How will you pay your buyers agent?

[SilentC]

All of a sudden the NAR settlement is about to kick in.  How are buyers agents planning to manage this?  Prospective buyers, what/how are you planning to pay your agent?

[GilesMM]

Sellers decide. If agents don’t like the percentage in the MLS notes they will steer clients away.

[MrGreen]

Sellers decide. If agents don’t like the percentage in the MLS notes they will steer clients away.

Not anymore. Sellers will not be able to list a percentage to be paid to the buyer's agent on the MLS. Buyers will need to pay their agents directly.

[Glenstache]

I just did a private sale in which I did not use an agent (friend of friend happened to lineup right). I told them that I was not interested in paying agents for some thing as simple as a purchase and sale agreement. The buyer really wanted one, so I told them that they could pay them whatever they wanted and it could go into the contract, but I would not be looking at that money in what I considered the purchase price. Worked just fine. They negotiated a flat fee with their agent.

I am very keen to see how the NAR settlement shakes out. I think they have been doing a lot of money on advertising as I have seen a lot more "content" from realtors (as opposed to agents) talking about how they won't be working for free and won't do anything without a contract. The settlement does not define that you have to have a buyers representation contract in place, or that you have to be exclusive before putting in an offer, just that your relationship has to be clear and in writing.

I think this is an industry that is over-ripe for competition and selection against useless agents. I think there is a role for people who know the process and understand the market to help buyers and sellers negotiate what is a major financial decision that most people just don't have the working knowledge to do on their own. That said, the current commission system is deeply flawed and sets up some weird incentives. 

[GilesMM]

Sellers decide. If agents don’t like the percentage in the MLS notes they will steer clients away.

Not anymore. Sellers will not be able to list a percentage to be paid to the buyer's agent on the MLS. Buyers will need to pay their agents directly.

It’s no longer a requirement to list the commission but failing to do so would be the same as putting 0% and impede the sale.

[Omy]

In my local MLS, they are removing the commission field altogether and agents are unable to put the cooperating commission in remarks, either. The buyer's agent will call all of the listing agents before showing homes and will need to get paperwork from each listing agent regarding commission.

I'm not sure how this will help sellers. As a listing agent, I would be less likely to negotiate commission if I have a lot of extra busy work to do.

It's definitely going to hurt first time home buyers since most will not have funds to pay a buyer's agent to represent them. Cash offers will prevail. Usually, when you make it harder for first time buyers, the rest of the market struggles as well.

I'm interested to see the unintended consequences of this seismic shift in the market.

To answer the OP's question, I would pay my buyer's agent directly if the seller is offering less than our agreed upon fee.

[bacchi]

It's definitely going to hurt first time home buyers since most will not have funds to pay a buyer's agent to represent them. Cash offers will prevail. Usually, when you make it harder for first time buyers, the rest of the market struggles as well.

This can be specified at hiring, written into the offer, and paid out on closing. It'll be wrapped into the loan just as it is now.

[neophyte]

Sellers decide. If agents don’t like the percentage in the MLS notes they will steer clients away.

Not anymore. Sellers will not be able to list a percentage to be paid to the buyer's agent on the MLS. Buyers will need to pay their agents directly.

It’s no longer a requirement to list the commission but failing to do so would be the same as putting 0% and impede the sale.

How would this pan out though? Granted I've only bought 2 houses, but I think I've only ever looked at one property my agent suggested. Every other house I looked at I told them that I wanted to see it. I wouldn't have taken kindly to them refusing that.

I could envision a pay-per-showing model which would probably lead to more open houses with people looking to avoid the fees. Followed by a flat payment for help with negotiations and contracts.

[MrGreen]

Sellers decide. If agents don’t like the percentage in the MLS notes they will steer clients away.

Not anymore. Sellers will not be able to list a percentage to be paid to the buyer's agent on the MLS. Buyers will need to pay their agents directly.

It’s no longer a requirement to list the commission but failing to do so would be the same as putting 0% and impede the sale.

It's no longer allowed to list a commission. Quite a bit different than simply not requiring it.

[SilentC]

I like Omy’s suggestion of basically guaranteeing a minimum commission, so my agent isn’t worried about getting paid if we are one of the first clients to make an offer after the change goes into effect.  Like 2.5% or whatever, and great if someone offers to pay the 2.5-2.8 that is standard in our area and if the seller want to contribute zero I’m baking that into the offer price.  I guess that’s a potential template.  But has anyone had the discussion yet with an agent or heard of any good compensation arrangements outside of % of sale price? 

