Seismic changes took place in the Real Estate industry last month revolving around how an agent representing a buyer is paid commission. This is the opinion of the writer, not anyone else. Names have been changed to protect the innocent. Yada, yada, yada…. 🙂

A little bit of history is in order to explain how this is important and cut down on the confusion about how the system evolved. 

We’ll go back to how it worked when I bought my house 30 years ago. My wife and I had an agent working with us as the buyers of the home. We trusted her implicitly. She was with us every step of the way and knew everything about us. The seller’s paid her commission too. That was because she represented the sellers, not us. Everything we said to her, our buying power, max amount we could offer, our other homes we were pursuing,… everything…. went straight back to the sellers to be used against us in negotiations. The Rule: Buyer beware, was basically the way the industry worked. Real Estate commissions were negotiable, but it wasn’t widely known and never used. 

Around 2000, the industry changed and made “Buyer’s Agency” a thing. Now the buyer’s agent’s had a fiduciary duty to the buyer, not the seller. The commission however was still paid by the seller, not the buyer. The thought was, the system worked, buyer’s normally have a tighter budget than sellers, so it made sense to keep that burden on the seller. The seller also had the benefit of controlling the buyer’s agent’s pay, so they could increase the amount to attract more buyer’s agents or decrease the amount and save a few bucks. Agent commissions were still negotiable. More people knew it, but most never pressed the sensitive issue. 

That changed in mid August 2024. A collection of large dollar sellers sued Keller Williams, The National Association of Realtors and a group of other large agencies for setting up the old system and enforcing it through tradition and standard operating procedure(SOP). The settlement reached was worth billions, changed the industry and has somewhat paralyzed the buyer’s side of the population in the current market.

So here we are….Buyer’s are responsible for paying their agents. The agent’s are fiduciarily tied to their clients. Those corporate sellers who sued NAR, Keller Willians and others got a big fat settlement. All’s right with the world, right? 

Not really. The typical buyer who’s just scraping by with enough money to buy a home, now has to foot the bill for their agent’s commission. Some sellers are still offering buyer agent commissions, but only a very few. The buyer’s agents now aren’t really sure where their livelihood comes from now. The typical seller who’s not exactly rolling in dough either now has much less control over incentivizing the buyers to visit his property. Everyone looses in the short run, except the large sellers awarded in the settlement. They made bank. 

All is not lost though. You can navigate the current system. VA Loans changed their requirements to allow buyers to pay commissions. Most loan programs will allow a buyer to roll commissions into the loan and pay their agent at closing from those funds. Additionally, once the new policy becomes better known, accepted and SOP, it will be a better, simpler system that’s fairer to both, buyer’s and sellers. 

Buyer’s talk to your Realtor about the changes. They really aren’t as scary as the news and hysterical social media reports are making them out to be.