Selling Your Home? What to Know About Commission and Paying the Buyer's Agent

If you're getting ready to sell, you've probably heard that the rules around real estate commissions changed. Maybe you've read that sellers don't have to pay the buyer's agent anymore. Maybe you've asked a chatbot whether you should.

These are fair questions, and you deserve straight answers. Mike Pillow from our team and I spent a recent Tuesday training on exactly this. Here's what every seller should know.

One note before we start. Commission is negotiable and will vary. You won't find specific numbers in this post, and that's on purpose. How much any agent charges is between that agent and their client.

What changed, in plain English

After a major industry lawsuit and settlement, the concern was that the real estate business had drifted into treating one commission level as "normal." If you stopped 100 people on the street and asked what it costs to sell a home, most would give you the same answer. That kind of assumed standard was part of the problem.

The result is a lot more clarity. Sellers and agents agree on fees directly, offers to pay a buyer's agent can no longer be posted in the MLS, and buyers now sign a written agreement with their own agent before touring homes.

Here's what didn't change: sellers paying the buyer's agent was never mandatory. It's always been a choice. What's new is that more sellers are thinking about it.

The real question behind "What's your commission?"

When sellers ask what my commission is, I don't hear an objection. I hear a buying question, like asking the price of something you're interested in at a shop.

Usually what you really want to know is this: if I sell my house with you, how much money do I walk away with? That's why I bring a net sheet to every listing appointment. As Mike Pillow puts it, a net sheet shows what you're walking away with after all the fees are paid.

It's an estimate. We don't know the final sale price, closing date, or title company yet. But it lays out every cost in one place, including the agent fees, so you can see the number that actually matters to you.

Price versus value

You can sell your home and pay no listing commission at all. It's called selling it yourself. You can also hire a flat-fee service that puts your home in the MLS, which is one slice of the marketing. There's nothing wrong with either if it fits what you want.

But price and value aren't the same thing. I bought a Vitamix blender years ago. I could have bought a cheaper one for a fraction of the price, and I'd probably be on my fourth or fifth by now. Mike Pillow makes the same point about TVs. There are cheaper ones, but a lot of us choose quality because we want it to work.

I've seen plenty of sellers choose an agent who wasn't the cheapest, because they wanted the one they trusted to get the job done. As Mike says, we're here to sell the house, not just list it.

Why paying the buyer's agent can help you

This is the part that surprises many sellers. Being open to paying the buyer's agent isn't about doing the agent a favor. It's about the buyers.

Think about what buyers already have to bring to closing: a down payment and closing costs. Many have saved enough for those and nothing more. If they also have to pay their own agent out of pocket, some can't afford to buy your home, and some will skip having representation altogether.

Mike Pillow calls buyer agent compensation a marketing tool, no different from a new roof or a new furnace. It makes your home reachable for more buyers. More buyers means more chances at multiple offers, and competition is what drives up your price. In the end, what matters is your net. If you hit your number, the rest is scenery.

Veterans are a good example

VA loans let many veterans buy with little or no money down. That's a great benefit, but it also means many of these buyers don't have extra cash sitting around. A seller who's open to covering some of their costs, including their agent, keeps the door open to these buyers instead of closing it.

Why buyers need their own agent

I learned this the hard way. One of my first purchases was a for-sale-by-owner home, and I didn't have an agent. I didn't know what I didn't know. I bought a house that had previously been condemned, and nobody told me.

You wouldn't walk into a courtroom and let the other side's attorney represent you. Buyers shouldn't have to walk into the biggest purchase of their lives without someone on their side either. When buyers can afford representation, deals tend to go more smoothly for everyone, including the seller.

Offer it up front, or wait for the buyer to ask?

There are two schools of thought here, and I'll tell you where I land.

One option is to let buyers' agents know up front that you're willing to pay their agent if they bring an acceptable offer. Since the MLS no longer allows that, it's communicated other ways. The other option is to say nothing and negotiate it only when an offer comes in.

Some smart people prefer the second approach. Their argument is that a buyer's agent might have asked for less, so offering up front leaves money on the table. I respectfully disagree.

Picture a buyer comparing two similar homes. One seller has made it clear they'll consider paying the buyer's agent with an acceptable offer. The other is a question mark. A buyer with limited cash, like that veteran, is likely to go see the first house first. With the second, they know they'll have to offer less to cover their agent, so they're unlikely to make the seller's ideal offer anyway.

Mike Pillow compares it to a roof that needs replacing. You can fix it yourself before listing and control the cost, or you can let buyers ask for a credit and let them set the number. Either way, it's part of the price. If you'd rather not factor buyer agent pay into your price, we can talk about whether the market supports pricing a little higher.

It's your choice

Some sellers will still decide not to offer buyer agent pay up front, and that's okay. If you go that route, just go in with clear expectations. Your best offer may come from a buyer who asks you to cover their agent. As long as your home is priced right and you're prepared for that conversation, you can still have a great outcome.

If you're thinking about selling in Northeast or central Ohio and want to see a net sheet for your home, schedule a time with me or someone on our team at 21mike.com.

Want to hear the full conversation? Watch our training on commission conversations with sellers.

Mike Ferrante
The Mike Team at LPT Realty
www.21mike.com
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