Should A Seller Offer a Buyers Agent commission? What to consider.

Should A Seller Offer a Buyers Agent commission?  What to consider.

One of the biggest areas of contemplation for a homeowner selling without a realtor or even with an agent is should commission be offered to the buyers agent?  There are certainly arguments to be made for offering commission and not offering commission.  Some say that offering commission helps market the home.  If commission is being offered to a buyers agent, they will bring their buyer clients, thus giving more traffic.  On the other hand is offering commission really necessary?  If a buyer likes the home they can come without their realtor, make a deal and possibly pay less for the home since the commission paid to a realtor is not an expense.  The real answer to this question is unique to each situation.

There are some things that you should consider when making this decision.  In this post we are going to discuss all of the factors that a seller should consider.

NAR and MLS Settlements regarding buyers agency commission.

Essentially the Multiple Listing Service, also called the MLS, a service for only realtors to share their listings with each other,  required that a seller offer commission to a buyers agent.  That has been changed and there will no longer be a location where a buyers agent commission can be inputted. In fact the MLS is not even allowed to get involved in buyers agent commission anymore.  It is to be worked out between the seller and the buyer.  This means that in the listing on the MLS it will not say anywhere that commission is being offered, comments sections for just realtors to see, in the public comments, no where.  There are many implications of this rule.

The one that impacts a seller the most is that listing on an MLS no longer guarantees a listing is offering buyers agent commission.  Currently and until this rule is implemented every buyers agent searching the MLS could safely assume something was being offered and that amount was stated in the listing.  In fact almost all MLS services currently have removed the requirement to have a buyers agent commission.  Some have started removing that field altogether to get ahead of such changes.  The effect this will have is to be seen.  However it will certainly mean that more sellers will offer nothing forcing buyers to seek homes without using a realtor or bare the cost of the realtor.  Zillow currently has the commission offered to a buyers agent displayed in each listing. That is because Zillow is actually licensed in every state to be a realtor. They did this for many reasons. One of them being that as a member of the MLS they are entitled to the feeds that have all the homes for sale on that MLS and can display them on their website.  Now that the commission is going to be removed from the MLS this information will not longer be broadcast to Zillow.

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Further this changes means agents will have to call each listing to ask if the seller is willing to offer a buyers agent commission.  If your selling without a realtor this means you will get dozens of phone calls if not more asking if you are offering commission. You can avoid all these calls by signing up with where we help you sell your home without a realtor.  When agents log into your property page, the amount of commission you are offering if any is stated upfront.  This way you don’t have to take any phone calls just direct everyone to your property’s website.  This amount is not displayed to the buyers whom log into your property page thus you are not bidding against yourself.

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As of the writing of this, there are no mortgage rules that allow for a buyer to include the commission for their realtor in the loan amount.  Yes a sellers concession can be used. For those that don’t know what a sellers concession is, lets use an example of a home where they buyer and seller agree to a purchase price of $100,000.  Lets say the buyers agent wants $2500 in commission.  The seller and buyer can agree to increase the sales price to $102,500.  The seller will give a sellers concession to the buyer of $2,500 at closing.  This sellers concession can be used to pay the buyers agent and the seller nets out the $100,000 they want to sell the home for.  There are several issues with this.

There are limits to a sellers concession.  It cannot not exceed 6% of the purchase price.  Also the home has to appraise for the increased purchased price.  Also many buyers, because of the increase in costs to purchase a home, utilize the sellers concession to pay for closing costs.  Adding the buyers agent means less money available to pay for closing costs.  And lastly if selling in a state that has transfer tax the seller has to pay based on the purchase price, the seller will now have to pay more in transfer tax.  Also loans like the VA, utilized by enlisted and veterans of the US military have rules that prohibit a veteran from paying a buyers agent commission.  Therefore in some cases this sellers concession wont help.

Marketing.  Does offering commission to a buyers realtor get more buyers to see your home?

That depends on the market place.  If there are many homes on the market, the answer has to be yes because you are now including a segment of buyers that will only buy a home with the help of realtor.  That means you are adding to the number of people that will see your home.  If inventory is very low then offering a buyers agent commission may not have as much of an impact on visitors.  Buyers in the low inventory market need to be creative to find a home. They cannot sit back and rely on one agent but will engage many agents. They must attend open houses with or without their agent, see homes even if their agent is not available.  As well as look for homes being sold by owner.  In a low inventory environment the competition is fierce, bidding wars occur, most home buyers will lose out to another buyer.  Thus offering a buyers agent commission in a low inventory market may not effect the number of buyers interested in your home.

