Death of the 6% commission
Apparently, the National Association of Realtors has agreed to eliminate rules on commissions.
“The NAR, which represents more than 1 million Realtors, also agreed to put in place a set of new rules. One prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers.”
Some predictions are that commissions will fall by 25-50%, which for a median priced home could save up to $6000. At the very least, this could force more competition among realtors.
We sold a house and bought a house in the summer of 2022. It was our second home purchase and first home sale, so I don’t have a personal context to place this in. Our first purchase was direct from the seller, who we knew, and we just hired an attorney to draw up a contract. We interviewed two agents to sell that house, and the one we hired did a good job and got a fair price. Our agents for the second purchase knew of a house in the neighborhood we wanted that was vacant but wasn’t listed, so in a red-hot market, we didn’t have to bid for it—in fact, we got it for $20K below the asking price. Of course, we wouldn’t have found it by searching the MLS ourselves.
End of the fixed realtor commission
“The NAR, which represents more than 1 million Realtors, also agreed to put in place a set of new rules. One prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers.”
Some predictions are that commissions will fall by 25-50%, which for a median priced home could save up to $6000. At the very least, this could force more competition among realtors.
We sold a house and bought a house in the summer of 2022. It was our second home purchase and first home sale, so I don’t have a personal context to place this in. Our first purchase was direct from the seller, who we knew, and we just hired an attorney to draw up a contract. We interviewed two agents to sell that house, and the one we hired did a good job and got a fair price. Our agents for the second purchase knew of a house in the neighborhood we wanted that was vacant but wasn’t listed, so in a red-hot market, we didn’t have to bid for it—in fact, we got it for $20K below the asking price. Of course, we wouldn’t have found it by searching the MLS ourselves.
End of the fixed realtor commission
A Story of Three Wise Realtors
The first was genuine and well meaning, the second was into the “show me the money,” and the third wanted to sell our home quickly. Time is money.
We lived in 2600 square feet of home with 4 bedrooms, three bathrooms, and on 2/3rds of an acre of land. Great house when the three kids were home and it was updated along the way of 27 years. It outgrew us even though at 70 I could still maintain it. We were ready to experience something new.
Our first realtor was in the neighborhood. Real nice guy, who we liked. For some reason, all of his advertising and contacts did not take. Bids were too low when we got one. Not sure why as we lived in the fastest growing and richest county in Michigan.
The second realtor we were forced upon by his boss. That went nowhere and he resented having us as a client. Never once did he show the place. The feedback was mediocre and limited. We could not tell what the issues were. We decided to take some actions we had never done before.
In order to find out why people were rejecting our home, we bugged our home.
Two hidden laptops on the main floor and two hidden iPhones on the second floor. The realtors were not really doing the job they were hired to do. One sat at our kitchen table and told her clients to go look around while she conducted business. Kids rifling through drawers. None so serious as to want to buy a house. And the realtors? Not really representing us. The internal chain of info between them was alive and kicking.
One inspection revealed an issue with the sceptic system which needed to be fixed and was solvable over time. Off the market, limit input to it, aerate the field, pump the 1500-gallon tank a second time that year, and it resolved itself. We had a good sceptic guy (Jarod) who was not into building new fields unless necessary. Bacteria and oxygen worked well and the thirty-year-old sceptic system passed inspection.
The third realtor was into selling our home. Two weeks later we had a plethora of offers. We took the safest one and not the highest. We got what we wanted only because the realtor understood the house and our needs. We also had a home inspection in hand sans the sceptic system. A battle of the documents if necessary. The other plus, we did not need to move.
When you sell aa home, you really have little control. You either accept or say no. If you say no, chances are you will not see many realtors afterwards. Selling a home is all about getting a commission. As the seller, you really do not have the power.
@Bill H,
“As the seller, you really do not have the power.”
