What Does this Mean for Agents?
Buying and Selling Real Estate in a Commissionless World?
What is the Best Way to Sell My Home Now?
In case you missed it, the National Association of Realtors (NAR) reached a settlement this month that will drastically change the American home-buying process. Gone are the days of a standard 6% real estate commission, split between listing and buyers agents with on-market sales.
If you recently sold a home, you’ve likely had about 6% of the purchase price deducted from your proceeds. For example, if you sell your home for $100,000, about $5,000-7,000 of those funds would be split between the agent that listed your home on the MLS for you, and the agent that represents the buyer that purchased your home. These funds end up being baked into the purchase price. This means that the real estate commission originates from the buyer’s funds, and is taken out of the seller’s proceeds. The argument against the NAR is that this system incentivizes buyers agents to steer their clients towards purchasing more expensive homes to increase the funds going to both agents.
Realtors: What Do They Do?
Typically, someone selling their home on market will hire a listing agent to list their home on the MLS. On the other hand, buyers agents are utilized to help buyers locate a deal that fits their criteria. In these circumstances, realtors, who are usually only compensated through their commission fees, are incentivized to make sure that the purchase price is as high as possible. This ensures they get a large payday when the home closes. With the increased popularity of services like Zillow and Redfin, the problem is that buyers agents are becoming increasingly obsolete.
What Does this Mean for Agents?
Up until this point, the 6% real estate commission standard has been a de facto aspect of the process. While it has always been negotiable, the negotiation of this is rare. Going forward, this settlement encourages sellers and buyers to negotiate these fees beforehand or to forgo using a relator altogether.
Due to the oversaturation of realtors in the market already, this will likely lead to a decreased number of realtors. This will further contribute to diminished commission fees going forward due to the increased competition.
Buying and Selling Real Estate in a Commissionless World?
With the growing popularity of selling homes off-market since the pandemic, we should expect this trend to grow exponentially. This settlement will only increase the whispers of the necessity of realtors in our increasingly online world.
When selling a home off-market, a seller will tell an investor how much they want to sell their home for. If the investor agrees to this price, the seller will receive 100% of this amount in their pocket, minus closing costs, taxes, and anything owed against the property. If buyers can search for homes by themselves, it’s in their best interest to reach out to sellers to avoid paying a realtor. With the growing amount of wholesalers in the industry currently, investors, buyers, and sellers alike can all ensure they get a better deal without paying real estate commissions by utilizing these middlemen when selling or buying.
What is the Best Way to Sell My Home Now?
Selling your home off-market has never required any real estate commission fees, as the transaction is between you and the buyer. Going forward we should expect a greater volume of these transactions to occur, especially with investment properties. However, if your home is in peak condition, listing on market still remains the best option.
With the increased popularity of off-market sales, we should also expect this aspect of the industry to continue to develop. An interesting trend to keep an eye on is whether realtors begin to abandon their profession altogether. With the probability of real estate commission fees diminishing being high, they might be better off using their network to utilize off-market transactions instead.
We’ve got you covered if you choose to bypass realtors and forego paying commission fees. Fill out this form to receive a free consultation on the best means to sell your home and its value to an investor.
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