This January marks Inman’s fifth annual Agent Appreciation Month, which culminates at Inman Connect New York in a celebration of agents at the end of January. Plus, we’re rolling out the coveted Inman Power Player Awards, as well as the New York Power Brokers and MLS Innovators awards.
In the wake of the landmark legal ruling against the National Association of Realtors (NAR), homeowners and industry professionals alike are re-evaluating the conventional practice of sellers paying commissions for both the buyer’s and seller’s agents. This verdict has sparked a nationwide debate, questioning the fairness and efficacy of this long-standing tradition in the U.S. real estate market.
While the outcome of the lawsuit may not immediately revolutionize existing practices, it does open a critical dialogue about the distribution of commission costs. I want to explore the benefits that sellers reap from adhering to the traditional model, shedding light on the advantages of this practice becomes more pertinent than ever, providing sellers with compelling reasons to continue shouldering both sides of the commission.
This won’t change the outcome of the lawsuits, but it should give you some compelling ways to articulate the benefits to the seller for paying both sides of the commission.
In the United States, the seller almost always pays the commission for both the selling and buying agents, a practice that has been much scrutinized with lawsuits continuing to pop up.
However, this approach has been a cornerstone of real estate transactions for decades. Understanding the benefits of this practice is crucial, especially in the current climate of legal and regulatory challenges.
Advantages of seller-paid commission for sellers
- Increased buyer interest: When sellers cover the commission, the property becomes more attractive to a broader range of buyers. This is particularly beneficial in competitive markets, where every advantage counts.
- Potential for higher selling price: Because buyers don’t need to reserve funds for commission, they might be willing to offer a higher purchase price.
- Faster sale of property: By removing the extra financial burden on buyers, sellers often enjoy quicker sales, reducing the time their property spends on the market.
- Simplified negotiation process: With commission costs off the table, negotiations can focus squarely on the property’s price, streamlining the discussion.
- Reduced financial burden on buyers: This approach makes properties accessible to a wider pool of buyers, some of whom might have limited available cash for upfront costs.
- Enhanced seller reputation: Sellers who cover commission costs are often viewed as more motivated and cooperative, traits that can attract serious and qualified buyers.
- Streamlined transaction process: The transaction becomes less complex with fewer parties negotiating over commission payments, leading to a smoother overall experience.
Here’s the deal. Until we get more direction from the “powers that be” on what and how buyer’s agents should be paid, we should probably keep doing what we are doing — but with a lot more transparency and better communication skills with everyone involved.
The practice of sellers paying the buyer’s side of the commission in the U.S. real estate market has deep roots. While recent legal challenges have put these practices under the microscope, it’s clear that this method offers multiple advantages for sellers.
From attracting more buyers to potentially fetching higher selling prices and ensuring a quicker sale, the benefits are significant. As the industry navigates these legal waters, understanding the rationale behind this practice helps in appreciating its value in the complex world of real estate transactions.
Darryl Davis is the CEO of Darryl Davis Seminars. Connect with him on Facebook or YouTube.
