The San Diego Realtor Association has been sending out regular emails to its members about getting ready for the upcoming changes to the online listing service regarding buyer commissions.
As per the new rules going into effect this month, the MLS (multiple listing service) will no longer include offers of compensation to buyer’s agents. A seller can still offer a commission to the buyer’s agent but listing agents can no longer advertise what that commission is and instead buyer’s agents need to request compensation from the seller as a term within their buyer’s offer. The fear is that this may result in buyer commissions potentially being reduced or eliminated.
I can attest to the hard work a buyer agent puts in resulting in the eventual joyful day of closing on a property. Every year, I help quite a few first-time buyers finally become homeowners.
Beginning with the first meet up, discussing price and neighborhood goals, long term with building strategies and helping navigate the loan approval process. Over weeks and months, visiting many properties and sometimes submitting offers. Once an offer is accepted there is quite a bit of work to do with property inspections and disclosures. But some of my greatest days in real estate are when one of my buyers closes on a property and we have the handing over of the keys, popping champagne and taking photos.
The National Association of Realtors recently settled a series of high-profile lawsuits regarding real estate commissions, resulting in significant changes to industry practices. As of Aug. 17, 2024, these changes aim to increase “transparency and fairness” in real estate transactions, particularly concerning buyer commissions.
The NAR agreed to a $418 million settlement in response to multiple class-action lawsuits. These suits accused the organization of engaging in anti-competitive practices that inflated real estate commissions. As part of the settlement, the NAR committed to a comprehensive overhaul of its policies, particularly those related to the compensation structure between buyers and brokers.
One of the most notable changes is the prohibition of mandatory offers of compensation from sellers to buyer brokers, and buyer’s agents. Previously, it was common for sellers to offer a commission that would be split between the listing agent and the buyer’s agent. Now, buyers will have to enter into a compensation contract with their buyer’s agents prior to seeing any properties (yes, even open houses!) And buyer brokers will need to negotiate their fees directly with their clients (buyers), independent of the sellers’ involvement.
The difficulty here is that without any compensation or with a reduced compensation, many buyer agents will disappear. After many months of working with a buyer, agents need a compensation check to get their bills paid! The new rules have a buyer signing to pay the buyer agent commission of typically $10,000 to $20,000, or more at the end of a transaction. The issue here is that buyers are usually short on funds; I have many first time buyers scraping together 5% to 10% of the purchase price as a downpayment plus having to pay around $5,000 to $10,000 in closing costs. Fortunately, the buyers agent can “request” a commission credit from the seller to help pay some or all of the buyer’s agent commission but there is no guarantee the seller will cooperate.
In summary, we will have to wait to see how this all plays out but if the buyer agent commissions become greatly reduced or eliminated, buyers will not be well served in their search and acquisition of a property. Less buyers, especially first time buyers, will be able to navigate the process and less first time buyers will be able to find and purchase a property.
If you are thinking about buying or selling, give me a call for a no-obligation chat about your situation. (858) 431-6043.
– Sarah Ward is a REALTOR with Fine & Coastal. Reach her at: [email protected].
