By Mike Bodeen · 6 May 2024
The Day the Buyer’s Agents Died
I’m not sure why or how Don McLean’s famous 1971 song hit American Pie got lodged into my Snapshot brain today, but if I don’t write this, it’ll stick with me well beyond this hour – not a good thing.
The song did however, bring back some fun memories from my Jr and Sr high school years, especially the part, “and good ole boys were drinking whiskey and rye, singing this will be the day that I die…” (Mike’s Note: this good ole boy and friends were drinking Coors (not light) and Bud Malt)
BTW, the link below offers the song, with lyrics and historic pics about their take on the meaning of the lyrics, which is still debated to this day, but is half the strange fun of it all. Enjoy!
https://genius.com/Don-mclean-american-pie-lyrics
So, as promised last week, today’s Snapshot will take a look at how the real estate world will change for sellers, due to a newly announced date of August 17th, 2024 to mandate into practice what will shortly by codified by the court. Next week we’ll look at how the buyer’s residential real estate will hugely change as well.
Drum role, please…
The standard (though always negotiable) 6% commission is dead – Somewhat! I’ll explain the ‘somewhat’ shortly.
Previously, for a half century, since the MLS has been around, the buyer’s agent would know via the MLS listing, how much they would be paid by the seller’s agent. The seller’s agent would “cut the 6% commission pie” with the buyer who brought a buyer to the table and closed the deal. That fee to the buyer was typically 2.5% to 3%.
Now, that automatic buyer’s agent fee shown in the MLS has gone bye, bye! MLS’s across the country will no longer be able to publish a buyer’s fee in the MLS listing.
It will now be required for a buyer’s agent and their buyer to execute a written Buyer’s Broker Agreement up front explaining how the agent will represent and how much that buyer fee will be. Call it what is – an employment agreement.
Sellers will continue to do what they’ve always done, which is to execute a listing agreement with their agent of choice. The difference now is that a seller’s agent’s fee will not include the fee for the buyer’s agent. Therefore, commissions will continue to be negotiable between a seller and their agent, but there is no fee stated to be paid out to the buyer’s agent from the seller.
The end result could be a change to the total seller’s fee, but how much? Could go down to as low 3%, or it could stay closer to 6%. Time will tell!
Now, let’s head back to the “somewhat” mentioned above about the death of the 6% fee. Sometimes, perhaps often, what will happen in practice is that if buyer Francisco (relocating from the Bay Area) wants to see a home listed with another company, Francisco’s agent, Al, will need to contact the listing agent of that home to inquire if that listing agent’s seller will provide a “concession” to the buyer, of say 2.5% – 3%. If the seller does that, than Francisco could pay agent Al at closing the pre-arranged fee agreed to in the Buyer-Broker agreement.
So, could the seller end up paying for the buyer’s fee anyway? Yes, indirectly, but that’s totally negotiable between the buyer and seller.
Where the seller could really reap the benefit of this is in a hot seller’s market with multiple offers. Many buyers will get outbid simply because the net to the seller will be greater when the seller does not agree to provide a concession to the buyer.
How a buyer like Francisco pays his agent Al, is between he and Al. It could be by the concession method we just spoke of. It could be the buyer writing a check at closing to cover Al’s commission if there’s no concession provided in the deal. And this is the point of the shaft to the buyer, especially first-time homebuyers who will probably not have the means saved to pay their agent.
Loans from VA and FHA currently prohibit a buyer from paying their agent’s fee. Will that change? Hopefully.
The biggest change from all this is with buyers and their agents. But that discussion is for next week and the months ahead. This is an evolving story taking place in real time.