How to Capitalize on the New Realtor Commission Deal
A recent lawsuit settlement has redefined real estate commission structures, shifting the financial responsibility for a buyer’s agent’s commission from sellers to buyers.
This change is set to impact the industry significantly.
Price War Ahead for Buyer’s Agents
According to Vishal Garg, CEO of Better Mortgage, a price war for buyer’s agents is expected to unfold within the next year. Early signs of this shift may already be visible.
Details of the Real Estate Commission Settlement
A $418 million settlement between homeowners and the National Association of Realtors (NAR) has been enacted.
Under this new agreement, sellers are only responsible for their agent’s commission, which is generally around 2.5%.
Buyers and their agents will now negotiate their commissions independently, which will not be deducted from the sale price.
Garg predicts that consumers will begin shopping for buyer’s agents similarly to how they currently shop for mortgage lenders, potentially leading to increased competition and lower costs for buyers.
Implications for Buyers
While this settlement will save sellers money, buyers face a new challenge: their agent’s commission cannot currently be included in their mortgage.
Although there may be future regulatory changes to allow such inclusions, these adjustments could take months to implement.
Strategies to Navigate the New Commission Structure
Bankrate offers four approaches to avoid realtor commissions:
- Go Solo: Opt for a “for sale by owner” approach. Although 7% of home sales last year were completed without an agent, this route requires considerable effort.
- Negotiate: Discuss commission rates with potential agents upfront and compare offers. Working with agents from the same firm may give you additional negotiating leverage.
- Seek Discount Agents: Some firms offer reduced commissions, typically between 1% and 1.5%, or work on a flat-fee basis.
- Cash Homebuying Companies: These companies bypass commissions and offer a quick closing, though the sale price may be lower than with a traditional sale.