The National Association of Realtors recently settled a class action lawsuit regarding how commissions are advertised. What does this mean for sellers? Very little. The manner in which buyer’s agent commissions are disclosed is changing. Not much else.
Sellers may be rejoicing thinking that they no longer need to pay buyers agents. Guess what? They never did. It was always possible to offer zero commission to buyer’s agents. However, guess how much interest you’d receive if you offered zero commission to buyer’s agents? Very little.
The Spokane MLS, for example, no longer includes a field in the MLS listing form for entering a commission to a cooperating buyer’s agent. So where can a seller disclose how much commission they are offering? Pretty much anywhere else. Many emailed flyers are now disclosing commissions for buyer’s agents. Sellers agents can also disclose commissions on their own websites.
One thing that changes is that commissions will now be agreed on a separate form that is not part of the MLS listing form.
How much commission should a seller offer? This is another area where things change a bit. Buyer’s agents now must sign buyer agent representation agreements with buyers before touring houses. In those forms, they will agree on a commission with buyers. They will obviously try to get paid by seller’s agents but can agree that if the sellers don’t pay the full agreed amount, the buyer will make up the difference. If the seller offers more than what is in the buyer broker agreement, the buyer’s broker can only charge the amount that they have agreed to charge. So it may not make sense to offer a fixed amount. Instead, sellers can, and probably should, state that buyer broker commissions can be negotiated in an Offer. Buyer brokers will usually specify a commission in offers that correspond to the amount specified in their buyer broker agreements with their buyers. As different buyer brokers will have different commissions, it might be better to not specify a buyer broker commission.
It is possible that buyers will want to go unrepresented. Many don’t see the value of a buyer’s broker. For this reason, it may be advisable to hire a seller’s agent who agrees to hold one or more open houses. It is possible for a seller’s agent to show a house to a buyer who is unrepresented while representing the seller and the seller’s best interests. Unrepresented buyers may not understand how to calculate number of days before an inspection period ends, how to negotiate for repairs during the inspection period, or how to property fill the complex offer forms and contingency forms. Sellers may be able to accept a lower offer from an unrepresented buyer if a buyer’s broker commission does not need to be paid. Sellers may prefer to deal with unrepresented buyers as they are more likely to make mistakes and to forfeit their earnest money if, for example, they don’t complete their inspection in the allocated time frame. In the past, open houses were mostly a way for seller’s agents to find potential new buyer clients. More serious buyers were usually already working with an agent and had specified to their agent what locations, prices, and features were of interest. Now, there is a potential value to sellers in having open houses. There are also some risks, of course. Unrepresented buyers wandering through open houses have not been vetted to see if they have qualified for a loan. There is also some risk of theft. Sellers should remove or lock away all valuables when putting a house up for sale.
In summary, the main differences to sellers is that they can specify an “unspecified” buyer broker commission and negotiate the commission during the offer stage. Sellers may also benefit from having open houses. Commissions will be agreed in a separate agreement than the listing agreement.