We plan to list our house in L.A. at the end of May, but we might wait until some time in June, as we think interest rates may go down by then.

I'm not sure how this change will affect us, but we did change agents from the first one that we interviewed. Her proposal (which I did not accept) included 5.9% commission, but the second one included 5% commission, which should save us $20k, which is considerable.

Commissions have always been negotiable. The buyer broker commission the seller is offering will no longer be filled in in a field in MLS, so buyer agents will be contacting listing agents to get that ironed out ahead of time. If sellers are not willing to offer an adequate buyer agent commission, this will mean that a smaller pool of buyers will be interested in the home.

Sellers thinking they can ultimately offer $0 to buyers agents are shooting themselves in the foot. Most buyers will still see the value in having their own representation. Buyer agency came about in the ‘80s because they realized the listing agents were representing the interests of the sellers. I’m sure more buyers will now choose to go this alone but they are in for a rude awakening when they start navigating this by themselves. For some buyers working with agents, they will not have the cash to directly pay their agents, so many will choose to finance this by tacking it on to the purchase price. This will cause appraisal problems and will ultimately increase sales prices. For buyers using VA loans, they are prohibited from directly paying the buyer agent commission.

Everyone is frustrated by the rapidly-increasing home prices but this is due to a supply and demand problem. The fact that many sellers are sitting with interest rates in the 2s and 3s means they will do everything they can to not move, which means our inventory will remain tight for years to come. It is easy to pile the blame onto agents’ commissions being the cause of this but it’s simply not the case.

I did not know until not too long ago that commissions were negotiable; that was never mentioned to me by agents I sold through, and why would they mention it if it was not required for them to do so? Around here, 6% is standard, split 50:50 between buyer and seller agents.

I can absolutely foresee sellers offering a buyers agent commission eventually going the way of the dodo, and I don't see that as necessarily a bad thing. From a seller's point of view, why should I have to pay a 3% buyers agent commission. That's money out of MY pocket to pay for someone else's representation. The seller's commission? Perfectly fine -- they're playing for my side. If a buyer wants representation, they should pay for it themselves.

I've been to the rodeo a few times and know enough that a buyer should have representation and I would pay a reasonable commission for it. But, how many buyers are going to want to do this -- let's face it, people are cheap. Then there's first-time buyers who don't know what they don't know, and I venture a vast majority of first-timers don't understand the value of a buyer's agent and are going to balk at paying for it if it's not baked into the seller's end of things.

How would this new ruling affect ability to finance? Whether the buyer's % is tacked onto the seller side or the buyer side, it's the same % added to the cost of financing.

I imagine a lot of realtors are up in arms over this, it makes sense that a lot would get out of the business if this goes through since they may end up losing a guaranteed buyers commission.

I was a real estate agent for few years almost a decade ago. The NAR didn't want this change so I don't see it as Sellers agents trying to cheat the Buyers agents.

Having to call to check the commissions before hand is a mess. Negotiate commissions before you maybe put in an offer? The 6% commission (split between them) was the unspoken rule and I'd bet that won't change.

A clear cut way to separate the two is for the buyers to pay their Realtor. That way the buyer and seller can negotiate their side up front. But again the unspoken rule will apply so I don't see it drastically cutting commissions. In practice I assume this would mean in times of a buyers market the seller would end up paying all of it (that's how it is now). In a hot sellers market maybe the buyer would end up paying all of it.

"In practice I assume this would mean in times of a buyers market the seller would end up paying all of it (that's how it is now). In a hot sellers market maybe the buyer would end up paying all of it."

Ok, now that makes sense how this change might affect financing. However, if we stay in a sellers market for a long length of time -- and I think we will (around my parts) -- the "norm" is going to be reset and we may see the end of sellers paying buyer's agent commission as the standard. Only time will tell.

We have sold 6 homes in the last 35 years, in Louisiana and Texas. We always negotiated the commission, never paid 6%.

Anything anywhere and in any context might theoretically be subject to a negotiation but whether in fact a change can be effectively negotiated is a different story.

I live in an area where real estate is expensive and a seller's market prevails more often than not. Negotiated commissions below 6% have been common for properties beginning a bit higher than first time buyer price levels. Why? Because getting a listing normally means a sure bet for a quick sell and payday and if one realtor wants to turn down that income, several more will be easily found who will be happy to have the listing under the conditions the seller wants.

What will happen from this change remains to be seen.

If a realtor sells one house every two months in my neighborhood in L.A., they will get over $200K a year in commission, if their commission is 2.5%. This is a comfortable income where I live, and so there is a surfeit of realtors here IMO, and a seller can pick and choose a realtor, although the realtors who get the highest prices are more in demand, as a rule.

Right now it is a seller's market because there is low inventory; however, the market is slow because there aren't that many buyers either. Some buyers are probably waiting for interest rates to go down. Home prices have been fairly stable here for the past year or so.

" Home sellers can still offer a commission to the buyer's agent, but that will no longer be a condition of using an MLS. "

Really, this will be the only difference - requirements for using MLS - but a seller would be a fool not to offer a commission to the buyers agent. Commission rates have always been negotiable for various circumstances, so that's nothing new.

" "...but a seller would be a fool not to offer a commission to the buyers agent."

Why?"

Because offering an incentive to the buyer's agent is an incentive for those agents to try to sell your house to their clients. Otherwise, it's like trying to do a private sale - you'll have fewer prospective buyers because any buyer working with an agent is unlikely to see your place, or find out all the various important things an agent can tell you about that house/neighbourhood - their agent is going to work harder to help you find a different place you like than showing you around a house they won't earn any money from helping you buy.

