It's really not that complicated, and your real estate agent will explain it to you in detail. The difference now is that the fees you pay your agent are now negotiable by law and are split between buyer and seller. Our agent is charging us 2.5% for buying our new house, and he will charge us 2.5% when we sell the house we are in.

If you are buying or selling a multi-million dollar house, you might want to pay a smaller percentage or else negotiate a flat fee. You can also negotiate an hourly rate, if that is what you prefer.

Previously, the entire commission was paid by the seller and the selling agent gave the buyer's agent their share out of that pot, usually 50-50 split. Now the seller pays only for his realtor and the buyer pays his realtor directly. So the seller is no longer paying the entire commission and the buyer now has to pay his share. As Lars pointed out, the seller negotiates a commission percentage with his realtor and the buyer negotiates a commission percentage with his buyer's agent.

And do shop around for a realtor who is willing to take a smaller percentage commission. Negotiating a 3% commission down to 2.5% commission is a significant amount of money considering how expensive homes are now.

I think the new approach is a good one, an improvement and simplification in fairness to all concerned.

Commission levels have long been negotiable in my area. The odd thing is that when that happened, the seller and his/her agent were in essence negotiating the compensation in the listing agreement for a buyer's agent who at that time was unknown and unidentified. The buyer's agent would walk into the situation to find their pay had been reduced in advance.

It's happened to me twice in buying homes when behind the scenes, the two agents in concert agreed to "contribute" by reduction by about half of their commissions charge to the seller to make the deals go through, when I had presented a good offer on the table and each seller was being stubborn.

Now it will be that much harder, even tho the percentage is small, for first-time home owners to buy a house. The sellers are much more easily able to pay the fee.

The way I understand it, commissions were always supposed to be negotiable, but many agents/agencies were misleading clients and fixing rates. The recent settlement puts a stop to that.

sjerin, if you accept that most sellers factor in their own costs when setting a price (for anything, personally or in business), you can accept the suggestion that buyers have been paying the commissions all along. They just weren't separately stated. As an example, sellers needing to "net" a given amount of cash from a sale added all selling costs to that number when determining the price. And when negotiating a contract.

" many agents/agencies were misleading clients and fixing rates. The recent settlement puts a stop to that. "

We all have different experiences, but no other occupation field comes to my mind faster than real estate if I think about which jobs have the most weaselly, phony and conniving and non-truth telling people so employed in its ranks. This settlement won't change that a stitch.

I've had several personal experiences that when a target is sighted, the agents on both sides will say anything, do anything, represent anything they can later deny, etc., to get the deal to close. At that point, they're representing themselves, not their clients.

Well, gosh, Elmer, tell us how you really feel. Hope no one here is in real eastate. My son is and my mother was and none of your diatribe applies to either of them, nor to any real estate agent with whom I have worked.

I you watch Million Dollar Listing Los Angeles, you can see some of what Elmer is talking about. Of course almost all listings in Los Angeles are over a million dollars (certainly in my neighborhood, which I considered somewhat modest), and many listings are over $10M, which can net the agents over $500K on one sale.

I did tell my last agent what percentage I wanted to pay, and so that was negotiable. The first agent I talked with wanted 6%, and so I never signed a contract with her. I had other issued with her as well that were going to cost me a lot, and everything she wanted to do was unnecessary, as proven by the fact that my house sold on the first day without doing most of what she said I needed to do.

"We all have different experiences, but no other occupation field comes to my mind faster than real estate if I think about which jobs have the most weaselly, phony and conniving and non-truth telling people so employed in its ranks. This settlement won't change that a stitch."

That was wholly uncalled for. One of my best friends from my youth was an agent and he was an upstanding, honest man. I've also never had even remotely similar agent experiences to what you describe, and I've bought and sold multiple homes. Sure my experiences are anecdotal, but so are yours. Good and bad, competent and incompetent are employed in every field.

" Sure my experiences are anecdotal, but so are yours. "

Absolutely, I couldn't agree more.

