A few weeks after the new NAR rules went into effect, Redfin agents report some homebuyers and sellers are confused about fee agreements and who is responsible for paying the buyer’s agent. Once they understand the guidelines, most sellers are still willing to cover the buyside commission–but negotiation has become more common in some markets and at higher price points, which could put pressure on fees.
The National Association of Realtors (NAR) settlement went into effect on August 17, rewriting the playbook on how real estate agents fees are communicated and negotiated among consumers and agents. The result is that homebuyers and sellers are more likely to negotiate which party pays agent fees, and that may lead agent commissions to come down over time, but it’s too soon to say by how much or how quickly fees could change. They’d already begun to fall slightly in the lead-up to implementation.
Under the new rules, 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. While consumers and agents are still adjusting to the new rules, Redfin agents report different impacts in different parts of the country. In some areas, negotiations over fees are becoming more common, while other markets have not experienced much change at all.
“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. Now, like the amount of earnest money deposit or including an inspection contingency, the amount the buyer is asking the seller to pay her agent is a term that impacts the strength of the offer. That will likely drive fees down over time.”
Redfin will continue to report on how the new rules are impacting agent commissions in different metro areas as we collect data. The new rules have made it harder to track fees by removing them from the MLS.
Buyers are confused about signing an agreement before a home tour
The requirement that agents and buyers agree on fees before they tour is intended to make fees more transparent. But buyers are understandably wary about signing paperwork to tour homes.
Redfin’s approach is 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; its purpose is to tell prospective clients what we would charge if Redfin were to represent them. Once a prospective client has met a Redfin agent, they can decide whether to continue working with them. Redfin offers competitive buyer agent fees as low as 1.75% depending on the market.
Many agents at other brokerages are taking 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.
- “I showed a $4.75 million home in Carlsbad. The buyer told me she tried scheduling a showing with another agent, but immediately that agent sent her a 12 page buyer representation agreement for signatures. She found it very off-putting, and appreciated our approach. 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.”–Alex Galanis, San Diego Premier agent
- “Buyers are confused at first. I’ve actually had a handful of house hunters cancel tours with me. I think it’s because they think they’ll have to sign an agreement that they’ll exclusively work with me. That’s not true, but I understand how it’s confusing because some other agencies are requiring that. And people who tour with Redfin do need to sign an agreement, but it’s not an exclusivity agreement. I think that will work itself out as agents keep explaining how the rules work.” –Van Welborn, Phoenix Premier agent
The way real estate agents are paid–and how much they’re paid–wasn’t always clear to homebuyers. Nearly 30% of homebuyers who purchased a home in 2023 had no idea how much their agent was paid, according to a Redfin-commissioned survey fielded in February, and roughly 20% had no idea who paid their agent.
- “A lot of prospective clients are taking the fee agreements at face value and signing. But most have questions: ‘Why are we signing this?’ ‘Does it come out of my pocket?’ It is leading to more competition among agents, because some buyers are shopping around and seeing which agent is offering the lowest fee.” –Matt Ferris, Virginia Premier agent
The biggest change: Buyers and sellers are negotiating over who pays the buyer’s agent, and how much they’re paid. This is especially true in the luxury market.
The NAR settlement has led more sellers to realize commissions are negotiable, and that they might be able to get the buyer to cover some or all of the buyside commission. The consensus from agents: Like most parts of a real estate deal, how much a buyer or seller can negotiate depends on demand for the listing.
