New Rules for Real Estate Commissions: How They Impact Your Next Transaction

The National Association of Realtors (NAR) has recently settled an agreement that changes how real estate agents, particularly buyer's agents, are compensated in transactions. While this might sound like a major shift, it’s important to realize that in many states, including Oregon and Washington, this practice has been in place for years, and the changes may not be as significant as they first seem.

What Has Changed?

Previously, the seller typically covered the commissions for both their listing agent and the buyer's agent. This allowed buyers to focus solely on finding their dream home without worrying about how their agent was paid. However, the NAR settlement now requires that buyers directly address their agent's commission as part of the transaction.

Despite this, in many cases, the buyer’s agent will still negotiate for the seller to cover the commission through concessions. Essentially, the key difference is that the buyer's agent’s commission is now formally part of the offer, rather than a pre-set figure determined by the seller when the home is listed.

Impact on Buyers

For buyers, the practical effect of the settlement change is limited. In fact, many buyers won’t see much of a difference:

• New Formality: Buyers must now sign an agreement with their agent that outlines how the agent will be paid. While this adds a layer of formal documentation, it doesn’t change the buyer’s ability to negotiate for the seller to cover the agent’s fee.

• Commission in the Offer: Rather than paying their agent separately, buyers can now include the commission as part of their offer for the property. This can be advantageous because it keeps the out-of-pocket cost down, with the fee effectively rolled into the financing or purchase price.

• Transparency and Flexibility: This change promotes transparency between buyers and agents, ensuring that both parties are on the same page regarding compensation. Buyers now have more flexibility to negotiate commission terms as part of the overall offer.

Impact on Sellers

For sellers, the changes primarily affect how commissions are negotiated:

• Negotiating at the Offer Stage: Sellers will no longer set the buyer’s agent commission upfront when listing the home. Instead, it will be discussed and negotiated at the offer stage. Sellers should be prepared for buyers to include their agent’s commission in the offer and should approach these negotiations strategically to attract the best offers.

• Concessions Still Standard: Even with the new rules, it’s still very common for sellers to provide a concession to cover the buyer’s agent commission. This means that in most cases, sellers won’t see much change in how they approach the financial aspect of the transaction.

Conclusion: Why This Change Might Not Be as Big as It Seems

While the NAR settlement formalizes new procedures, it doesn’t drastically alter the home buying or selling process. In many states, buyers have long been responsible for their agent’s commission, often negotiating for the seller to cover it. The real shift here is that these discussions now happen as part of the offer, promoting greater transparency and flexibility.

Whether you’re buying or selling, understanding the new rules can help you navigate the process with confidence. By working closely with your agent, you can ensure that these changes don’t disrupt your real estate goals.