In last week’s article I talked about the big changes about to take place in my industry beginning in August. Home sellers will initially agree (in the listing contract) to pay only their listing agent and will no longer offer compensation to buyer agents in MLS. This will likely cut the commission to sell a home in half. Also, agents who work with buyers will not be allowed to show them homes without a written representation agreement that defines the agent’s responsibilities and the compensation the buyer will pay their agent.
Last week about 300 agents around the country participated in polls I conducted about these changes in our industry. Because most of my readers own homes and may be buying and/or selling a home in the future, I thought a few of the polls might be of interest.
The new rules prohibit listing agents from making offers of compensation to buyer agents in the MLS. The goal is to end the practice of steering, where buyer agents recommend homes to show based on what they earn from the seller instead of which homes best fit their buyer.
Apparently, some agents like the status quo and may still try to convince their sellers to make offers of compensation to buyer agents off MLS – on the agent’s website, via flyers, emails, and texts.
What percentage of the 300 agents who participated in my poll may still try to circumvent the rules by making offers to buyer agents outside MLS? The survey says…
While the court decision and settlement do not specifically address offers of compensation to buyer agents outside MLS, the Department of Justice has made it clear that this is wrong and possibly illegal because it results in increased costs for sellers and agents steering buyers to homes where they earn more. The reason about 44% of agents don’t want the existing commission structure to change is their concern that their income will drop precipitously because when buyers have to pay for their own representation, buyer agents will likely earn significantly less than the 2%-3% they are accustomed to receiving from sellers.
I designed the second poll to see how much agents across the country think buyers will be willing to pay out of pocket for representation. I used a $400,000 home as an example. The survey says…
As you can see, over 73% of the agents I polled believe that buyers will not pay more than $3,000 for representation when they have to pay it out of pocket. That’s a heck of a lot less than the 2%-3% of the purchase price they’re accustomed to earning. On a $400,000 home agents are accustomed to earning $8,000-$12,000 and on an $800,000 home they are accustomed to earning $16,000-$24,000. If most buyers are only willing to pay $3,000, that is obviously a precipitous decline in income for buyer agents.
The third poll asked about the future of list-side commissions. If you are thinking about selling your home, you will love the response to this one. The survey says…
Why did 7 of 10 agents predict that list-side commissions will drop? They believe that agents who work with buyers will flip over to begin working with sellers because buyer-side commissions will drop significantly. This would create more competition for listings and possibly drive down commissions.
What do I think about these changes in my industry’s commission structure? You’ll pay a lot less to sell your home, probably 2%-3% instead of 5%-6% because you will only be compensating your listing agent. When you buy a home you will determine what your agent is worth based on their experience and the services they provide and pay them accordingly. Also, your agent won’t have an incentive to show you homes based on how much they are earning from sellers.
That’s what I think! More importantly, that’s what the surveys say.
