The Impact of the NAR Settlement
In 2024, the National Association of REALTORS® (NAR) reached a settlement that changed how real estate brokers handle and advertise buyer broker commissions. Under these new rules, brokers are prohibited from publicly advertising commissions, and they must now call the listing agent or seller to determine the exact compensation being offered. For Simply List sellers, this means you should be prepared to discuss commission with any buyer’s agents who reach out, because the details are no longer automatically visible online.
Generally speaking, this article explains two ways you can structure your Simply List listing agreement to handle these compensation inquiries, and what steps to take depending on the approach you choose.
Option 1: Agree to a Percentage Before an Agent Shows
- Specify Commission in the Listing Agreement:
- When you fill & sign your listing agreement, you include the amount (typically a percentage) that you are willing to pay a buyer’s broker.
- This amount should be clearly documented so there is no confusion later.
- Use the Pre-Showing Commission Agreement:
- Before a buyer’s agent shows the home, provide them with the Pre-Showing Commission Agreement.
- This document confirms the compensation that the buyer’s broker will receive if their client purchases your property.
- By providing it up front, you avoid last-minute misunderstandings or negotiations after a property showing.
Option 2: Negotiate the Buyer’s Broker Commission in the Contract
- No Pre-Set Commission:
- Instead of committing to a percentage in the listing agreement, you wait to see what the buyer requests in their offer.
- The buyer’s broker compensation then becomes part of the overall negotiation of price and terms.
- Broker Compensation Agreement as an Exhibit:
- If you accept the buyer’s offer (including their requested broker compensation), this amount is formalized in a Broker Compensation Agreement, which is attached as an exhibit to the Purchase and Sale Agreement.
- This lets you compare the total cost and terms of the offer (including commission) before making a decision.
What If the Seller’s Offered Commission Is Insufficient?
Even if the seller has set a commission percentage, the buyer’s broker might want more—especially if the buyer can’t cover their broker’s costs out of pocket. In these situations:
- The buyer’s broker may reject the original offer of compensation (for instance, 1% or a certain flat fee).
- They might submit a Broker Compensation Agreement with the buyer’s offer requesting additional commission.
- Seller options include agreeing to it, counteroffer, or decline, just as with any other term in a real estate offer.
Need Help?
Feeling overwhelmed by all the details? Choose “With Help” in your Simply List setup to get comprehensive guidance throughout the entire listing and selling process. Our real estate professionals can walk you through everything from setting up your listing agreement to fielding inquiries from buyer’s agents—ensuring you stay compliant and confident at every step.
How Much Compensation Should You Offer?
The short answer: enough to attract a qualified buyer and their broker to your property.
- First-Time Buyer Considerations:
- Many first-time buyers have limited funds. If your property is likely to appeal to them, consider how the broker’s compensation might be paid. If they have to pay their broker’s fee out of pocket, they may be less interested in a listing that offers no or low compensation.
- Price Point Matters:
- A 1% commission at a $100,000 sales price is quite small in absolute dollars. At $3,000,000, that same 1% yields significantly more dollars, giving everyone more “wiggle room.”
- When you set the buyer-broker compensation, think about whether the total payout will be sufficient to incentivize agents to bring buyers.
Handling Inquiries from Buyer’s Agents
- Agents Will Usually Call, Text, or Email:
- They will want to confirm the commission offered before scheduling a showing.
- If You Chose Option 1:
- Gather their email address (or preferred contact method) and send them the Pre-Showing Commission Agreement. This ensures both parties understand compensation before the buyer ever walks in the door.
- If You Chose Option 2:
- Let the buyer’s agent know that you have not pre-committed to a commission.
- Tell them you will be happy to consider their compensation request along with the rest of the offer when (or if) it is submitted.
Which Option Is Better?
Each method has pros and cons, and the best choice depends on current market conditions and your personal preference:
- Seller’s Market:
- If demand is high and there are many interested buyers, you may feel more comfortable waiting to negotiate commission as part of the offer (Option 2). You might get multiple offers, giving you leverage to choose the most favorable total package.
- Buyer’s Market:
- When inventory is high and buyers have plenty of choices, buyers will typically prefer listings that require less negotiation. If a commission is not offered, a buyer may pass over that property in favor of one where their agent’s compensation is not a concern in negotiation.
Ultimately, understanding your local market, recognizing your target buyer pool, and setting a realistic compensation are critical. If your home is similar to others on the market, offering a competitive commission may help your property stand out.
Disclaimer
This guide is for general informational purposes and does not constitute legal or real estate advice. For tailored assistance, consult an attorney, sign up “With Help”, discuss with a licensed real estate broker, or other qualified professionals familiar with your local laws and regulations.
