Real estate agents play a pivotal role in connecting buyers and sellers, providing guidance, and ensuring smooth transactions. Traditionally, agent commissions were included in the property’s sale price and paid by the seller, indirectly involving the buyer in these costs. However, recent updates from the National Association of Realtors (NAR) have introduced new practices affecting both buyers and sellers.
Understanding Agent Commission Fees:
Agent commission fees are a percentage of the property’s final sale price, serving as the primary income for real estate agents. These fees are negotiated in the listing agreement between the seller and the agent. The typical commission ranges from 5% to 6% of the sale price, though this can vary based on factors like region and market conditions.
Splitting the Commission:
Traditionally, the commission fee is divided between the listing agent (representing the seller) and the buyer’s agent. A common arrangement is a 50-50 split, but this can be adjusted based on agreements between the involved agents or brokerages.
Who Pays the Commission Fee?
Although the seller typically pays the agent commission fee, it’s factored into the property’s sale price. Therefore, buyers indirectly contribute to this fee through their purchase.
NAR Commission Updates: Buyer Agent Agreements and Touring Agreements
As of August 2024, NAR requires that real estate agents working with buyers enter into a written agreement before touring any homes, including both in-person and virtual tours. This change aims to enhance transparency regarding the roles, responsibilities, and compensation of buyer agents. These agreements, known as Buyer Agent Agreements or Touring Agreements, outline the scope of services provided and the agreed-upon compensation.
These agreements include:
Buyer Agent Agreements – A formal contract outlining the scope of services provided by the agent and the agreed-upon compensation.
Touring Agreements – A shorter agreement required before a buyer can tour properties, ensuring clarity on agent services and potential compensation.
Impact on Buyers and Sellers:
For Buyers:
These agreements clarify the relationship between the buyer and their agent, ensuring mutual understanding of services and compensation. Buyers should review these agreements carefully and discuss any concerns with their agent before proceeding.
For Sellers:
While the traditional commission structure remains, sellers may experience changes in negotiations due to the increased transparency of buyer-agent relationships. It’s essential for sellers to discuss commission arrangements with their listing agent to understand how these updates may affect their net proceeds.
Conclusion
These NAR updates aim to promote transparency and trust in real estate transactions, benefiting all parties involved.