It’s not likely they are going to turn a switch on August 17th, and suddenly everything’s going to be different,” Green says. The immediate effect will be more transparency between agents and their clients, emphasizing the buyer’s side of the commission discussions and whether sellers want to keep splitting commissions. Some sellers may decide to continue the practice to make their homes more attractive to buyers.

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Who benefits most from the change in how real estate agents are paid?

Although the settlement is meant to benefit all sellers and buyers, that may not be the case, according to Daniel Smith, founder of Keepingly, a home management platform. If the traditional model of commission sharing is fundamentally altered, it could simply lead to more upfront costs for buyers.

“For many consumers, particularly those with limited financial flexibility, this could make homeownership more challenging,” Smith says.

Aside from home sellers, who can decide if they want to continue footing the bill for the buyer’s agent and how much they are willing to pay, the other winners in this scenario are likely to be high-income buyers. These clients have the means to cover the costs of their own agent’s commission and may be more likely to shop around and negotiate agent fees.

On the other hand, the agreement could increase the challenges low-income and first-time buyers face in an already difficult housing market. Part of the settlement agreement includes a provision that buyers must sign a contract with their agents before touring any potential homes. That contract will likely include language that outlines how the buyer will be responsible for paying the agent’s commission if the seller decides not to.

If buyers have to pay for their agent’s representation, that cash needs to be paid upfront with the down payment and closing costs or somehow rolled into the mortgage, increasing the borrowed amount and the monthly payments along with it.

The increased cost of representation could also lead some buyers to hire an inexperienced agent or forego representation altogether, which could put them at a disadvantage when negotiating a home price or concession.

It will take time to measure exactly how much change the agreements will bring about to agent commissions. For now, it’s more important than ever that sellers and buyers understand the potential impacts of the settlement. For sellers, Green says, this means deciding whether to pay the buyer’s agent and for buyers, how to structure their offer in a way that makes financial sense.

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How new real estate rules are set to reshape home buying and selling across the U.S.

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How new real estate rules are set to reshape home buying and selling across the U.S. – CBS News

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Starting Aug. 17, new regulations will change how real estate commissions are handled, potentially lowering costs for homebuyers and sellers. Under the new rules, buyers and sellers will have the opportunity to negotiate commissions directly with their agents, a shift that could impact everyone involved in the real estate market.

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New rules for buying, selling homes take effect Saturday after lawsuits

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First, before a seller may show a residential property or a buyer may tour a property, real estate professionals and their clients will be required to enter into a written representation agreement outlining the terms of realtors’ compensation, said Ali Whitley, president of Ohio Realtors.

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Written representation agreements must include an expiration date, information on fair housing and blockbusting laws, whether the relationship is exclusive or nonexclusive, and terms of compensation, according to House Bill 466, which was recently approved in addition to the settlement agreement.

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Stephen Brobeck, a senior fellow with Consumer Federation of America, told this news outlet that the lawsuit and resulting ruling is based on the fact that for the last century, the real estate industry has effectively set commission rates.

“DOJ (the Department of Justice) has been working for 80 years to try to force the industry to create a more price-competitive market … but the real watershed was the jury decision in the combined Sitzer and Moehrl cases,” he said. “A jury found the the industry defendants guilty of price fixing and awarded the Missouri plaintiffs over $5 billion including triple damages.”

For decades, real estate agents have typically been paid a certain percentage of the sales price once the home is sold. A typical agent’s commission has been 6% of the sale price, split between the agents or companies representing the buyer and seller.

Brobeck said in the new system, it is important for people who intend to buy or sell a home to carefully select an agent ahead of time who is both honest and competent. Before deciding on an agent, the buyers and sellers should get a proposed contract document from the agent and have an opportunity to read and understand it. He said the agent should be willing to discuss the contract before the buyer or seller selects them.

“If an agent will not present a readable contract that is consumer-centric, a consumer should look for another agent,” Brobeck said. “And it’s that refusal by consumers to work with agents presenting unreadable contracts that will persuade the industry to improve them.”

Second change: Compensation

Real estate professionals will be prohibited from offering cooperative compensation on listings on multiple listing service (MLS) databases, Whitley said. That includes all listing types that appear on the MLS, including residential, commercial and rentals.

“What that means is that if the buyer’s broker is authorized by the buyer to accept commission compensation from a different party than the buyer, then they’ll need to just get that communication directly from the listing agent or the seller,” Whitley said. “What a buyer should expect moving forward is that we have a written representation agreement that will delineate what the services of their broker or agent is to them, and the fee for those services. So prior to showing any homes or to touring any homes, they will have a written representation agreement with their agent.”

Buyers and sellers can still negotiate compensation arrangements directly with real estate professionals outside of the MLS. Additionally, sellers may continue to offer buyer concessions, such as closing cost contributions on the MLS.

Whitley said the changes are meant to be transparent and provide clarity to both the sellers and buyers in the transaction.