Agreed. The only real “power” we had was to do some research on the front end and interview two agents. In the event, we got a gal who was all business and sold a problematic house (built in 1928, only 1.5 baths) within a month of listing for the asking price, less the cost of removing live knob and tube wiring.
Could we have gotten more by waiting? Maybe, but the house doesn’t sit in the deep freeze during those months. Houses only deteriorate. I feel like she earned her commission. Time is money.
Joel:
If you are in a hurry, you are at their mercy. I try to prepare by gathering all the information I need to make an informed decision as I know they will lie to me to get a commission. I never reveal what information I have in hand. Avoid the, “well you know you said this earlier comment.” Hey, “you picked the price and now you tell me, it is too high? What were you thinking?”
I am not a business that has a wide swath of give to line their pocket.
Neither do I pay the “what if” you had to sell game.
We have always gone real estate agent shopping before real estate shopping. You want the agent who seems most likely to get you what you want. Sometimes real estate is about sympatico esthetics. Sometimes it’s about getting it done quickly. Sometimes it’s about getting as much or paying as little as possible. Sometimes it’s about local knowledge. Most agents have worked hard for their 6%.
We’ve had two really outstanding agents. One seemed to have connections everywhere. We bought land through him, partly because he produced a booklet with what to look for when you buy land including local agencies, well drillers, inspectors, utilities and so on. The other was the “seller” who sold our lake property. She hooked us up with her team of experts, so we got a great stager, a place to rent the stuff the stager insisted we needed, a photographer who used drones before they were commonplace and so on.
Three transactions, two buys and one sell. Each worth the commission for assessing the situation and providing great advice.
First agent’s key value was knowing and communicating if you’re really close to a deal, you shouldn’t let tiny things kill the deal.
Second agent understood how to figure out what the sellers wanted in a white hot market. House had 16 bids after 24 hrs, most over list price. Agent advised bid XX over list knowing same XX would come off due to inspection problems (not fixed up before sale). Also noted young couple with two young kids were stressing while selling one house, buying another, and taking care of kids. Suggested I write a letter to explain why I wanted THEIR house and how selecting me was best for them. I was preapproved, could lease back to them if they needed more time, and had reasons I wanted THAT property. I got the house for 10% under top bid because of that letter. And I wanted THAT house.
Third agent had 40 yrs in a town of 15K people, used to live in the same neighborhood, good friends with my aunt, ridiculously great recommendations. Town was one of hardest hit by Hurricane Harvey, even ended up on nat’l news. Going on market in early August, knew how to price given how market was moving. Had huge list of contacts, sent notices of new property hitting market, etc. Everything she did made a difference to get the offer we wanted before school started in fall and market trickled to a halt. And then the big thing hit at closing… you do NOT want to be without an expert if something goes wrong at closing. We had a title company glitch where a document was emailed to buyer for signature that didn’t need that, which he signed. Which forced an immediate 3-day delay in closing. Buyer asked for 3-day, $1 per day lease so he could move in anyway. Should we do it? $1/day? Risk of squatting? In the end, agent talked to his agent, got assurances nothing was wrong and buyer was as frustrated as we were. We together decided to sign the $1/day lease with $150/day rate starting day 4. My agent calls buyer’s agent, who says he’d sign anything to get that 3-day lease. OK, trust everyone and do it. And that’s when the next legal obstacle showed.
Buyer had FHA financing with an expiration day… on the originally planned day of closing. If the papers were signed by midnight Friday night, 3-day extension didn’t change anything. If not, buyer would have to reapply with renewed credit checks. Buyer’s agent says he had some hospital bills that he missed payment on since prior approval. Would that kill financing? My agent calls the FHA officer b/c she’s worked with her for 30+ yrs. FHA officer says the missed payments were actually considered, but approval would take 4+ weeks. Ugh. Push to get signatures and keys swapped by midnight (Friday night).
Agents end up meeting at my agent’s office at 11:30 PM Friday night to ensure deal goes through and keys are swapped.
So, you tell me. Did these agents earn their commission? I’d say so.