In response to you and cyn427, I expect experiences vary from place to place, person to person. When I think of the real estate field, I think of it broadly. Let me ask - for stereotypes of the following occupations, do people in your areas (or experiences) see any of the following as at the high end of the scale in representing highest standards of integrity and ethics in their conduct in your communities? Who are viewed as being always fair and never self-opportunistic, untrustworthy or looking to advance their own self-interests at the disadvantage of others?

Landlords

Developers

Contractors

Real estate leasing or sales agents

Tradesmen, like plumbers, HVAC techs, etc.

Property managers

Where I am, if you go into dealings with these kinds of folks with your eyes open, your BS meter turned to Highly Sensitive and your hand on your wallet, you do fine. If you think you're dealing with your grandmother and Tinker Bell, you're more likely than not to get taken advantage of. That's all. If it's different where you are ,you're in a special place unlike most others.

Edit to add: Of course there are exceptions. There are also unscrupulous people in occupations people think of as composed of folks with high standards of conduct. None of the above fit into such a description as I see it, those at the high end exist but are rare. Almost oxymorons - a generous landlord, a building contractor that does extra work without charging for it? Nah.

This is a very interesting thread for me, because I will looking to purchase a home within the next few months (probably).

I am talking to a few Realtors and will talk to some more. The first 3 I have spoken to about this change have uniformly told me the same thing.

(And I realize that (a) this is just what they are saying now; perhaps their current "talking points", and (b) perhaps this would only apply in my little corner of our huge country).

I am being told that regardless of the change, that the reality is going to be that the vast majority of sellers (in my area), will CONTINUE to offer 2.5% to the buyer's agent, with the change being that it can't be advertised.

I am told that though inevitably some sellers will balk, or try to offer lower, but that in the event their house doesn't sell, their agent may/will be pointing out to the seller that the lower commission price could be stifling buyers, who now MUST be represented by a licensed agent/broker, simply in order to visit a home.

Indeed, if anyone here wishes to go see an open house, that person will (supposedly) be required to sign an agreement before entering, identifying their agent, and if they don't have one, the potential buyer will have to acknowledge that in the case of this one house, that seller's agent will act as their agent (double commission = dual agency, depending on the seller's negotiated deal with the seller).

As I'm typing this, I'm wondering what happens if I, as a seller, do NOT want my agent doing the dual representation (I do NOT); I wonder if I'll have to specify that in the agreement to list the house... I guess so.

I also wonder whether these are just the current "talking points" as all these agent kind of try to preserve the existing fee structure as best they can? Or is this just going to be the way most of the folks who wish to buy/sell a house will be pressured to do it?

Interestingly, I was just listening to this today - about the new real estate landscape and potential for dual agency, which is outlawed in some states...

https://www.marketplace.org/2024/08/15/dual-agency-realtor-rules-settlement-homebuyer-real-estate-agent/

"...But starting Saturday, it’s no longer assumed that sellers will pay the buyer’s agent. They can, but many likely won’t. Waller said that means buyers will have to come up with thousands of dollars out of pocket for their agent’s commission, “in addition to all the other closing costs that they have to bring to the table.”

Buyers who can’t afford that may choose to tour properties on their own and work directly with the listing agent if they make an offer. The listing agent then becomes a dual agent, and Waller said they may accept a lower fee because they’re also getting paid by the seller. That creates a potential conflict of interest.

“The buyer, of course, wants the lowest price; the seller wants the highest price,” he said. “Dual agency is like a husband and wife being represented by the same attorney in a divorce. It just doesn’t make good sense.”..."

Since I’m actovely looking at RE, I’ve taken an interest in this but not enoigh to have figured it all out. In talking to several realtors yesterday at open houses, none were 100% sure of what it will look like. Though they did all seem to suggest that for the most part, sellers will agree to pay the buyers broker. It seems to complicate things, and I’m wondering what benefit we’ll see. Whether I’m the buyer or the seller, who cares who pays? If as a buyer I have a million to spend, either I pay a million and the seller pays out $50,000, or I offer $975K and pay my broker $25K snd the seller pays their broker $25K. Either way, Buyer pays $1MM and the seller gets $950K so what’s the difference? Now if the buyer can negotioate with their broker, great. I see discussion of brokers offering various tiers of service, perhaps some flat rate and others percentage.

