You probably have heard, and have questions, about the recent National Realtor Association settlement
that basically says that starting August 17 th , the sellers are no longer responsible for the buyer agent’s
commission in a real estate transaction. Let’s consider the implications:
Sellers
Whether seller is paying the buyer agent commission or not, seller still expect to sell his home to the
buyer who offer the highest price. Therefore, this new change will not have any effect on real estate
prices. The old rule of supply and demand still applies.
However, it would be prudent for seller to still consider paying the buyer agent commission. The math
works like this for say, a $1M home: If a buyer pays his agent 2% commission, that is $20,000 cash
needed from the buyer at closing. But if the seller pays the buyer agent, the buyer will be able to apply
this cash towards his down payment of 20% of the purchase price, that will enable the buyer an extra
purchase power of $100,000. This will allow the buyer to possibly offer a higher price to the seller.
Instead of the buyer qualifying to buy a $1M home per his lender, he can now offer close to $1.1M.
Buyers
If the seller is unwilling to pay the buyer agent commission, the buyer should still consider paying his
own agent the commission. It is prudent for the buyer to have his own agent representation since the
seller agent is only obligated to represent the seller’s interest. Your agent still has to make a living after
all!
Buying a home is one of the largest and most significant financial commitments you will make. Having a
professional advise you can help avoid many potential pitfalls and legal liabilities. Your agent negotiates
the best price with proprietary real estate statistics and to make sense of the numbers, guides you
through the complicated process and legal documents, manages timelines so you will not fall out of
contract and lose your deposit or even the home, ensures compliance with relevant real estate laws and
disclosure so you won’t get into a lawsuit, arranges inspections and interpret reports.
Pay your experienced agent his fair commission because not all agents are equal. Those part-time
agents deserve part-time commissions and those less capable agents don’t deserve any commissions.