[Sibley]

I am NOT looking to buy or sell a house, but I did go to the open house for the house down the street from me (I'm curious). I ended up in a conversation with the realtors about this topic. At least in my area, right now it seems that the following is generally happening:

-Buyer's agents are calling and asking about commission before they show the house to potential buyers
-Sellers are agreeing to pay commission, but not necessarily locking on a specific amount upfront.
-There's a 4 page contract that gets signed by buyers, so they're agreeing to pay their agent if the seller doesn't.

This is leading to additional confusion and explanation needed to buyers. One of the realtors mentioned that Colorado was challenging it as well.

[Glenstache]

I expect that the settlement will change the paperwork but will be cost neutral for all intents and purposes unless agent commissions are reduced through competition. I see nothing in the new paperwork to suggest that agents are budging on rates or making any sort of meaningful attempt to add transparency or make things easier for buyers and sellers to understand. Their industry is based on being seen as the experts in an impossible to understand financial transaction that has major ramifications for their customer's finanacial future. There is little incentive to make the paperwork or education of customers easier. There are requirements that mortgages disclose how much a person will actually pay over the life of a loan. I could see a similar requirement that if an agent percentage commission is agreed upon, that there is an accompanying table listing the commission for a range of potential purchase prices. (ie, if house sells for $600,000 the 3% commission is $18,000 and that the commission is a part of the escrow amount of funds to be distributed. 

I could also see a model in which there were MLS agents that had a job of just confirming the information in a listing, taking listing photos, and stopping once the property was listed. This ensures that accurate information was included in a listing (critical that this is correct and accountable), but does not require a comission based agreement to sell your house to have it listed.

I could also see people who will put together market values for listing prices (not same as formal appraisal) and purchase and sale contracts as ala carte services. None of this would prevent agents from providing turnkey services, but would provide a competitive way for people to step away from agents as a de facto requirement. Agents would also have to make the case for what they bring to the table. And for the record, I do think that there are agents that do bring a lot to the table. I had a great agent on the last house I purchased and sold. One of his best characteristics was telling us to walk away from houses that would have earned him a good commission. When I reviewed the escrow statements, I felt his contributions were worth the commission.

[SilentC]

Helpful answers, thank you.  I hope some system emerges where I can just pay a buyer agent hourly but I doubt that will be the way forward.  It will be very interesting to see what portion of sellers don’t want to pay a buyer commission, I suspect many of those homes will end up weighing on comps in the neighborhood (when I find out I’ll have to pay my realtor $30k and offer $30k less on the house than comps, because buyer’s market on everything that’s not perfectly updated).

[bacchi]

This change will, at least, prevent a seller's agent from claiming to represent both sides when you wander into an open house without representation. I've had that happen.

One of the articles mentioned ShopProp. It has a sliding scale based on how many showings the buyer's agent handles for you. Hopefully there will be more companies like that.

[Archipelago]

I won't be paying a buyer's agent. I've bought 2 houses without agents altogether. I talked to the seller directly and we each had an attorney to look over paperwork and handle closing. In both cases it went completely fine.

If I make an offer for a property on market listed by a selling agent, I'll just write my own offer. It's not hard. I can look up the local RE paperwork on Google and fill it in myself. No need to pay someone 2.5% to show me a house and fill out some paperwork.

[Omy]

I spoke with a realtor (former colleague) about the recent changes. She said that for the most part sellers are offering to pay a commission to the buyer's agent in order to get showings. Occasionally a seller will offer less or zero buyer's agent commission and the buyers make up the difference out of pocket.

Our metropolitan market is still a sellers market, so sellers are not offering closing cost assistance (so commission costs can't just be absorbed into the loan).

Because the buyer's agent commission is no longer advertised in the MLS, buyer's agents are now required to get paperwork filled out by listing agents prior to showings indicating the commission amount the seller is willing to pay (so buyers are aware of how much they will need to come up with at settlement).

[GilesMM]

Where we are Buyer's agents are signing agreements with prospective Buyers and assuring them most Sellers are agreeing to cover those fees.  The previous default was 2.5% per agent but negotiable for higher end properties and that seems to have stayed unchanged.

[SilentC]

Where we are Buyer's agents are signing agreements with prospective Buyers and assuring them most Sellers are agreeing to cover those fees.  The previous default was 2.5% per agent but negotiable for higher end properties and that seems to have stayed unchanged.

That’s helpful, thanks for the color.  Our agent is not having buyers sign an agreement with buyers because they are basically not enforceable.  So if the seller is offering something that’s written into the offer letter. I’ll update if we offer on a place that is not offering buyer commission, at that point I think there will need to be some negotiation with our agent.

[Villanelle]

Where we are Buyer's agents are signing agreements with prospective Buyers and assuring them most Sellers are agreeing to cover those fees.  The previous default was 2.5% per agent but negotiable for higher end properties and that seems to have stayed unchanged.

