Homes sellers and buyers will split commissions - or will they?
A For Sale sign appears outside of a home.(Artur Widak/NurPhoto via Getty Images)
Oakland, California - It used to be, the buyer's and sellers’ agents’ commissions came out of the sale price of the home. Now, they might well have to split that cost.
The National Association of Realtors agreed that the Multiple Listing Service, the database that real estate agents use to connect buyers and sellers, cannot mention how much the buyers' agent will get in commission. Now, before an agent can show buyers homes for sale, they need a written agreement on what the buyers must pay to their own agents.
Fif Ghobadian says this will be complex.
"In some cases, the seller is willing to pay that compensation, in some cases the buyer has to cover that. But it's a conversation we now have to have with our buyers," said the Origin Point Mortgage Broker.
Consider a house that lists for about $1.5 million. That means that it would have a $75,000 sales commission on it. Half of that, $37,500, would have put a brand new 2025 Hyundai Palisades 3 row SUV in the driveway.
If the buyer or seller cannot agree on who pays what, that could kill the deal. The Bay Area Home Ownership Alliance says this could be challenging for new homeowners.
First-time home buyers, especially from low-income to moderate-income households, are already strapped for cash. This new addition could cause more financial barriers for those families Walter Zhovreoff of theBay Area Affordable Home Ownership Alliance told KTVU.
In order to get deals, some agents will compete by cut their commissions. Dubious super discounters might rush in.
"I don't think that the work of the agent will be replaced with aa $9,000 flat fee device, and I don't think the buyer will find the home that he wants," said Ms. Ghabodian.
"I think it diminishes the pool of prospective buying agents," said Mr. Zhoveroff. "It's not only a function of price but a function of representation in terms of negotiating."
Since lenders cannot put the buyer's commission into the mortgage, buyers may have to reduce their down payment. Or, perhaps a family member will gift or loan the money to them. Or, they can ask the bank to raise interest rate, and get a credit to pay the commission. Or, if they can offer the seller a higher price, making that the down payment.
In any event, it's complicated, and the consequences are unknown.