Real Estate Commission Changes: What You Need to Know
There are important changes happening in the real estate industry this month. The National Association of Realtors and multiple listing service (MLS) have implemented new rules about how real estate agents communicate about real estate fees. The changes provide greater transparency and competition around fees—goals that Redfin has always supported.
We know this can be confusing, but Redfin agents are prepared to answer any questions you have and expertly guide you through your buying and selling journey.
So, what is changing exactly?
It has been customary in most transactions for the home seller to pay a commission to both their agent (the listing agent) and the agent who represents the buyer (the buyer’s agent). While it has always been the seller’s choice to decide whether and how much compensation to offer the buyer’s agent, the process around it has changed in two main ways:
Disclosure of buyer’s agent fees: A buyer will now need to agree to their agent’s fees before touring homes. This sets the maximum amount that your buyer agent will be paid when you purchase a home.
Advertising of buyer’s agent fee: Offers of buyer agent compensation are being removed from many MLSs, the databases agents use to share and market listings. A seller can still pay the buyer’s agent, but they cannot advertise any offers of compensation in the MLS unless expressly allowed by local rules. As a result, buyer’s agent fees will increasingly be negotiated as part of the offer.
What does this mean for sellers?
Sellers will still have conversations with their listing agents about any compensation they would like to offer to the buyer’s agent. We expect that in many cases, buyers will continue to ask sellers to help cover the buyer’s agent fee as part of their offer. Sellers will evaluate offers and negotiate, like they would with any other terms.
What does this mean for buyers?
As a buyer, you will have an upfront conversation to learn what your agent will charge. Your agent will ask you to sign an agreement about their fee before touring homes. You can still ask the seller to cover your agent’s fee as part of your offer. Depending on how you structure your offer, the seller could agree to compensate your agent directly or could offer closing concessions that you could allocate to pay your agent at closing.
As a buyer, why do I need to sign an agreement so early in the process? I just want to tour a home and I’m not ready to commit to paying an agent.
The new industry-wide rules require a written agreement that explains the agent’s fees before touring. Unless otherwise specified by state law, a buyer doesn’t need to sign an exclusive, binding agency agreement to tour a home. Different brokerages have different approaches and policies. Redfin’s approach is transparent and gives buyers flexibility.
Is Redfin requiring a buyer agency agreement to tour?
Unless your state has other requirements, Redfin is adding a simple fee agreement for the buyer to sign when you request a tour with a Redfin agent that discloses the fee we would expect to collect at closing. Many sellers will cover this fee for you at closing.
This fee agreement does not lock you in to working with a Redfin agent. Once you’ve had a chance to meet your agent in person, your agent will ask you to commit to working with Redfin. Buyers who commit to working with Redfin before the second tour will get a discount of 0.25% off our fee.
What are Redfin’s fees for buyer services?
Redfin’s buyer fees vary by market. We’ve set our pricing to give our buyers a competitive edge, offering a discount of 0.25% off our fee if you commit to Redfin before the second tour. By reducing our fee by 0.25%, we can make your offer more attractive to a seller. Just like the offer price and contingencies, a seller will compare how much in buyer agent fees each offer is requesting and factor that into their decision.
What if the seller doesn’t agree to pay my agent? Am I responsible for paying my agent out of pocket?
Many buyers are using all of their financial resources for their downpayment and don’t have extra cash to pay agent fees. So far, most sellers understand this and are often willing to cover the buyer’s agent fee from the proceeds of their sale. If the seller doesn’t agree to pay your agent or only agrees to pay a portion of the buyer’s agent fee, you can amend your offer, agree to pay your agent directly at closing, or walk away. In any case, before signing a contract to purchase a home, you’ll be aware of the associated costs so that you can make an informed decision.
It’s important to have a good relationship with your mortgage lender, who can help you structure your offer in a way that fits your financial situation. Redfin’s mortgage partner, Bay Equity, has loan officers at the ready to guide you through this process.*
When I sell my home, do I have to pay a buyer agent commission? Should I offer one?
A seller has always had the ability to decide how much, if any, compensation to pay the buyer’s agent. As a seller, you have options:
You can leave it open-ended and ask buyers to make their best offers, which may include buyer agent compensation, and then negotiate from there.
Or, you can proactively offer a commission or a concession that the buyer could use to pay their agent as part of your home’s marketing strategy. This can still be communicated to buyers and agents when a buyer’s agent contacts the listing agent to schedule a showing. Whether or not to offer a commission, and how much, can be dependent on various factors your Redfin agent can help you with.
How do I know what is a fair price for a buyer’s agent?
Buying a home is a huge commitment; you should focus on finding the best agent at the best rate. Redfin agents have significant experience and we publish their sales and customer reviews online so you can see for yourself. The average Redfin agent sold more than three times the number of homes as the typical agent at other major brokerages. And we’ve set our prices to be as competitive as possible. Connect with an agent to learn more.
*Bay Equity Home Loans is affiliated with Redfin. You don’t have to work with a Redfin Agent to use Bay Equity’s services. For additional information, please read our Affiliated Business Disclosure.
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