Now, maybe after a long while, buyers paying a commission to their own agents will catch on, but I have my doubts.

"...but a seller would be a fool not to offer a commission to the buyers agent."

Why? From a sellers point of view, it's saving me money not to, and that money saved isn't chump change. Now, offering a buyers agent commission during the negotiation process is entirely different and may be beneficial for the seller depending on the particulars of the overall offer, and that I can see. But a flat % for buyers agent at listing time? Not necessarily a bad thing for that go away, and I do think it eventually will.

@Toronto: I think we must have been posting at the same time, I re-posted to add some additional thoughts.

I don't necessarily disagree with you, but I do think it's going to take a while to see how this plays out. It's one thing to REQUIRE a buyers agent commission at the time of listing and quite another to OFFER it. Which is really what this ruling is about, no?.

That is correct, it will no longer be required. There was never a required amount of buyer agent compensation so a seller could have said $1. My Mls removed the requirement a while ago but we have seen that selllers are still offering a decent buyer agent commission for the most part. The big headlines are misleading as commissions have always been negotiable.

Are agents required to inform sellers that the % is negotiable? (under the current "old" law) Asking because if it's not, how many sellers are actually aware that it's negotiable?

In my neck of the woods , commissions were not negotiable. Not a coincidence that the lawsuit originated in my area . Also I find it interesting that other countries commission percentages are usually much lower .

: It's one thing to REQUIRE a buyers agent commission at the time of listing and quite another to OFFER it. Which is really what this ruling is about, no?. :

Only with respect to using MLS, I think.......before, in order to use MLS, you had to be giving both the buyer and seller commission, now you don't need to. Unless I misunderstood.

Realtor Organization are not going to let the sellers cut off the buyers agents. There are some agents that like to work exclusively with only buyers or only sellers but generally agents have a mix.

If, for the sake of argument, sellers were to cut off buyer agents then no agent would want to work with buyers. In some states the agent can represent the seller and the buyer, dual agency. In those states the seller agent would end up doing the seller and buyer work (because the buyer can't find an agent) for only the sellers fee.

While the commission is negotiable it doesn't seem so because why would an agent say "I charge 6% split evenly but if that doesn't work for you then let's negotiate so I make less money." The illusion of them being fixed works in their favor.

While the commission is negotiable it doesn't seem so

Right.....instead the seller should say "I'm offering 5% to be split evenly between you and the buyers' agent".

Keep in mind that what people think of as an MLS agreement is really nothing more than an agency agreement for a fixed period of time. The agreement does include the requirement to list the solicitation on the listing service and gives the broker exclusivity (unless negotiated otherwise) for the sale, no matter from what source the buyer arrives.

The forms are preprinted but the boilerplate can be changed, existing things deleted and new things added. While any agreement is subject to negotiation, this practice of standing firm on the commission percentage was institutionalized. "No, we can't do that" might be encountered.

My experience is that when something other than the "customary" rate has been negotiated by the seller with their agent, it's added to the listing detail because in essence the selling broker has "negotiated" a fee reduction for the as-yet unidentified buying agent.

I'm glad this is happening. I've thought for years that the whole realtor fee set-up is a big rip off.

For openers, I've never understood why a realtor apparently is required to be associated with a broker. I know, I know it's the law in many areas (which will hopefully go away), but why? Why can't realtors operate like lawyers, accountants, architects, and many other LICENSED professionals and set up a one man shop in their house if they wish. That way it would reduce the commission split from four parties (two brokers and two realters) to two. No other professionals have to have a broker, only realtors.

And the fixed percentage no matter how expensive the house is. It's typically takes the same amount of effort to sell a $500K house as it does a $750K house or a $1M house for that matter but the fees for the latter are higher for no reason that other than the "that's the way we do it" price fixing model.

My wife once worked for a guy that brokered the selling and buying of radio and TV stations. His fees where graduated.....5% up to a million (a VERY cheap station), 4% a million to 5 million, 3% 5 million to 10 million, etc. Worked well for him.

The realtor fees here in the USA are among the highest in the western world. Hopefully that will start to change.

Don't confuse terms. It may vary from place to place but an agent/salesperson's licensing requirements are less substantial than what's required to be a broker. From what I've seen in this industry, neither is particularly difficult to obtain.

A salesperson needs to work for a broker, a broker can work for themself.

A realtor is simply a term for those who have joined the NAR

Any realtor can be a broker once they have enough points. Points are earned by completing sales.

The broker I was with had 2 payment options. There was the monthly fee that everyone paid and then you could pay an additional higher set fee or a % of your sales.

A National or even regional brokerage firm is an assurance that your realtor has the expertise and reach back for even more expertise,legal and otherwise. The lone agent can be crap, shifty or great. At least the brokerage keeps an eye on maintaining their own standards and reputation in a fractured market.

It's significant that commissions may become more negotiable, potentially impacting how homes are bought and sold. More flexibility in commission structures could benefit buyers and sellers by potentially lowering costs, although it might lead to changes in how agents operate.

I'm going to have to look into this class action lawsuit, I did sell a home during this time and may be entitled to something. Even if it's only a hundred bucks or two, all it will cost me is my time to fill out the paperwork:

Home | Burnett et al. v. The National Association of Realtors et al. (realestatecommissionlitigation.com)