“Instead of there being a perceived situation of a listing broker determining what will happen moving forward with a buyer’s broker, it will be very clear that it is the seller and the agent are having a conversation and determining that the seller is or is not willing to offer cooperative compensation,” she said. “And if they are willing to offer cooperative compensation, what is that amount that they are wiling to offer.”

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On the buyer’s side “it’s clarifying that the buyer’s agent provides services to the buyer … and they advocate on behalf of the buyer,” Whitley said. “And so the written representation agreement will delineate what those services are, and then also what the fee is that that broker is charging for those services. And then the buyer and the buyer’s broker will be able to negotiate from there what that commission is that will be paid and how it will be paid.”

Whitley said the compensation obligation can be satisfied through the purchase agreement, if the seller is willing to offer it.

“It also can be negotiated between buyer and seller during the time of a purchase agreement, or the buyer could say ‘I prefer to pay my own agent because they are working on my behalf … or any combination of those things can happen,” she said.

Kelly McCormick, president of Dayton Realtors, said commissions were “always negotiable.”

“Now, creating that clarity between buyers and sellers is something that the real estate industry and agents will be doing every single day,” McCormick said. “There’s always going to be a cost to sell and a cost to buy. Those costs are always provided, as far as a lender of good faith estimate, and now both buyer and seller will have potentially more clarity in how that cost impacts their purchase and their sale.”

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Austin Castro, a team leader at Coldwell Banker Heritage, said part of the impact from the changes could come as a result of people signing agreements with buyers agents up front, as opposed to down the road.

“What I think that means is when someone wants to sell their house, there was always a big interview process?” he said. “They’d call three or four different agents. They’d sit down and interview them. They’d talk about it, you know, and then they sign an agreement to sell their house with whoever they thought was best fit for the job. I think we’re going to start to see that now with with buyer’s representation.”

Castro said buyers, when choosing an agent, used to go with the first person they met, someone they met at an open house or a friend of a friend.

“Now I think it’s going to be a little bit more of a interview process for buyers representation because people are signing those agreements up front, disclosing ‘Hey, this is what my agent makes on this transaction,’ so I think that’s probably where we’re going to see a biggest change is going to be maybe buyers putting a little more thought on who they’re going to have represent them,” Castro said.

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New real estate commission rules to roll out Aug.17: Here’s how selling and buying a home

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New rules to how homes are bought and sold could mean an average savings of more than $50,000 to Peninsula home sellers. Photo courtesy Getty Images.

Big changes are coming to how homes are bought and sold beginning Aug. 17 when new rules roll out that will revamp how Realtors get paid commission. 

The changes, which are part of a $418 million court settlement that the trade group the National Association of Realtors announced in March, put an end to the decades-old practice requiring home sellers to pay 5% to 6% of a home’s purchase price to cover the commission for both the listing agent and the buyer’s agent.

For sellers on the Midpeninsula, where the median price for a single-family home is above $2 million – this means an average savings of more than $50,000 in commission fees.

The sudden death of the 6% commission

The Sitzer/Burnett buyer-broker commission lawsuit – a class-action lawsuit filed in Kansas City, Mo., last October on behalf of 260,000 home sellers in the Midwest over the National Association of Realtors’ commission rules – paved the way for the new regulations that will affect sellers, buyers and agents nationwide. 

A federal jury found the National Association of Realtors and some residential brokerages liable for nearly $1.8 billion in damages after determining they conspired to inflate commissions by forcing sellers to make non-negotiable offers of compensation to the buyer’s agent for listings on the Multiple Listing Service. 

What buyers should know

If you are a buyer and your agent is using an Multiple Listing Service, you will need to sign a written agreement with your agent before touring a home so you understand exactly what services will be provided and for how much. Written agreements are required for both in-person and live virtual home tours and must include: 

The amount of compensation the real estate agent will receive and how this amount will be determined. Is it a flat fee, a percent of the home cost or an hourly rate?  Compensation cannot be open-ended or determined by “whatever commission amount” the seller is offering to give to the buyer’s agent. 

A statement indicating that the agent is prohibited from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer

A statement indicating that broker fees and commissions are fully negotiable and not set by law. 

Information from the National Association of Realtors.

To resolve the litigation claims against the trade association and more than one million Realtor members, the National Association of Realtors agreed to make changes to its commission process as part of the $418 million settlement agreement.

The association, however, has stressed that commissions have always been negotiable and continues to deny any wrongdoing by its members in regard to commissions. 

“NAR does not dictate commissions. This was true before the settlement agreement and remains true once the practice changes go into effect,” according to a statement by the association.  

What the changes mean to buyers and sellers

Under the new system, the most significant change is how buyers’ agents are paid. While the seller can choose to pay a buyer’s agent, the rules make it crystal clear that sellers are no longer required to offer any compensation to a buyer’s agent. 

