By: Sara Pakula, Broker Owner of Modern Realty LLC
8/7/24
(Disclaimer: This blog is opinion based. Nothing written below should be construed as legal advice.)
We are about one week away from mandatory industry-wide changes for real estate!
What changes should Sellers expect?
Sellers have a great deal of autonomy over the total commission they will pay at closing. One might say that prior to this point, everything was negotiable in real estate…except the offer of compensation. That is no longer the case.
1. Offers of compensation will still be allowed, but cannot be advertised via MLS. They are 100% negotiable between you and your listing agent and can be a percent of the purchase price or a set dollar amount.
2. Offer contracts now include optional provisions for buyer to ask you to pay their agent. Sample offer language includes:
SELLER PAYMENT OF COMPENSATION TO BUYER’S FIRM: Seller agrees to pay to Buyer’s Firm the amount of __________ (e.g., dollar amount, % of purchase price, etc.), toward Buyer’s brokerage fees at closing.
3. More Options. Sellers now have the option to offer compensation up front, offer concessions in lieu of an offer of compensation, negotiate with buyers via the offer contract, or any combination of these. Sellers also have the option to opt out of paying the buyer’s agent completely.
My recommendations to sellers:
· All commissions are negotiable. Individual agents are typically required by their managing broker to charge a certain amount, but you have the right to negotiate that amount or go elsewhere. If an agent does not seem to have a good understanding of the changes in place do to the DOJ settlement agreement, it may be in your best interest to interview a few more.
· Confirm how much commission each broker will receive if you decide to still offer compensation to the buyer’s broker, especially if you encounter agents who continue the practice of giving you a set % to sell your house with no further explanation.
· If we start to see buyers paying some or all of their agents’ fees, I predict median home prices may plateau or even go slightly down in the short term and buyers may be more forward in asking for repairs, home warranties, etc.
· Smaller, local real estate brokers will continue to have more flexibility in negotiating commissions due to less/no layers of management, franchise fees, etc.
What changes should Modern Realty’s seller clients expect?
1. Updated Listing Commissions – Modern Realty is a flat rate broker, which means you pay the same amount no matter what your home sells for. This will not change. Modern Realty reserves the right to update the listing commission rate at any time and will implement an increase beginning August 15, 2024.
2. All options are open to you with regards to paying or not paying the buyer’s broker. You may authorize Modern Realty to offer compensation to buyers’ brokers. You may offer concessions up front to assist the buyer. You may decide to not offer anything up front and instead will negotiate this with the buyer directly as part of an offer contract.
If you have questions or comments, please feel free to reach out to me at SPakula@modernrealtywi.com
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