Understanding the New Commission Rules: Why Your Agent's Knowledge Matters More Than Ever

It's been over a year since new commission rules took effect in August 2024, yet we're still seeing agents who don't fully understand how they work. This knowledge gap is causing real problems in negotiations and potentially costing both buyers and sellers money.

What Changed and Why It Matters

The fundamental shift: sellers no longer automatically pay buyer's agent commissions as part of the listing agreement. Now, buyers must sign a buyer's agency agreement before touring homes, which outlines their agent's compensation.

Key points to understand:

• Sellers contract only for their own agent's commission

• Buyers agree to their agent's commission separately

• All commission amounts are negotiable as part of the offer

• Nothing is "automatically" paid - everything must be agreed upon in the contract

Where We're Seeing Problems

Despite these rules being in place for over a year, we're encountering situations where agents still don't grasp how this works:

The "We're Only Paying X" Problem: Some listing agents tell buyers agents that the seller is "only paying" a certain commission amount, as if it's non-negotiable. In reality, this is just an initial offer - the same as a list price. Every aspect of the contract, including commission arrangements, is negotiable.

Last-Minute Contract Changes: We've seen agents try to change commission terms in the final contract without prior agreement. This isn't just bad practice - it's potentially problematic from a legal standpoint.

Missing the Net Proceeds Picture: Some sellers and their agents get stuck on specific commission percentages without understanding that what really matters is net proceeds. There are multiple ways to structure a deal that arrive at the same bottom line.

It's More Complex, But Offers More Options

The new system provides more flexibility in structuring deals. Commission obligations can be handled in various ways:

• Seller covers all of the buyer's agent commission

• Seller covers part of the buyer's agent commission

• Seller covers none of the buyer's agent commission (buyer pays directly)

• Various combinations that affect the overall offer price

The key is understanding that all these pieces work together. If a seller wants to reduce the commission they're covering, buyers will likely adjust their offer price accordingly - it all comes out in the wash.

How to Protect Yourself

Red Flags to Watch For:

1. Last-minute paperwork: If an agent presents buyer agency agreements at the last minute (like when you're ready to make an offer), they're not following proper procedure. These should be signed before you tour any properties.

2. Avoiding the conversation: Agents who shy away from discussing commissions or seem uncomfortable answering questions likely don't fully understand the system.

3. Inflexible positions: Anyone who presents commission arrangements as "this is just how it is" rather than as negotiable terms doesn't grasp how the new rules work.

What Good Representation Looks Like

Your agent should:

• Explain the rules early: Don't wait until you're ready to make an offer or list your home

• Welcome questions: The system is complex - good agents want you to understand it

• Present it in digestible terms: While the framework is complicated, a knowledgeable agent can explain it clearly

• Show you options: There are multiple ways to structure deals under the new rules

At The Bruen Team, we discuss these commission structures with every client as early as possible in the process. We want you to have time to think about the information and ask questions - not feel rushed into decisions you don't fully understand.

The Bottom Line on Net Proceeds

Whether you're buying or selling, focus on the bottom line rather than getting fixated on individual components. A buyer should care about their total cost to purchase. A seller should care about their net proceeds after all costs.

How the commission is structured within that framework is less important than ensuring the overall deal meets your financial goals. A knowledgeable agent will help you understand how different structures affect your bottom line and negotiate accordingly.

Moving Forward

More than a year after these rule changes took effect, there's no excuse for agents not to be well-versed in how they work. These aren't "new" commission rules anymore - they're simply how real estate transactions work now.

If you're working with an agent who seems uncertain about commission structures or can't clearly explain how they work, that's a significant red flag. Your real estate transaction is too important to work with someone who hasn't kept up with fundamental industry changes.

Looking for an agent who thoroughly understands current commission structures and can clearly explain your options? Contact The Bruen Team for a consultation on how these rules affect your specific buying or selling situation.