These home sellers don’t want to pay 6% commissions — so they’re pushing back
For the fifth time in his life, Dave Canfield is getting ready to sell his house.
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This time, he’s hoping to avoid a headache he and legions of other sellers have long faced: the 6% Realtors’ commission, which will take a bite out of his sales price.
The retired doctor, 68, is concerned about how much he will have to pay on the sale of his upstate New York home, which has doubled in value over the last 30 years.
Canfield’s five-bedroom home is currently valued at about $650,000, he estimated. So if he pays a typical 6% in total commissions — split between his listing agent and the buyer’s agent — he would lose about $39,000 or more, compared to the $17,000 he would have had to pay had he sold the house around the time he bought it.
The recent $418 million settlement by the National Association of Realtors upending real-estate commissions is giving Canfield and others hope they can circumvent one of the most despised parts of the home-sales transaction.
‘I’m looking at $5,000 to $6,000 in savings’
To save himself some money, Canfield has decided to either pursue the for-sale-by-owner route, in which he would mostly pay the buyer’s agent, or list his home the typical way by hiring a Realtor to help him sell — but negotiate a reduced total commission of around 3%.
“For each 1% that I decrease in commissions, I’m looking at $5,000 to $6,000” in savings, Canfield told MarketWatch.
Joanne Cleaver, a former real-estate editor at a newspaper, is also trying to negotiate how much she’ll pay in commissions to Realtors as she and her husband prepare to put their suburban Charlotte, N.C. home up for sale.
Cleaver and her husband bought the home in 2019, when they wanted to be closer to their elder daughter and grandchildren, whom they visited frequently from Michigan.
But Cleaver’s daughter’s family has moved since, and Cleaver and her husband now want to move to New Hampshire. They’re preparing to sell their $730,000 home and have a hard deadline of late June.
“When we bought this house, we worked with a [buyer’s] agent who was very helpful,” Cleaver said. “We had never bought in North Carolina, and were buying from a distance, and that, in my opinion, is when it was really helpful to have a buyer’s agent.”
But five years later, Cleaver is not interested in paying a hefty commission to sell her home. After all, the couple put in their own time and money to upgrade the house, which has increased its value. She doesn’t think it’s fair for an agent to reap the rewards of her investment.
“Why would we want to pay the same amount to sell it that we did to buy it when that commission rewards the agents involved for a rise in value that they did nothing to earn?” Cleaver wrote in an email.
“We’ve been interviewing agents … trying to understand what’s out there,” she explained in a phone interview. However, she faced opposition when she tried to negotiate a lower commission for the buyer’s agent. The typical commission structure she was cited was a 5% fee, split between the listing and buyer’s agent.
“As a consumer, it’s incredible to me that they blatantly continue to push back on commission negotiations,” Cleaver wrote in an email.
Canfield’s and Cleaver’s push to reduce how much they pay Realtors is driven in part by new developments emerging from the landmark settlement announced by the National Association of Realtors last week.
The proposed settlement said that offers of compensation — or commission fees — stating how much buyer’s agents will receive are prohibited on the Multiple Listing Service, effective mid-July.
In other words, agents listing the home cannot tell a buyer’s broker how much they will stand to make if they show the home via the MLS, the widely-used real estate listing service that is only available to NAR members.
But sellers and agents can communicate offline. Sellers can offer to cover the buyer’s agent fee, or provide other forms of compensation.
Buyers will also be required to enter into written representation agreements with their own agents. And that could potentially involve them negotiating and paying for their own fees.
Many homeowners aren’t fully aware of the fees they pay when selling
While the settlement pushes the real-estate industry to be more transparent about fees and opens the door wider for negotiation, it does not change the fact that homeowners and buyers can negotiate fees, which has always been an option in real estate.
It’s just been one that many consumers haven’t embraced.
Many homeowners aren’t fully aware of the fees they pay when selling. A recent survey by real-estate brokerage Clever found that only 11% of Americans know that the average commission rate is about 6%. And 42% of current sellers don’t even realize they’re expected to pay for the buyer’s agent commission.
The settlement does not prohibit home sellers and listing agents from making offers of compensation or concessions to help the buyer with their Realtor fees.
