Realtor says change to commissions will add 'substantial' cost for homebuyers

My wife, who is a real estate agent, was notified by her brokerage that the deal requires all buyer's agents to have a signed contract with their client, with pre-negotiated commissions (up to now it's usually been oral agreements). Her brokerage also said that they are working on new contract language for mortgages that will allow buyer's agent commissions to be paid out of the mortgage financing. That's the way it's always been done, but it's been a matter of the seller agreeing in advance to give up a percentage of their compensation and redirect it to the buyer's agent. Now it will be a matter of the buyer agreeing in advance to borrow enough to pay both the seller and their own agent.

So I think that little will change except the mortgage financing formalities, and that the seller will no longer have any control over the buyer's commission.

Currently, the agents will sometimes agree to reduce their commissions to make a close deal happen, but that won't be the case any more. Sellers will have to negotiate on price only if they want to make a close deal happen (buyers usually offer close to the upper limit of what they can afford, and can't move much to the upside). That will likely work to the benefit of the agents and the disadvantage of the seller.

Buyer's agent commissions have been negotiable for a long time, but few bother. It's also always been possible to make a deal without a buyer's agent (in fact seller's agents love that, because if the buyer has no agent, the seller's agent keeps the whole commission amount rather than split it with the buyer's agent). But again few bother, or after losing out on a few deals they decide they want someone on their side.

I suspect that the NAR has had an endgame worked out for this settlement years in advance, and the settlement language will include enough wiggle room to keep things largely as they have been, just with more paperwork and lawyers' fees.

>> “Buyers’ agents are going to have a discussion with their client and say, ‘Hey, you’re going to have to pay for my service now,'” he said.

Maybe buyers will just get rid of their agents, like in the rest of the world.

6% becomes 3% and the sellers/buyers keep the saving.

Realtors have a lot of power.

In many states, they have enough power that they have outlawed a-la-carte brokers, but they can save you a lot of money.

An a-la-carte broker charges fixed fees for specific services instead of getting a commission. We sold our last house that way, and paid a flat fee for MLS listing. We still had to pay for the buyer's agent commission to entice buyer's agents to show the house to their clients.

This settlement will hopefully help with this. It's too bad the settlement didn't require flat fee for service instead of percentage, but I won't have to worry about paying the so called buyer's agent anymore when selling.