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Exploring Realtor Commissions: Impact on Buyers and Sellers in Today's Market

Chad Cox • September 6, 2024

What’s happening with Realtor Commissions?

If you’ve tuned into the news recently, you’ve probably heard discussion about realtor commissions. We’re here to inform you on what’s taken place and where things are headed. We’ll also discuss how this affects buyers and sellers. 


A quality realtor will always advise the seller to offer a commission to the buyer’s broker. Commissions ultimately drive more buyer traffic to homes on the market. Not offering a buyer’s broker’s commission can significantly reduce the stock of potential buyers.


What is NAR, What are the Recent Developments?

The National Association of Realtors (NAR) is a professional organization that represents real estate agents and brokers in the United States. NAR was sued due its commission polices. The lawsuit claims that NAR engaged in anti-competitive practices and that their rules resulted in elevated commission rates-- rates that would not have been possible in a free market. 


One stipulation of the settlement is that NAR must implement new practices around commissions. This doesn’t mean commissions won’t be paid. They will, but sellers must note them in the MLS. They can also post the commission amount on the online property listings.


Buyer Impact

The lawsuit could have a substantial impact on buyers. We could see changes to commission practices. This could lead to greater industry transparency. It might also mean reduced commission rates for buyers. Buyers should know they are required to sign a contract with any realtor they hire. The contract will detail their commission agreement. 


Why Commission Rates Matter

Understanding how commissions work is essential. Sellers usually pay the commissions. The amount they pay is generally a percentage of the sale price. The seller typically pays their broker a certain percentage. The seller’s broker then pays the buyer’s broker a certain percentage. Sellers can offer a lower commission and declare what rate they pay to each broker. Ultimately, sellers have always been in the driver’s seat when it comes to commission rates. This is unlikely to change. 


Buyers need to have open discussions with their realtor about commission rates and understand how it impacts their costs across the board.


Why Buyers Need a Realtor

Buying a home is the largest financial investment that many people will ever make. Failure to hire a realtor for representation may pose risks for buyers. It can also be disadvantageous for sellers with more experience. Buyers can effectively maneuver through the commission landscape by discussing with their realtor how the commission will be managed and paid out. They can also formulate a backup plan in case the seller doesn’t have a commission agreement. 


Not hiring a real estate agent can be disaster. There can be number of surprises during the buying process. Having an experienced agent at hand can help you effectively manage any unexpected twists and turns. Finally, buyers will want to find a relator that delivers value beyond a decent commission rate. They’ll want a seasoned agent capable of negotiating favorable terms overall. 


What to Expect

There’s a lot of concern among buyers and sellers-- and lots of speculation. The media naturally wants to get attention using fear. No one knows for sure where the market will head, but prices aren’t likely to plunge or suddenly run wild.


So buyers don’t have to rush and purchase a house. They also don’t have to delay buying a home if now is the right time. Some have speculated that relators could become unnecessary. It’s unlikely that a significant number of buyers and sellers would opt to take a lone-wolf approach. People in the market will generally find utility in representation. 

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