Some say Realtors are worth paying for
And to be sure, for some, that fee is well worth paying, some argued.
“Buying a house is a massive decision,” said John Burns, CEO of John Burns Research and Consulting. “Especially as a first-time buyer, you’ve never done it before, so if you buy a resale home, you want to make sure that the agent walks you through the inspection and helps you negotiate on your behalf.”
Sam DeBianchi LaViola, a Fort Lauderdale-based real-estate agent, said many of her clients are busy. “Could they do it themselves? 100%. But do they want to? No. It takes a lot of time and research.”
“So this outcome isn’t changing whether representation exists or not,” DeBianchi LaViola added. The biggest change, in her view, is that buyers will have written agreements with their brokers, which she said will create “full transparency.”
The written agreements between buyers and agents will be “extremely clear on a real estate agent’s role, how they get paid and who’s responsible for paying them,” she wrote in a recent blog post.
First-time home buyers may suffer
But some say buyers won’t benefit. “The biggest losers, however, will be low- and moderate-income first-time, and especially first-generation, homebuyers already confused by an often byzantine process tied directly to their financial future,” David Dworkin, president and CEO of the National Housing Conference, wrote in a blog post.
“Consumers who can’t afford to pay their agent upfront will have a hard time finding an experienced agent,” he added.
But for Canfield, who has the time and energy to do his own research, paying extra costs in commissions to Realtors doesn’t make sense.
Canfield, an anesthesiologist, bought his Syracuse home in 1995 for $278,000. “I bought it because it was a mile and a half from the hospital,” he said — and for the proximity to good schools and a nice neighborhood — “and it’s served me very well.”
Since he retired a year and a half ago and seeks warmer — but not too warm — weather, he decided to move to Northern Virginia in the summer with his longtime girlfriend, who is also looking to retire soon.
Consequently, “we’re looking to probably put the house on the market sometime in the next month or so,” Canfield said.
While he said he’s not concerned about whether the home will sell fast, because houses in the area have been flying off the shelves, he’s worried about the commission fees he will pay on the sale of his home.
The doctor is also concerned about whether he’s been overpaying for services offered by Realtors. The couple are also buying a newly built home in Virginia, which is expected to be finished in June.
When Canfield was buying the land for the home, for which he paid $1.4 million, his buyer’s agent wanted to charge him a commission based on the value of the as-year-unbuilt house versus just the land. Canfield recalled asking if the agent was willing to do the deal for 1% less, but they rebuffed him.
“That is the established practice,” Canfield said. “There isn’t that negotiation.”
‘They insist that you stick with a traditional commission structure’
Cleaver, in North Carolina, has succeeded in getting her listing agent to drop their fee to 1.5%; she had cited the online real-estate brokerage Redfin’s RDFN 1.5% listing commission and her agent matched that. But she has not been able to get the buyer’s agent fee down below 2.5%.
Cleaver provided screenshots of conversations she’s had with Realtors who have pushed for a 2.5% buyer’s agent fee, to which she agreed, on the condition that the home will receive offers at or above full asking price and that the buyer will not request contingencies.
“When you try to actually negotiate, they insist that you stick with a traditional commission structure because that’s all that anybody will accept,” Cleaver said of buyer’s agents asking for a 2.5% commission.
Home builders mixed on paying Realtors commissions
But some home builders, such as Lennar LEN, state on their website that select communities and areas may not offer commission to buyers’ agents.
“When the market is hot, you really don’t need the agents, and when the market is slow, you’re gonna want the agents,” Burns noted.
The risk for home builders is that house hunters will be steered by buyer’s agents away from newly-built homes to resale homes because builders don’t offer compensation, he added.
And the price some builders pay to keep Realtors from steering buyers away because they don’t pay a commission can be a hefty one.
In its fiscal fourth-quarter earnings call, executives at Toll Brothers TOL said that the company on average pays Realtors 2.25% of the final price of a new home. And through that, the company is spending 1.5% of its total revenue on “third-party Realtors,” or buyer’s agents.
Lennar and Toll Brothers did not respond immediately to requests for comment.
See also: Ending 6% commissions would mean ‘dangerous times’ for home buyers, mortgage lender says
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