While I woildn’t put it in the same language that Elmer did, my experience with buyers brokers is the ones who go online post about all the value they add to the trsnsaction are not the ones I come across IRL.

I live in an area where houses sell like hotcakes at very high prices, so when you facter in 2.5 percent more on the buyer’s part, its not chump change. Elmer, sellers here don’t have to do much ’figuring’ of commissions—they‘re in the catbird seat.

food and others, I think realtors are the last people who would have any clue today about how things will be in 6 months. They saw nothing wrong with what the "business as usual" practice was for so long, and many were shocked when clients started refusing to pay "the standard commission". Time will tell.

food, I get your so long as who pays what and what the effect is, but I don't think that's what happens or will happen. Have you never encountered a situation where someone flat-out refuses to pay something out of what they consider to be a "principle" or just because they're cheap, when the consequence of their stubbornness has a much greater ramification than what they're trying to avoid doing? I think people like that will have trouble selling homes, compromising in negotiations, dealing with needed repairs or fixes along with settling who pays what commission.

Sadly I don't think Elmer's assessment of some realtors is inaccurate. Everyone's experience is different of course. I've never understood why a percentage of the sale was their fee. In a hot market they do so little in not much time. It seems reasonable they should go to an hourly fee. Bet that would cut their take in half or more. To say their fee is negligible over time to a monthly payment is a great way to hide the truth. They are making insane amounts on little work!! If they all stick together the 'negotiable' will just not be reality. Goes to Elmer's assessment. That bit about the open houses and agents if true will KILL open houses. The arrogance in these people drives me insane.

" If the buyer's portion is rolled into their mortgage . . .'

It is my understanding that this cost would be considered a 'closing cost' and not able to be rolled into the mortgage as previously done. That is the biggest affect for first time buyers as I understand it.

Interesting thread.

Edited to add: actually all buyers, not just first-time. Although coming up with the downpayment and closing cost is a challenge for many without equity in the property they are selling.

"It is my understanding that this cost would be considered a 'closing cost' and not able to be rolled into the mortgage as previously done."

Some lenders allow closing costs to be rolled into the mortgage loan. Mine were on all of my mortgages.

There was a great article in wall street journal explaning the changes and potential outcomes.

https://www.wsj.com/real-estate/real-estate-commission-changes-homebuying-cf5d2448

That article is only available to subscribers, unfortunately...

'Some lenders allow closing costs to be rolled into the mortgage loan. Mine were on all of my mortgages.'

Thank you, I did not realize that.

Where I live, the commission amount has always been negotiable. But if the seller was paying 5% instead of 6% (or less, which also happens), an agent who's representing a good buyer may be more apt to show the buyer properties where the commission is 6%, so they'll get 3% instead of 2.5%.

Any time there's a commission involved, there is always a risk of the salesperson trying to make the sale which brings in the most money. Back in the days when everyone had to use a travel agent just to purchase plane tickets, I always wondered if they were really searching for the best deal. Why would they put in the same effort to make less money?

I think the new system may make some buyers decide that they don't need an agent at all. Generally, these are not the kind of people who are best equipped to fend for themselves. Whatever you think of real estate agents, they have more expertise than the average person when it comes to neighborhoods, the homes themselves, even knowing the other agents and how to negotiate with them.

"But if the seller was paying 5% instead of 6% (or less, which also happens), an agent who's representing a good buyer may be more apt to show the buyer properties where the commission is 6%, so they'll get 3% instead of 2.5%."

One of the changes is that commission rate can no longer be shown on the MLS, presumably to address the very problem you describe.

You can edit someone else’s post???

That can’t be correct.

No, they come back and edit their own post, adding spam. Slimey.

Dedtired has it. I see that din's post is gone, so I'll delete my post calling it out.