In the immediate aftermath of the National Association Realtors (NAR) settlement, negotiations over real estate agent commissions have spiked in some markets and at higher price points. Dozens of Redfin agents across the country have reported seeing varying impacts; in some areas, negotiations over fees are becoming more common, while other markets have yet to experience much change.
“We've found a tale of two markets,” said Redfin Chief Economist Daryl Fairweather. “In slow markets where there's less demand from homebuyers, like Austin, agents report that most sellers are still willing to pay the buyer's agent commission to attract buyers, and agent fees are mostly the same as before. In markets with low inventory and robust demand, like San Francisco and Boston, agents report more instances of negotiation around fees, with sellers asking buyers to make their best offer rather than preemptively deciding what they want to offer a buyer’s agent.”
In July, a Redfin analysis found the typical buyer's agent commission was down slightly to 2.55%. The press release noted that the new rules have made it harder to track fees by removing them from the MLS. As of August 17, listing agents may no longer include a unilateral offer for the buyer’s agent commission in NAR-affiliated multiple listing services (MLSs), and agents must tell potential buyers what they charge before buyers start touring homes.
In some markets, the requirement that agents and buyers agree on fees before they tour is making buyers feel wary. But Redfin shares its approach to ask house hunters to sign a simple fee agreement, which can be signed online with one click, before their first home tour. The agreement doesn’t obligate the customer to use Redfin, but rather to tell prospective clients what Redfin would charge if an agent were to represent them. Redfin stated its buyer agent fees as low as 1.75% depending on the market.
However, some are using a more heavy-handed approach, requiring buyers to sign a full buyer agency agreement to tour. These agreements typically obligate the buyer to work exclusively with that agent for their home purchase for a certain period of time.
Alex Galanis, a Redfin Premier agent in San Diego, described a scenario in which a buyer tried scheduling a showing with another agent, but that agent sent her a 12-page buyer representation agreement for signatures.
“She found it very off-putting, and appreciated our approach,” Galanis said. “I want to win a customer’s business as much as the next agent, but I don’t think anyone should be forced to make such a big decision before we’ve had a chance to meet.”
In the luxury market, agents are reporting there’s more downward pressure on buyer’s agent commissions for high-end listings. Sellers realize commissions are negotiable, and that they might be able to get the buyer to cover some or all of the buy side commission. So buyers and sellers are negotiating over who pays the buyer’s agent, and how much they’re paid.
"While I’ve always let my sellers know they can offer whatever commission they want and don’t have to offer anything at all, my sellers are having the conversation with me in more depth than ever before,” explained Blakely Minton, a Redfin Premier agent in Philadelphia. “I recently had a seller decide to offer 1.5%. I let them know offering less commission would most likely mean the buyer has to make up the difference, and it would only matter if you don’t have demand for your home. That 1.5% home listed at $350,000 and got 12 offers. It was a great little home right near the University of Delaware. Half the offers we got still asked for 2.5%. But the two highest offers accepted that the seller would pay just 1.5% to the buyer’s agent."
In Las Vegas, it’s all price-specific and seller-specific, according to Redfin Premier agent Fernanda Kriese.
“Maybe it’s 2%, maybe it’s 2.5%, maybe it’s 3%, depending on how desirable the listing is. And ultimately, the commission goes together with the price,” Kriese said. “Sellers may have to list slightly higher if they’re offering to pay a higher commission to the buyer’s agent, and vice versa.”
Because every half-a-percent on a $5 million home is $25,000, Redfin analysts reason that’s why buyers and sellers of luxury homes are more likely to negotiate agent fees.
“They want to make sure they are getting value from their agent,” Mimi Trieu, a Redfin Premier agent in Silicon Valley. “My luxury listings aren’t offering a certain buyside commission. If the buyer makes a great offer, they’ll consider paying the buyer’s agent.”
By and large, most sellers are still willing to cover the buyer agent fee as long as they still net their desired amount.
“Sellers in my area are still offering to pay commission to the buyer’s agent in all price points, so far. I wrote five offers the first two weeks the rules were in effect. In all five, we knew the seller was offering to pay commission,” said Redfin Premier agent Amira Elgoneimy in New Jersey.
