New Changes Affecting All Home Sellers
Background
I want to share some very important news with you. This news is important if you are thinking about selling a home or investment property.
You may have seen the news headlines about a recent class action lawsuit settlement involving the National Association of Realtors, and several large real estate brokerage franchises. Let me point out upfront, that neither I or my company, Robert Slack Real Estate, were defendants in the lawsuit.
If you have seen or heard new stories about this lawsuit and the resulting settlement, then you likely have questions about how this could affect you. Especially because many of the headlines were sensationalistic, exaggerated, and often flat out inaccurate.
Since this story has been all over the news, I won’t recap what the lawsuit and settlement entails here. If you would like to know more, simply Google: NAR Settlement, or refer to the National Association of Realtors (NAR) article: “Home Sellers: Here's What the NAR Settlement Means for You”
Keep in mind, for many years prior to this lawsuit settlement and the resulting rules changes, generally, all home sellers agreed to pay a commission to the listing broker, who then agreed to share part of that commission with the buyer’s broker.
Providing a commission to a buyer’s broker provided a strong incentive for that broker and agent to have their buyer make an offer on your home! But do you still have to do that? The short answer is no.
If you choose to sell your home without offering compensation to buyers’ brokers, you should expect that buyers’ brokers will try to negotiate a concession from you with an offer to buy your home. Since that concession is negotiated with the offer, you may save money over what it would have cost you before.
Example:
· Prior to these changes, Bob wanted to sell his home for $500,000. He agreed to pay his listing agent 3% and offer the buyer’s agent 3% of the sale price for a total commission of 6% or $30,000.
· In this new approach, Mary wants to sell her home for $500,000 and she agreed to pay her listing agent 3% but not offer any commission to the buyer’s agent. A buyer offers Mary $500,000 for her home and includes a request for a $15,000 concession from Mary to compensate the buyer’s agent. After negotiations, Mary agrees to the $500,000 offer price with a $12,500 concession from Mary to compensate the buyer’s agent. So the total of the ‘compensation’ Mary is paying to brokers to sell her home is $27,500. She saved $2,500!
Since these changes are still very new, I expect many sellers will offer a commission to buyers’ brokers because they will fear that if they don’t, the brokers won’t show their clients their homes. Whether you as a home seller agree to offer a buyer’s broker commission upfront, or are open to offer a concession to cover the buyer’s broker commission, the broker is motivated to help you sell your home.
If you decide you don’t want to offer any compensation to buyer’s brokers either upfront, or during negotiations, that would mean the buyer will have to pay compensation to their broker out of their own pocket! So they will perceive that, unless you are selling your home for less than what they think it’s worth, they’ll view your home as costing them more to buy. And if they are cash strapped, paying their broker out of their pocket won’t be an option.
As a home seller, buyer’s brokers are a valuable resource for you! In Palm Beach County alone, there are over 20,000 active licensed Realtors…don’t you want them to be incentivized to have their clients buy your home?
And effective now, all homebuyers must sign an agreement BEFORE any Realtor can work with them or show them a home(s). These agreements outline the duties of the buyer and the Realtor and clarifies how the buyer’s Realtor gets compensated. They also clearly state that real estate commissions ARE negotiable. That doesn’t mean that everyone involved…buyers, sellers, and Brokerages are required to accept the result of negotiations.
I will be happy to discuss these compensation changes and the best approach to sell your home and maximize your net proceeds from the sale!