- “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. 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.” –Blakely Minton, Philadelphia Premier agent
- “Right now, most sellers are still offering to pay the buyer’s commission in Washington, D.C. If the market gets hot, buyers will use that commission as a way to make their offer stand out. I’m submitting an offer on a popular property. The sellers are offering 2.5% to the buyer’s agent, but my buyer decided he wants to pay my 2.5% fee directly. That will net the seller more and my buyer has the cash to pay my fee. When the market heats up, a lot more buyers will be paying their own agents and that will put first-time homebuyers at more of a disadvantage.” –Mary Bazargan, Washington, D.C. Premier agent
- “On one of my listings, I received multiple phone calls asking what we’re offering to the buyer’s agent. Every time I say the same thing: It depends on the offer. If your offer is high, we can offer more money to the buyer’s agent. One buyer wanted the seller to pay 3% to the buyer’s agent, but the offer was low and they were also asking the seller to cover closing costs. My client was fine with paying the 3% commission–but he needed to get the net number he had in mind for the sale of his house. The buyer ended up increasing the purchase price and dropping the request for closing costs. It helped my client realize it’s not all about the purchase price, it’s about the net amount of money. The new rules have changed the conversation, but so far, not the amount of money changing hands.” –Sam Brinton, Salt Lake City Premier agent
- “It’s all price-specific and seller-specific. Sellers understand that agents aren’t going to work for free, but they’re thinking about what percentage they’re going to offer the buyer’s agent: 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. Sellers may have to list slightly higher if they’re offering to pay a higher commission to the buyer’s agent, and vice versa.” –Fernanda Kriese, Las Vegas Premier agent
Agents are reporting there’s more downward pressure on buyer’s agent commissions for high-end listings.
- “Luxury clients are savvy. They’ve always been aware that commissions are negotiable, but in practice they’re doing more negotiating now. Sellers of high-priced homes seem to feel more comfortable negotiating over who pays the buyer’s agent commission, and how much, because there’s no promise in the MLS anymore and the listing agent is the gatekeeper of how much the seller may be willing to pay to the buyer’s agent. On one recent high-end listing, my seller was willing to pay up to 2.5% to the buyer’s agent, but that of course wasn’t published. So when we negotiated the offer we got, we also negotiated the commission to the buyer’s agent down to 2%.” –Juan Castro, Orlando Premier agent
- “Buyers and sellers of luxury homes are more likely to negotiate agent fees, which makes sense because on a $5 million home every half a percent is $25,000. They want to make sure they are getting value from their agent. 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.” –Mimi Trieu, Silicon Valley Premier agent
But even though negotiations are becoming more common, most sellers are still willing to help cover the buyer’s agent fees
Before, sellers proactively advertised a commission in the MLS that they were willing to pay any agent who represented the buyer. And often the buyer’s agent accepted the commission offered. Now sellers are evaluating their options and deciding on a strategy based on the housing market and the competition they expect for their home. By and large, most are still willing to cover the buyer agent fee as long as they still net their desired amount.
- “With sellers, I’m laying everything out upfront, presenting the options for payment to the buyer’s agent. One, don’t offer a buyer’s agent commission at all. Two, state that you’re open to paying buyside commission but don’t provide an exact number. Three, go ahead and put a number out there–it can’t be advertised over the MLS, but listing agents can communicate it to buyer’s agents in different ways. Once sellers understand, most of them are choosing option three, because it sets them apart from listings that aren’t proactively offering buyside commission.” –Gregory Eubanks, Los Angeles Premier agent
- “None of my sellers are saying they won’t pay the buyer’s agent. But they are welcoming the idea of having flexibility in how much they’re willing to pay; they’re happy because they feel like they’re in the driver’s seat.” –Michelle Palmquist, Portland, OR Premier agent
Removing the offer of compensation from the MLS has resulted in more back and forth between agents when scheduling a showing, with more buyers’ agents texting and calling listing agents to ask if the seller is offering compensation or open to it. Redfin agents report some listing agents are communicating what the seller is willing to pay buyer’s agents in creative ways. In Dallas and Portland, for example, our agents have seen instances of “3%” written on a lockbox. Still, most agents report they’re mostly communicating about fees via phone calls and texts.
- “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.” –Amira Elgoneimy, northern New Jersey Premier agent
- “Things haven’t changed that much. The commission is no longer automatically coming from the seller, but most sellers are still open to paying it. Of course, it depends on the market and the house and how much competition there is.” –James Gulden, Boston Premier agent
United States
Canada