It has been a while since I last wrote a blog post, but today's topic is an important one, which needs to be heard, whether you are buying or selling in the near future.
As many of you must know by now, the National Association of Realtors (NAR) have been in the headlines with their settlement. As future buyers or sellers do you really know what this means?
Lets start with a little background. Prior to this settlement, and how things are currently being handled. Commission for agents were being paid through the home transaction.
The commission was often set by the seller's agent through the listing. Here in Connecticut the customary percentage offered is 5% that is split between both agents (2.5% each).
Rarely it is 6%, and in fact buyer agents are more likely to be offered 2% than split 6%. It all depends on, what is written in the listing. One of the changes proposed from this settlement is doing away with commissions being offered through the listing.
The plus side of this move each agent gets to negotiate their commission. For selling agents, this doesn't chance much, but one less thing to fill out on a listing.
As a buyer agent, you now don't have to rely on what the seller is offering. Although, if you as an agent were under contract for a property offering 2%, and your buyer's agreement stated your fee is 2.5%, you could hold your buyer accountable for the difference.
So actually as buyers, you have always negotiated your agent's fee through the buyer agent agreement. Now if these changes go through you as buyers will need to pay your agent directly instead of through the real estate sale.
Say you purchase a home for $300,000, as buyers you have closing costs to bring to the table in addition to the purchase amount. One of those costs were not, your agent's fee.
Purchase price $300,000, both seller and buyer agent fee 5% or $15,000 (300,000/.05). Seller gets $285,000 minus any other costs they may be accountable for.
So the seller has always deducted the real estate agents fee 99.9% of the time through the transaction. Now what is being proposed is, the seller still can pay their agent, but the buyer now is on the hook for paying their own agent.
Back to the $300,000 sale, if as a buyer you signed an agreement to pay your agent 2.5% of the sale. You now are on the hook to pay $7,500 on top of the sale price.
Some local Realtor associations including ones here in Connecticut are proposing using seller concessions as a way to pay the buyer agent's fee. So it would again be a deduction from the seller's bottom line.
So no commission offered through the listing, once a buyer and seller have come to terms. The concession would be part of the contract, but both parties would have to agree on it.
Nothing is official yet, but these changes may have a negative effect on the market. Seller's may not want to agree to concessions, buyers may opt to buy on their own to safe money.
A real estate transaction is very complicated, I do not suggest anyone go it alone. There are many unknowns going forward, and I am here to help with it all.
If you have any questions or concerns about this, feel free to contact me.
