The world is changing so fast with artificial intelligence, electric and self-driving vehicles and instantaneous information on every subject at our fingertips. For professionals who are members of the National Association of Realtors, their world has just been upended.
Last week we reviewed the National Association of Realtors’ landmark settlement regarding the agent commission system. The major conclusion of this settlement is that compensation in the form of commissions will no longer be shown on the multiple listing services. Listing agents can still negotiate commissions through private conversations and written agreements, but these agreements cannot be shown on the multiple listing website.
The disadvantage for sellers is that buyer’s agents do not know what their commission will be immediately and some of them may be reluctant to show the property to potential buyers without this information. Regardless of what many people believe, commissions have always been negotiable between the seller and their agents, the difference now is that this percentage is not obvious to buyers’ agents immediately. In an effort to work with this new ruling, brokers and their agents are looking for new payment models.
Starting in July, sellers won’t need to make an upfront offer for how much they will pay a home buyer’s agent. Sellers and their agents could, however, continue using the selling model that has been in place for generations and share the agreed-upon commission, it just won’t become part of the published listing agreement and will require buyer’s agents to call the listing agent and ask what their share of the commission is, another layer to an already busy job.
Flat fees for service provided might work as a new commission model. Under this approach, buyers would agree to pay their agent directly, but they could still choose to ask the seller to cover this cost. Asking sellers to cover the cost of mortgage points for the buyer has always been a part of the negotiation on a property in addition to other fees or a portion of property taxes, therefore, asking to pay buyers’ brokers is not a stretch for sellers.
Many customers like the flexibility of flat fees or hourly rate models which can significantly lower the fees paid to a buyer’s agent and might also work for selling agents. This would require the buyer or seller to perform more of the work to close out a transaction themselves but save on commissions.
It’s not as easy as it sounds. Paying for advertising, open houses and following up on inspectors, mortgage commitments and title companies is something realtors are accustomed to doing every day. Taking time out of your workday may not look as attractive once you have to make all of the phone calls yourself and the savings in money may not justify the time spent.
The National Association of Realtors provided these statistics: 86% of buyers purchase their home through a real estate agent or broker; 89% would use their agent again or recommend them; 51% found their home on the internet and 29% found their home through an agent; and for sale by owner properties accounted for only 10% of home sales in 2021.
No doubt agents will leave the business rather than deal with the complications of the changes and that’s a good thing. Since COVID there has been an influx of new inexperienced agents to the business. It’s not an easy job and anyone who has done it will understand that. No matter how much the world spins with changes every day, you can’t take away the importance of in-person contact with other humans, and that’s what realtors bring to the table.
