Understanding the Changes to Real Estate Commissions
To help explain these new changes, let’s first look at how commissions were paid before August 17, 2024.
Before August 17, 2024
When a seller listed their home for sale they would sign a Listing Agreement with their agent. Within the agreement was a negotiated commission amount, typically a percentage of the sales price. The listing brokerage would then share part of that commission with the brokerage representing the buyer. This shared commission was advertised in the MLS (Multiple Listing Service) for other agents to see.
After August 17, 2024
The way real estate commissions are handled has changed. Commissions are no longer shared between brokerages. When a seller signs a Listing Agreement, the only commission specified is what the seller pays to the listing brokerage. Moving forward, buyers must include their agent’s compensation as part of their offer, and it can be negotiated like any other term.
How Does This Work Now?
Before viewing homes, a buyer will sign a Buyer Representation Agreement, which outlines the commission owed to their agent. When the buyer submits an offer, they can include their agent’s fee as part of the terms. If the seller does not agree to cover the full fee, or any portion of it, the buyer is responsible for paying the difference at closing.
What Does This Mean?
For sellers, this change could lower the overall commission they pay. However, it’s important to understand that buyers will consider this cost when making offers. Commissions have traditionally been factored into the sales price, and it’s unlikely we’ll see prices drop due to this shift.
Having an experienced and knowledgeable buyer’s agent is still invaluable. They guide buyers through the entire process—from selecting a reputable lender and educating them on the market to ensuring everything stays on track for a timely closing.
If you have any questions about these changes, please call or email today. Having the information you need to make an informed decision is my number one priority.
To learn more about how these commission changes effect buyers, read this: Commission Changes – Buyer Version
