Sellers to Save 50% on Brokerage Fees?
Starting August 17th, the real estate landscape is set to undergo a significant shift, thanks to a new agreement between the Department of Justice and the National Association of Realtors (NAR). The big change? Sellers will no longer be required to pay the buyer’s agent commissions. Instead, buyers will now be responsible for paying their own agent directly. While this might seem like a major win for sellers, the reality is a bit more complex.
Understanding the Changes
Historically, sellers have covered the cost of the buyer’s agent commission, a practice that has been the norm for decades. However, this new rule brings transparency to the process, making it clear that buyers have always indirectly paid for their agent’s services through the home purchase price. Now, buyers will see this cost upfront.
One of the key aspects of these new rules is the emphasis on negotiable agent fees. While this might sound new, the truth is that agent fees have always been negotiable. Some firms and agents have set fees, others are open to negotiation, and discount brokerages will continue to offer lower fee structures. The difference now is that this negotiation will be more visible and more commonly discussed between buyers and sellers.
The Impact on Sellers
Although sellers are no longer required to pay the buyer’s agent commission, this doesn’t mean the cost will simply disappear. In many cases, buyers may still expect a SOC (Seller’s Offer of Compensation) to help cover their agent’s fee. This expectation is rooted in tradition and practicality:
- Longstanding Tradition: For over 50 years, it has been customary for sellers to cover the buyer’s agent fee. Changing this practice overnight is unlikely, especially as it has been factored into home pricing for decades.
- Comparable Sales: When buyers evaluate home prices based on comparable sales, they’re often looking at prices that included the seller covering the buyer’s agent fee. This historical context will continue to influence buyer expectations and offer strategies.
- Liquidity Challenges: Many buyers prefer to have their agent’s fee financed into their mortgage, as it allows them to preserve their cash for upgrades, savings, or other expenses. If a SOC isn’t offered, buyers might lower their offers to compensate for the additional out-of-pocket cost.
Strategic Recommendations for Sellers
Given these considerations, it’s advisable for sellers to continue offering a SOC. Here’s why:
- Meeting Buyer Expectations: Most buyers will either expect a SOC or will adjust their offers downward if it’s not provided. By offering a SOC, sellers can avoid potential lowball offers and ensure that their home remains competitive in the market.
- Overcoming Liquidity Concerns: By offering a SOC, sellers make their property more attractive to buyers who may be concerned about upfront costs. This can broaden the pool of potential buyers and increase the likelihood of a sale.
- Enhancing Market Appeal: A transparent and straightforward approach, like offering a SOC, can make a property more appealing by eliminating additional negotiation points. It’s akin to having an “OPEN” sign on your property—buyers know you’re serious about selling and are willing to make the process as smooth as possible.
Offering a SOC may also increase the chances of receiving multiple offers, as it signals that the seller is ready to do business and accommodate buyer needs. In some cases, this could even result in higher offers, particularly from buyers who appreciate the flexibility and financial relief that a SOC provides.
Conclusion
While the new rules may seem like a win for sellers on the surface, the reality of the market means that offering a SOC is still a smart strategy. It keeps your home attractive to buyers, reduces potential roadblocks, and ultimately helps you achieve the best possible outcome in your real estate transaction.
As these changes take effect, it’s important to stay informed and consider how they impact your selling strategy. Whether you’re buying or selling, understanding the implications of these new rules will help you navigate the market with confidence.
CLICK HERE to learn more about the specific rules for both Sellers and Buyers.