As anyone who’s paying attention has noticed, the market trends are unchanged for about a year, keeping the housing supply tight while housing prices continue to escalate. Working in real estate, one of the phrases I hear so often is “I can’t believe that house sold for so much”. But of course, by now people are believing it, and there actually are a number of good reasons for it, that I’ve been writing about in prior state of the market articles: very limited supply and lots of people needing homes.
However, there are big changes in the works with how buyer agents are compensated and hired, none of which seem to me to be improvements, but this is what you get when complicated issues are decided by a jury of people who cannot be associated with the issues on which they are to decide. These changes will be in effect next month.
As anyone associated with real estate knows, there are two main roles of real estate agents–listing agents and buyer agents. As the names imply, buyer agents represent people looking to buy a home, and listing agents represent people who are listing their house for sale. Some people are both, but most specialize. I, for instance, am almost exclusively a listing agent, although I am also happy to work with buyers. Most people hire me because of my marketing and reach, skills which aren’t really needed by buyer agents. These two types of agents typically work closely together to consummate a real estate transaction. The listing agent helps the homeowners price, market, and prepare their house for sale, and negotiates, in conjunction with the homeowners, with the buyer agents who represent people who want to buy the house.
Both agents, prior to this new ruling going into effect, are compensated by commission, which in the case of buyer agents, is by a percent of the sale price, as determined by the the listing agent and the seller (who has the final say in this and everything else). The most common percent was 2% (we know this because it’s been a published number in the MLS), but it is and has always been negotiable.
Traditionally, the buyer and the buyer agent work closely together, but are not required to continue to work together, if either party doesn’t want to keep working together, and buyer agents are compensated at the rate approved by the owner of the home for sale. They used to be able to see what commission rate is offered on the MLS (multiple listing service), but not anymore under the court settlement.
Now, under the new rules, buyer agents must get the potential homebuyer to sign an exclusive buyer agency agreement, meaning prospective home buyers can’t work with another buyer agent for some period of time (whether they get along well or not), and it is now illegal to post the buyer agent commission amount on the MLS (again, thanks to the court ruling).
There’s been talk of the buyer agent being paid directly by the person looking to buy a house, but that has some loose ends to be worked through. For instance, the exclusive buyer agent agreement could still be 2% (or 3% or anything else, including by the hour or as a flat fee), and that payment to the buyer agent might be written into the offer, to be paid by the seller, which takes us right back to where we started. It really does strike me as odd, that all the commotion about buyer agency fees, that this scenario doesn’t change things much, but does make it more complicated. We’ll have to see how it works out.
My guess is that the commission required will be part of the offers, going forward, and the sellers will simply factor that cost into all the other costs involved with this particular offer, when they choose which offer to accept. I’ve said this dozens of times now, but if I were listing my house for sale right now, next month, next year, etc. I would absolutely want to offer compensation to a buyer agent, because I believe it will bring more buyers and better offers, resulting in the best price and terms for me as the seller. I’ve had many potential seller clients ask about the upcoming changes, but I haven’t had one seller tell me they want to be the first to offer $0 to the buyer agent. Time will tell.
*The photo above is 116 Mill Creek Drive in Ashby, which sold in June 2024, for $650,000. It was a very specific and unique house, at almost 4,500 square feet, including a 1,000 square foot solarium with two massive tropical bird cages and a room on the first floor so large (1,000 square feet) that I’m told it’s going to be used as an in-home Brazilian jiu-jitsu dojo. Turns out 116 Mill Creek Drive was just what the buyers were looking for. I love being a matchmaker.