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Fact: Real estate brokers’ commission rates are not regulated in any state and are ALWAYS 100% negotiable.

Surprisingly, many people think that real estate brokerage commission rates are “set” in their area and they have to pay a specific percentage of the sales price to the agent in order to get their services. This is absolutely not the case.  In fact, you can pay whatever you and the agent have agreed upon.

Why was this rule change put into effect?

In an attempt to get ahead of looming outside forces, broker-owned multiple listing service Northwest MLS is changing its rules to allow the public display of buyer broker commissions, starting October 1.

“Making this information readily available to consumers will allow for complete transparency with regard to buyers’ broker’s compensation and provide consumers with additional information at the outset of the transaction.”

Who pays the Buyer's Agent commission?

This really gets to the heart of why the change was made and the surrounding confusion on real estate commissions.

Where a lot of confusion came in was the fee paid to the Buyer’s agent. That money was traditionally always offered as a promised split of the overall commission to the Buyer’s agent. So technically the Seller was paying for the Buyer’s agent, and that Buyer’s agent then proceeded to represent the buyer and negotiate “AGAINST” the Seller for a lower price, or on inspection items, ETC… So, the Seller was paying for someone to literally work on the other side of a transaction and often against them.

See a detailed breakdown of how this works HERE

So now it becomes clear that the Buyer’s Agent commission is part of the negotiated purchase price and it’s clear who is paying them, who they represent and what % amount of purchase price that represents. It’s all about better transparency in the process. Agents will still be properly compensated, just everyone will be clearer on who represents who and it conforms with the law that states “ALL” Real Estate Commissions are negotiable.

And honestly many Buyers and Sellers didn’t understand how that worked.

Now the Selling Office Commission offered or (SOC) will be publicly displayed and can be negotiated. What will most likely happen is Buyer’s agents will have what’s called a Buyer’s Agency Agreement with their clients. This agreement will guarantee them a certain commission.

Are commissions negotiable?

YES!

Fact: Real estate brokers’ commission rates are not regulated in any state and are ALWAYS 100% negotiable.

Surprisingly, many people think that real estate brokerage commission rates are “set” in their area and they must pay a specific percentage of the sales price to the agent in order to get their services. This is absolutely not the case.  In fact, you can pay whatever you and the agent have agreed upon.
What is a “Fair” amount to pay for real estate commission?

“Fair” is whatever you and the agent decide is fair, and just as you are not under any obligation to pay more than you want, the agent is not under any obligation to do business with you if they are not going to earn what they expect. What will most likely happen is Buyer’s agents will have what’s called a Buyer’s Agency Agreement with their clients. This agreement will guarantee them a certain commission.

Do I have to offer a Buyer's Agent commission?

NO..

In the past to have your home listed on the local MLS you were required to offer compensation. With the new rules that is no longer the case. Even homes offering zero (0) commission will be found on all brokerage websites…. HOWEVER…. (See next question)

Additionally, there are many other options now available than just offering no commission, or a flat commission across the board no matter what your home sells for. Contact us and we’ll explain the many options now open to you including offering a “Negotiable” commission and a commission structure based on the final sales price of your home (Meaning if your selling price drops, then you pay a lower commission).

What happens if I don't offer a SOC (Selling Office Commission)?

As part of the changes, NWMLS will revise its listing agreement form to remind sellers that Washington law says that buyers’ brokers and agents are not required to show property for which there is no written agreement to pay compensation to the buyer’s broker. Asked why this was being added, NWMLS said, “When listing their home for sale, sellers in Washington state need to be aware of the legal consequences of not offering a SOC.”

Can I "Test" the waters with no SOC and then change my mind a few weeks later?

Absolutely! You can try no, or a low SOC to start out, and then if after a few weeks you decide to offer more commission that can be changed with a simple form and signature!

What happens when a Buyer's Agent has a Buyer's Agency Agreement?

The Buyer’s agent “May” ask for a higher commission only if they have a buyer’s agency agreement signed in advance AND submitted with the offer that guaranteed them a higher commission. “This revision allows greater flexibility for sellers when listing a property, while affording buyers and buyer’s brokers a vehicle for negotiating the compensation for the buyer’s broker’s services (if no SOC is offered),” NWMLS said.

Buyer May Request Seller to Pay Buyer's Commission Obligation. Only if the buyer so requests as a condition of a written buyer representation agreement, the selling office may negotiate on behalf of the buyer to obtain the seller's agreement to pay the buyer's commission obligation to the selling office, to the extent that obligation exceeds the published selling office commission. The selling office shall provide a copy of the buyer representation agreement to the listing office prior to or at the time of negotiating.

The Seller still has no obligation to agree to pay the higher commission, and as the buyer’s agent works solely for the buyers benefit it may fall to the buyer themselves to make up the difference in the offered commission and the commission amount guaranteed in the buyer’s agency agreement.

Many Buyer's Agents offer "Rebates" to their clients. How does this rule change affect that?

Letting brokerage websites publish the commission that a homeowner is offering the buyer’s agent will show everyone all the incentives at work in a home sale and make it easy for agents to explain the costs of our services.

And being explicit that a listing can offer buyers’ agents any commission or now even no commission will assure consumers and agents alike that Seattle’s real estate market is wide open for competition. Therefore, the public will be able to see in advance what percentage of commission is being paid on any home.

 

NWMLS: The recent class-action lawsuits certainly called attention to this issue and afforded NWMLS member brokers the opportunity to review NWMLS rules and improve them to allow brokers to continue to innovate and provide better service to buyers and sellers alike.
 
As part of the changes, NWMLS will revise its listing agreement form to remind sellers that Washington law says that buyers’ brokers and agents are not required to show property for which there is no written agreement to pay compensation to the buyer’s broker. Asked why this was being added, NWMLS said, “When listing their home for sale, sellers in Washington state need to be aware of the legal consequences of not offering a SOC.”
 

Read More: Conversations On Real Estate Commissions
  

Other MLSs could follow NWMLS’s lead. Real estate commissions have been under increasing scrutiny in the past year. First, they attracted an unexpected amount of attention at a real estate competition workshop held in June 2018 by the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ).

Then earlier this year multiple class-action lawsuits accused NAR and several real estate franchisors of antitrust over the sharing of real estate commissions between listing brokers and buyer brokers.

What is a “Fair” amount to pay for real estate commission?

“Fair” is whatever you and the agent decide is fair, and just as you are not under any obligation to pay more than you want to, the agent is not under any obligation to do business with you if they are not going to earn what they expect.

If you have any questions about commissions, please fill out the form below.

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