Experts provide guidance following a legal resolution that is restructuring the payment structure for real estate agents.
Homebuyers are now encountering unfamiliar territory following a Realtor settlement that alters the traditional method of paying agent commissions. This change brings both challenges, such as additional financial burdens alongside high financing costs and increased home prices, and opportunities, including enhanced price transparency and negotiation power as the new standard is implemented.
Recently, the National Association of Realtors reached a settlement, pending approval from a federal judge, that would eliminate the customary 6% commission paid by sellers and transfer some of that responsibility to buyers.
We interviewed industry professionals to discuss the implications for homebuyers. Here are their recommendations for navigating this transition successfully and achieving favorable outcomes.
First of the Strategies for Homebuyers: Look for Real Estate Agents who are Amenable to Your Needs
Compare shops and hire an agent who delivers true value.
It’s crucial to thoroughly assess your personal requirements, financial situation, and familiarity with the home buying process. For first-time buyers, having a hands-on agent who can guide them through every step may be essential, whereas experienced buyers who have navigated multiple transactions may not require such comprehensive assistance.
According to Lei Wedge, an associate professor specializing in investments and real estate at the University of South Florida, “If you’re a first-time homebuyer and lack knowledge about the process or the unique features of different neighborhoods, seeking assistance is advisable.”
When selecting an agent, look for someone who offers services tailored to your needs, such as a local expert if you’re relocating, a financial expert if your budget is limited, or a skilled negotiator if you’re seeking a favorable deal — or perhaps a combination of these traits.
“Conduct thorough research and interviews with potential agents,” advised Stephen Brobeck, a senior fellow at the Consumer Federation of America.
While this has always been a recommended approach, the difference now lies in determining the method and amount of payment, as sellers are no longer automatically covering these costs.
Agents may adopt various fee structures, such as negotiating compensation through sellers’ concessions or including their fee in your mortgage payment — arrangements that buyers must agree upon before committing to an agent.
“Don’t sign any contracts until you’re fully satisfied,” Brobeck emphasized. “If you’re not content after discussions and conducting your own research, consider consulting another agent.”
Second Tip for Homebuyers: Utilize Limited Services or 'A la Carte' Options
Instead of hiring a full-service agent who manages every step of the purchase process, find someone who offers reduced service by stepping in after you have found your home. That means you would take on the early work — such as researching neighborhoods and scheduling home-viewing appointments — and leave the technical aspects to hired professionals to close the deal.
“That would provide more flexibility and potentially a lot lower costs,” Steven Nicastro, Realtor and project team lead at Clever Real Estate, a discounted online brokerage, told Yahoo Finance.
If partial service agents are still too costly, opt for ‘a la carte’ assistance — an option that experts said will become more popular. This means picking from a menu of services like home valuation, preliminary inspection, or contract drafting.
“You can go to the internet, find your home, call the listing agent, see the homes yourself,” Wedge said, “and when you need to make an offer, hire an agent charging $500 to write a contract for you.”
If you don’t know how to negotiate a home purchase — and most people probably don’t — ‘a la carte’ provides the option to hire an agent to do just that. They would take charge of getting you benefits like closing cost concessions, earlier moving dates, and repair credits.
“[Negotiation] is like science,” Nicastro said. “If you are a buyer’s agent and have done lots of deals, you know how to negotiate. You know how willing the sellers are to negotiate based on discussion with the listing agent and how long the house has been on the market.”
You could also purchase access to the Multiple Listing Service (MLS), the Realtor association’s private database tracking for-sale homes that is created and maintained by professionals. This platform contains exclusive and first-hand information not available on mainstream listing sites such as Zillow. Before making an offer, you can compile a competitive market analysis on the MLS, giving you a leg up during the buying process.
Third Tip for Prospective Homebuyers: Negotiate for Reduced Real Estate Agent Fees
The primary advantage for buyers following the settlement was their enhanced bargaining power. They could now negotiate for reduced commissions or lesser fees commensurate with the services provided. This negotiation could be based on the amount of time the agent devoted to assisting them in purchasing a property.
For instance, Wedge highlighted that some buyers may spend only a weekend searching and quickly find a home they like, subsequently making an offer. In such instances, buyers were encouraged to seek lower fees since the agents expended minimal effort, which wouldn’t justify a 3% commission.
Moreover, buyers could propose a lower commission rate even for higher-priced homes, ensuring a satisfactory payout for both parties. Wedge suggested that for a $2 million home, agents might accept a 1% commission, still amounting to a significant $20,000.
Additionally, buyers were advised to consider their preparedness, both mentally and financially, when determining the appropriate compensation for their agent. Nicastro pointed out the contrasting scenarios of a buyer who extensively explores various properties without clarity versus one who is well-prepared and focused on a specific type of house.
In more typical situations, Clever’s CEO anticipated that most agreements would settle at a commission rate ranging from 1.5% to 2% for buyers’ agents.
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