BY ANNA & MICHELLE
Recent policy changes made by the National Association of Realtors (NAR) have shifted the dynamics and discussions around buyer’s agent compensation. Some sellers have asked if the changes mean they don’t need to pay compensation to a buyer’s agent. Here’s what you need to know.
Many buyers, especially first-time homebuyers, have limited savings and may struggle to cover additional costs beyond the down payment, closing costs, and other expenses such as inspection and appraisal associated with purchasing a home. And, mortgage lenders typically do not allow buyers to include agent fees in their loan amount, meaning buyers must pay these fees out-of-pocket, which can be a significant financial burden.
Requiring buyers to cover their agent’s compensation, as opposed to the traditional seller-offered model, exacerbates affordability issues and limits many buyers’ ability to purchase a home.
To maximize market appeal and facilitate a quicker sale at full market value, sellers should strongly consider offering buyer’s agent compensation. Here’s why:
- Increased Buyer Pool: Offering compensation to buyer’s agents can attract more potential buyers. Most buyers rely on agents to navigate the home-buying process. Buyers may elect not to view homes where the seller is not offering to compensate the buyer’s agent. Offering to compensate the buyer’s agent will allow a seller to reach the largest pool of potential buyers for their home.
- Competitive Advantage: In a competitive real estate market, offering buyer’s agent compensation can make a seller’s property stand out compared to similar listings that do not offer such incentives. This could lead to quicker sales and potentially higher offers.
- Facilitated Negotiations: Providing compensation can simplify negotiations. Without the need for buyers to scramble to pay agent fees or do contractual contortions to include their agent’s fee in the offer; the transaction process becomes more straightforward, reducing potential friction points that could delay or derail a sale if compensation is agreed to in advance.
- Legal and Compliance Benefits: Buyer agents help ensure compliance with legal and regulatory requirements during real estate transactions. By compensating buyer agents, sellers can mitigate the risk of non-compliance and potential litigation, which could arise from handling complex paperwork and disclosures on their own.
- Market Perception: Not offering buyer’s agent compensation might create a perception that the seller is less flexible or cooperative, which could deter potential buyers and their agents. This perception can be particularly detrimental in most markets, and certainly ours, where such compensation is customary.
- Preservation of Market Norms: While the NAR settlement invites more opportunities to discuss compensation, the traditional model that buyers and sellers are accustomed to, where sellers offer compensation to buyer’s agents, isn’t going away. Sellers who deviate from this norm might confuse or alienate potential buyers, affecting the property’s marketability.
In summary, sellers who choose to offer buyer’s agent compensation enhance their property’s appeal and attract a wider range of buyers, which should result in obtaining the highest price, in the shortest time, with the fewest problems. In a competitive market, this strategic decision may be crucial for achieving a successful and timely sale.