That’s helpful, thanks for the color.  Our agent is not having buyers sign an agreement with buyers because they are basically not enforceable. So if the seller is offering something that’s written into the offer letter. I’ll update if we offer on a place that is not offering buyer commission, at that point I think there will need to be some negotiation with our agent.

How is it not enforceable?  if a buyer signs an agreement with their agent saying they will pay 2.5% (or whatever) commission, how is that not something they could enforce? Either the seller pays it, or the buyer comes up with it.  It's a signed contract. 

(Maybe I misunderstood your first sentence since it says the agents isn't having buyers sign with buyers...?)

[Michael in ABQ]

I purchased a small business (roughly the cost of a house) and while the seller was represented by a broker, I was not. Buyer's agents are very rare in business sales. You can hire one and it's usually a flat fee for them to help you find a business to buy and maybe a success fee (aka commission) if you close on a purchase.


We still rent but when we do decide to buy a house, I'm fairly confident I can handle the process on my own. I spent many years as a commercial real estate appraiser so if I can get access to the data I can figure out if the property is priced reasonably. I've read hundreds of purchase and sale agreements and mortgages, so I know what to look for there. If that means paying some broker or residential appraiser a couple hundred bucks to export some data and send it my way that should be sufficient. Maybe pay an attorney $500-1,000 to review the purchase agreement as well.

[SilentC]

Where we are Buyer's agents are signing agreements with prospective Buyers and assuring them most Sellers are agreeing to cover those fees.  The previous default was 2.5% per agent but negotiable for higher end properties and that seems to have stayed unchanged.

That’s helpful, thanks for the color.  Our agent is not having buyers sign an agreement with buyers because they are basically not enforceable. So if the seller is offering something that’s written into the offer letter. I’ll update if we offer on a place that is not offering buyer commission, at that point I think there will need to be some negotiation with our agent.

How is it not enforceable?  if a buyer signs an agreement with their agent saying they will pay 2.5% (or whatever) commission, how is that not something they could enforce? Either the seller pays it, or the buyer comes up with it.  It's a signed contract. 

(Maybe I misunderstood your first sentence since it says the agents isn't having buyers sign with buyers...?)

If you are established bad for business/reputation risk. 

[Villanelle]

Where we are Buyer's agents are signing agreements with prospective Buyers and assuring them most Sellers are agreeing to cover those fees.  The previous default was 2.5% per agent but negotiable for higher end properties and that seems to have stayed unchanged.

That’s helpful, thanks for the color.  Our agent is not having buyers sign an agreement with buyers because they are basically not enforceable. So if the seller is offering something that’s written into the offer letter. I’ll update if we offer on a place that is not offering buyer commission, at that point I think there will need to be some negotiation with our agent.

How is it not enforceable?  if a buyer signs an agreement with their agent saying they will pay 2.5% (or whatever) commission, how is that not something they could enforce? Either the seller pays it, or the buyer comes up with it.  It's a signed contract. 

(Maybe I misunderstood your first sentence since it says the agents isn't having buyers sign with buyers...?)

If you are established bad for business/reputation risk.

I'm still not following. Are you saying it's bad for business if you try to get someone to pay what they signed a contract agreeing to?  I don't think that's bad for business.

We bought a place this summer and the timelines were straddling this change.  Our agent, who I liked very much and felt was super forthcoming, did have us sign an agreement.  I had no issue doing so. 

[SilentC]

Where we are Buyer's agents are signing agreements with prospective Buyers and assuring them most Sellers are agreeing to cover those fees.  The previous default was 2.5% per agent but negotiable for higher end properties and that seems to have stayed unchanged.

That’s helpful, thanks for the color.  Our agent is not having buyers sign an agreement with buyers because they are basically not enforceable. So if the seller is offering something that’s written into the offer letter. I’ll update if we offer on a place that is not offering buyer commission, at that point I think there will need to be some negotiation with our agent.

How is it not enforceable?  if a buyer signs an agreement with their agent saying they will pay 2.5% (or whatever) commission, how is that not something they could enforce? Either the seller pays it, or the buyer comes up with it.  It's a signed contract. 

(Maybe I misunderstood your first sentence since it says the agents isn't having buyers sign with buyers...?)

If you are established bad for business/reputation risk.

I'm still not following. Are you saying it's bad for business if you try to get someone to pay what they signed a contract agreeing to?  I don't think that's bad for business.

We bought a place this summer and the timelines were straddling this change.  Our agent, who I liked very much and felt was super forthcoming, did have us sign an agreement.  I had no issue doing so.

My bad!  Edit- if you are established, suing a client is bad for business/reputation risk. Her words.  It makes sense, if you can get the fee in the purchase contract then she gets paid at close and doesn’t have to try to collect on or sue someone and have “Jane Doe deceived me and took me to court” social media posts to worry about.