Buyers now will be required to negotiate directly with their own agents and must enter into signed agreements that outline how they will compensate their agent (flat fee, hourly rate or other arrangements), the amount they will pay and what services they want their agent to provide. Written agreements will be required before a buyer and their agent can do any in-person or live virtual home tours. Buyers do not need a written agreement if they are just speaking to an agent at an open house or asking them about their services.

There are also changes to how and where real estate professionals may communicate with each other about offers of compensation. These offers are no longer allowed on Multiple Listing Service platforms, which are private databases created, maintained and paid for by real estate professionals and provide property listings to Zillow, Trulia, Realtor.com and others.  

Individual agents and real estate companies, however, will still be able to reference compensation on their own websites. 

“These changes will bring more transparency and more clarity for home sellers and buyers,” said Jennifer Branchini, regional vice president of the National Association of Realtors for California, Hawaii and Guam. Branchini, who served as last year’s president of the California Association of Realtors, manages the Compass real estate office in Pleasanton.

Talk of the industry

The lawsuit and the National Association of Realtors’ subsequent agreement are the talk of the industry — but little of it on the record. Numerous local Realtors, the Silicon Valley Association of Realtors, the Sunnyvale office of MLS, and the Real Estate Research Institute of Hartford, Conn., all either declined comment or did not return messages for this story.

Michael Repka, CEO and general counsel of DeLeon Realty of Palo Alto, had plenty to say, however. He said the 5% to 6% commission structure — including sellers paying 2.5% to agents representing buyers — has been the norm throughout the industry since he joined it in the 1990s.

He said a recent analysis of home sales in Palo Alto valued at between $2 million and $10 million, revealed that nearly 95% of them included the 2.5% fee paid by sellers to agents representing buyers.

Repka said he believes the rule changes will be good for the real estate market. With sellers now looking at paying a commission of only 2.5% to 3.5% on any given transaction, Repka said this could persuade more long-time Midpeninsula homeowners to sell their homes. That, in turn, could put more badly needed housing inventory onto what has been an historically tight market in recent years.

“This new situation results in something that is more fair to the seller,” he said.

The new rules still allow sellers to offer some compensation to the agents of buyers, but the amount paid, if any, is now up to the seller, Repka added. 

“Typically, sellers had no option to pay less than the total commission. Even if the buyer’s agent’s involvement was minimal, or if the buyer discovered the property on their own (without the assistance of an agent), the listing agent retained both sides of the commission,” Repka said. 

This practice, he explained, has been used to encourage agents to point buyers toward properties that offer them higher commission rates. Sellers who didn’t offer 2.5% commission to a buyer’s agent, allegedly risked having their listing “blacklisted” by some real estate agents, according to Repka. 

“In essence, buyers will now have access to information about all homes available for sale, irrespective of whether the seller offers minimal or even no compensation to the buyer’s agent,” Repka said. 

According to the settlement facts outlined on the National Association of Realtors’ website, the association already had MLS policies in place regarding the non-filtering (or removal) of listings based on compensation. The new rules amend that policy “for clarification purposes and to ensure consistency with the proposed settlement agreement.”

Whether the 6% commission has been a longstanding and common practice, depends on whom one speaks to in the industry. 

One veteran Midpeninsula agent, who preferred not to be named, said 6% commissions have never been demanded across the board by agents locally, adding commissions are typically negotiated between home sellers and Realtors — and discounted commission rates are fairly common “to keep transactions alive.”

She said it’s not unusual for agents to “absorb costs” at times for sellers and buyers.

While the new rules provide more transparency and give sellers more options, some say the homebuying process may become more challenging for first-time buyers. 

“At a time when home prices and mortgage interest rates are higher, these new rules place an additional financial burden on homebuyers, particularly first-time homebuyers who are already struggling to come up with a down payment to purchase a home.” Eileen Giorgi, president of the Silicon Valley Association of Realtors, said in a news release from the association. 

New California requirements in the works

On the buyers’ side, Branchini, regional vice president of the National Association of Realtors, said the issue also has attracted the attention of lawmakers in Sacramento. The California Legislature currently is considering a bill that would require written agreements between agents and homebuyers. It would enshrine the requirement in state law, complementing the new industry directives.

Mantill Williams, Washington, D.C.-based vice president of communications for the National Association of Realtors, said 18 states currently have such laws, with several more, including California, now proposing similar legal requirements.

Assembly Bill 2992, authored by Assembly member Stephanie Nguyen, D-Elk Grove, would mandate buyer/broker written agreements — already required for sellers and brokers. The bill is still working its way through legislative committees.

Despite the National Association of Realtors’  widespread coverage, the association’s agreement does not yet cover all brokers in the industry. Officials of HomeServices of America Inc. of Edina, Minn., are still litigating the lawsuit, known as the Sitzer-Burnett vs. National Association of Realtors case. HomeServices of America is the parent company of Intero Real Estate Services, which has local offices in Palo Alto, Menlo Park, Los Altos and Redwood City.

David Goll is a freelance writer who regularly contributes to the Real Estate section.

– Linda Taaffe contributed to this article.



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