You may have heard that real estate commissions are changing, but how can you benefit? Understanding how to negotiate real estate agent compensation could be a major advantage if you’re on the cusp of buying or selling a home—and enlisting professional expertise could score you more chances to save money.
We’re here to offer you a clear and simple guide on the changes and what your options are. With this knowledge, you’re on your way to finding a great real estate agent who can help you hunt down your perfect home, or sell your home at a great price, or both.
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How have real estate commission rules changed?
The main shift is this: Before the rule change, an offer of commission for the buyer’s agent was listed on MLS, the database real estate agents use to share properties. Since the rule change took effect on August 17, 2024, offers of commission are no longer listed on these websites (the final decision regarding this change comes in November 2024.)1
However, these seemingly minor changes open buyers and sellers up to greater possibilities when the time comes to pay their real estate agent. Historically, in most cases, agents collected a 6% commission, typically split between the seller’s agent and the buyer’s agent, all of which was paid by the seller. With this rule change, the percentage commission is up for negotiation, and some of the cost might fall on buyers.2
Apart from this change, it’s now required that a compensation disclosure be provided to sellers, as well as prospective sellers and buyers, and agents must enter into a written agreement with a buyer before giving a home tour.1
Why did the rules change?
It’s a long story, but to keep it bite-sized:
Ø Home sellers filed several class-action lawsuits against the National Association of Realtors® (NAR) alleging that the association imposed rules that inflated real estate commissions.1
Ø NAR settled in March 2024. They agreed to pay a $418 million settlement, as well as eliminate a rule stating that when a home is listed for sale on an MLS, an offer of commission must be made for the agent who brings in the buyer.2
Ø The court granted preliminary approval of the settlement in April 2024, and a final approval hearing is scheduled for November.2
What are the implications?
Buyers and sellers could benefit from this—they can ask for greater flexibility for specific services they want from their agent and negotiate new pay structures.
On the other hand, since sellers may elect not to cover the costs of the buyer’s agent, buyers could now be saddled with more expense than they’ve been historically.3
How do I negotiate pay with a real estate agent?
When negotiating real estate agent commission percentages for buying or selling your property, understanding your negotiating points can help you achieve favorable terms.
1. Research standard commission rates in your local area. This can help you identify room for negotiation.
2. Evaluate market conditions. Depending on whether you’re entering a buyer’s market (high inventory, low demand) or a seller’s market (low inventory, high demand), agents may be more or less open to negotiate their fees to secure your business.
3. Consider the services offered. Review the services the agent is offering and compare them with other agents. Some may offer full-service packages including staging, professional photography, and extensive marketing, while others may offer a la carte services.
4. If you’re selling, assess your property’s value and appeal. The higher the property’s value, the more likely an agent will be to want to negotiate fees. Additionally, if you’re property is easy to sell (e.g., in a desirable location or excellent condition), you may have more leverage.
If you’re buying a home, you’re already shouldering a lot of cost between closing expenses and the down payment. If adding agent fees is creating some financial strain, here are a few possibilities that could save you money:
1. Negotiate that the seller covers your agent fees during the closing process. Again, the amount of leverage you have in these negotiations will depend on market conditions.
2. Pare down the services you receive from your agent to cut costs. For instance, you can search for homes online on your own and then seek an agent’s advice on homes you’ve found.
3. If you are simultaneously selling your current home, you can search for new properties via your listing agent and negotiate a reduced commission for combined services.
You can also explore house hunting without a real estate agent, but keep in mind agents can still offer a lot of value, especially if you are a first-time home buyer. A great agent can provide a wealth of local market knowledge and could save you money on the price of a home during the negotiation process. With an agent on your side, they might also tell you if they believe a home you’re eyeing isn’t a good deal.
If you’re selling a home, the process is essentially the same as it was before the rule change, but keep in mind that sellers are not required to cover the costs of the buyer’s agent.
How can I find a great real estate agent?
Your home is a major investment, and a stellar agent can vastly improve the process by letting you in on key market insights and steering you in the right direction. Ultimately, an agent should take some of the stress off your shoulders during one of your biggest-ever financial and life milestones.
If you’re looking for a way to potentially save money while benefiting from the expertise of vetted real estate professionals, take advantage of Newrez Home Rewards, our purchase program rich with benefits for buyers and sellers alike.
Want to possibly save even more when you buy a home? Get your loan with Newrez and snag some excellent perks.
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References:
1 NAR Settlement FAQs (National Association of Realtors®)
2 Real Estate Industry Settlement Has Experts Mixed On Predictions For Home Buyers – Forbes Advisor
3 What the Big Realtors Settlement Means for Home Buyers and Sellers - NerdWallet
