By Holden Lewis | NerdWallet
If you sell your home after the middle of August, cheers: You could end up pocketing the money that previously would have gone to the buyer’s agent.
But before you celebrate, consider the downside of waiting until late summer to list your home for sale: House prices tend to fall after August. The price drop might surpass the money you save on commission.
New policies governing real estate commissions are set to go into effect Aug. 17 as a result of the settlement of an antitrust lawsuit. The amended policies give home sellers more room to negotiate what to do about the buyer’s commission — whether they want to use it to induce competitive bids or keep it to themselves entirely.
The choices complicate this season more than usual, for both buyers and sellers. Here’s what to know to help you and your agent come up with the best strategy for you.
What, exactly, is changing?
Starting Aug. 17, sellers will no longer set the commissions for real estate agents who represent buyers. Buyers will decide how much their agents will be paid. Even when sellers are willing to pay some or all of the commission for the buyer’s agent, the amount will no longer appear on the multiple listing service.
For decades, and up to Aug. 17, MLS listings have been required to advertise how much commission the seller is offering to buyer’s agents. The information wasn’t visible to home buyers but could be viewed in agent-only fields of the MLS.
When sellers set commissions for buyer’s agents, they’re sometimes advised that offering a low commission will attract fewer buyer’s agents — and therefore fewer competing offers. The plaintiffs in the antitrust suit argued that the policy of requiring commission info on the MLS was designed to discourage them from negotiating lower commissions for buyer’s agents.
Can sellers start offering 0% to buyer’s agents today?
Technically, sellers have always had the option of offering zero or minimal commission to the buyer’s agent. But most sellers have offered such commissions to motivate buyer’s agents.
Even though they will set their agents’ commissions, buyers won’t necessarily pay out of pocket. Buyer and seller will negotiate who will pay. Scenarios include:
- The money may come directly out of the seller’s pocket, as has been the norm.
- The money may come directly out of the buyer’s pocket.
- The buyer and seller may split the payment.
- The buyer may pay indirectly, by adding their agent’s commission to the price of the house when they make an offer.
Here’s an example of how an indirect payment might work for a buyer who is paying a 3% commission. The buyer finds a house costing $400,000. The 3% commission is $12,000. The buyer offers $412,000 and asks the seller to transfer $12,000 to the buyer’s agent at closing.
Keep in mind that sellers, having equity, tend to have more access to cash than first-time home buyers, who accounted for 33% of buyers in April. A seller who’s willing to pay all or some of the buyer’s commission may end up with more offers, and a higher final price, than one who flatly takes that commission off the table.
How much money could sellers keep, though?
As a home seller, you stand to save thousands of dollars on commissions if the buyer pays their agent directly or indirectly.
Let’s say the agents in your town typically collect 2.5% on each side of the transaction, and you sell your house for $400,000. Each agent earns $10,000. If you pay both agents, you’ll shell out $20,000 and end up with $380,000.
But if the buyer pays their agent, you would pay your agent $10,000 and walk away with $390,000. That’s $10,000 more.
On the other hand, buyers might request bigger closing cost credits, subtracting from the seller’s bottom line, Chuck Vander Stelt, a real estate agent in Valparaiso, Indiana, said in an email. Or buyers might offer less because they will bear the expense of paying their own agents.
Even after Aug. 17, sellers might keep offering commissions to buyer’s agents as motivation, Vander Stelt added. These offers could remain standard in many markets, multiple agents said. Offering commissions to buyer’s agents will still be permissible under the new policies, but those offers will no longer appear on the MLS. Listing agents can communicate the information on brokerage websites, or in phone calls, emails and texts.
What would be the cost of waiting?
You might be tempted to keep your home off the market until the new policy goes into effect. But waiting might not be a wise move, because it would mean sitting out homebuying season.
Home prices peak from May through August, then drop off. In 2023, the median existing home cost $410,100 in June, $405,600 in July, $404,200 in August — and $392,700 in September, according to the National Association of Realtors. If you list your house after mid-August, you probably won’t close until October or later, when prices are even lower.
With house prices peaking in summer, you might come out ahead by selling during the busiest time of the year, even if you end up paying the buyer’s agent’s commission.
“I don’t really have anybody holding off until after August to list their house because they want to save a couple bucks,” says Michelle Doherty, an agent in northern Virginia with RLAH Real Estate. She says her clients will be ready to sell in June or July, “depending on how things progress with prepping the house.”
Can I negotiate the listing agent’s commission too?
You might save money if you don’t pay the buyer’s agent’s commission. But what about the commission that you pay the listing agent for selling your home? You might not see an immediate reduction. If a cut in commissions from 3% to 2% is your hope, you’ll probably mope.
“First of all, nothing’s going to change quickly, OK?” says Stephen Brobeck, senior fellow for the Consumer Federation of America. “The industry will resist, and consumers don’t really focus on this much.”
Vander Stelt said that he sees headlines that proclaim “the end of the 6% commission.” That’s a mistaken belief, he said. “Overall, the average commission costs per transaction on a percentage is likely to come down over the coming years,” he said. But not instantly.
What if I list before Aug. 17 but sell after?
Months can pass between the day you put your home on the market and the day you hand over the house keys at closing. What if the Aug. 17 policy change happens in the middle of this period? The National Association of Realtors provides guidance for two scenarios:
- Your home’s MLS listing offers to pay the buyer’s agent’s commission, and you sign the contract accepting the purchase offer before Aug. 17: You’ll pay the commission, even if the closing occurs on Aug. 17 or after.
- Your home’s MLS listing offers to pay the buyer’s agent’s commission. But in accordance with the new policy, that offer is removed from the MLS on Aug. 17. Sometime after that date, you accept the purchase offer: That defunct commission offer on the MLS is no longer valid. You and the buyer will negotiate how to take care of the buyer’s agent’s commission.
When you put up your home for sale, you’ll sign a listing agreement with your agent. NAR says that listing agreement might have to be amended if it says that an offer to pay the buyer’s agent must be made “on the MLS.” As of Aug. 17, that clause in the listing agreement will conflict with the new policy. Your agent might ask you to sign an amended listing agreement before that date.
Holden Lewis writes for NerdWallet. Email: [email protected]. Twitter: @HoldenL.
The article Should I Wait Till August to Sell My Home to Save on Commission? originally appeared on NerdWallet.