Lets also add to this that one selling a home can market that property just as effectively as a realtor.  You can list it on Zillow which gets the largest number of visitors to their site and their affiliate sites like Trulia and Street Easy.  Realtors routinely post their homes in the local Facebook groups to generate interest  and awareness.  In fact listen to any realtor listing course 101, listing a home on the MLS is not the only will not sell the home. You must market it as well through open houses, a yard sign, social media posts, as well as the only marketing which every realtor will agree is with Zillow.  Its not like only a realtor can effectively market a home.  You can effectively attain the same awareness as a realtor.

Level of effort.

Offering commission to a licensed real estate agent is helpful in that they have experience with all the paperwork involved.  You will have an agent that you can reach out to and ask for assistance with the buyer should they not be moving towards closing or having some issues.  So offering commission to an agent can make it easier for you the seller.  However there are many sellers that are experienced, know an attorney or title company as well as the paperwork needed.  Thus having a realtor involved is not as helpful.

Amount offer.

The old days of selling a home are sunsetting and the new age of selling without a realtor is upon us.  The real estate industry is changing and sellers have an opportunity to take advantage of this change.   This change is blindly offering a fixed amount based on the purchase price are over.  Pay should be based on the work put in by the realtor.  How can a seller say I will pay you $5,000 and not know if the realtor is good?  Wont disappear after the contract of sale?  Maybe they wont return phone calls and just show up at the closing to collect their $5,000?

Further to that not every agent is the same. Some agents are very experienced, set the buyers expectations correctly from the beginning, know to work with pre qualified buyers, are experienced in the loan process and thus really do make a positive impact on every transaction they are involved in.  And there are some agents whom are truly unprofessional, cause issues when there are none, or make small issues very big ones.

Traditionally the amount to offer is a percentage of the purchase price. Each market place is different. In some markets 3% to the buyers agent. In others 1% is.  It truly is up to you the seller.  What you need to do is set the expectations correctly with the buyers agent.  What are you expecting them to do for the commission you are paying them.  Could you imagine hiring someone to do work for you that is really against your best interest (The buyers agent is working in the buyers best interest which is opposed to yours.), and the amount of compensation is the same for the realtor whom is amazing, as well as a realtor that sucks.  Intuitively that does not make sense.

Sellers today should enjoy that the noose around their neck requiring, even expecting, that the buyers agent is being paid a pre determined amount for only procuring a buyer has been taken off.  The buyers agent needs to be involved in the transaction from start to finish, as well as have responsibilities and be accountable for such things as scheduling inspections, regular follow up with the buyers and sellers to make sure all is moving forward smoothly, play the liaison with the title company and or closing attorney.  As well as agreeing to a response time when not away on vacation.  If these are not agreed to then what role do they play?  Scheduling an appointment?  Emailing you an offer?  Conveying your reply to the offer? Attending the closing to get their check?

Should you state in the description or in the listing somewhere commission is or is not being offered?

Lets say you want to buy a car. You look online and see the perfect one.  Under price it says “$30,000 if you have a salesperson, $25,000 if you do not.”  If you don’t have a salesman your offering $25,000, right?  Don’t bid against yourself.  Don’t put out there what amount of money, if any, you are offering to agents.  First of all you are going to be inundated with calls when you list your home from realtors whom don’t have any buyer clients they just want to convince you to list with them, especially now they know what you are offering in terms of commission to a buyers agent.  Also any buyers that see this will want to consider this amount of commission if they don’t have an agent.  You are insuring your not getting the highest and best offer.  No I don’t think you should state anywhere what you are offering in commission because if the buyers agent is terrible you will regret it.  Give your money away to family and charity.  Don’t throw it away because your not thinking of the new way to sell your home.   I am against putting any commission amount on the promotion of your home. You can write “Brokers Welcomed,” or “Will work with realtors,” and that indicates to all realtors they are welcomed to call you if they have a client and you will compensate them.  The amount is to be discussed and figured out.  Each person is different.

Choosing to pay a buyers agent, as well as the amount if any to pay them is a personal choice done on a case by case basis.  There are many things to consider when making that decision.  I hope this post was thought provoking and provided a helpful perspective and some insight.