A transformational shift is underway in the real estate industry, as the consideration of offering a 0% commission to the selling agent gains traction. This change might seem alarming at first glance, but it opens the door to a new and innovative approach to commissions that can bring benefits to all parties involved.
A new approach to commission structure
Traditionally, commission fees have been split between listing and selling agents, often leading to a total commission of around 6%. The new proposal suggests that the listing agent could ask the homeowner to pay only for the listing agent’s side of the commission, which could be around 2% to 3%.
But how does the selling agent get paid? The solution is simple: add the selling broker’s commission to the negotiated price, which will then become the contract price. This allows the selling broker’s fee to be part of the buyer’s financing instead of an out-of-pocket expense.
Benefits of this model
- Transparency and clarity: This model promotes openness about how commissions are structured and paid. It makes the process more transparent to both buyers and sellers, as the commission is clearly defined in the contract price.
- Ease of obtaining listings: By offering a reduced commission for the listing agent’s side, agents may find it easier to obtain listings. Sellers might be more inclined to agree to a lower commission, thus making the process more appealing.
- Flexibility for buyers: Buyers have the flexibility to finance the selling broker’s commission as part of their mortgage. This eliminates the burden of an expensive out-of-pocket bill, and allows buyers to manage their finances more effectively.
- Potential savings for sellers: Sellers might save money by agreeing to a lower commission on the listing agent’s side. This could make the selling process for a property more financially attractive.
- Empowering the buyer-agent relationship: With the buyer directly financing the selling agent’s commission, it enhances the buyer’s role in the relationship, fostering greater collaboration and alignment with their interests.
The idea of a 0% commission for the selling agent coupled with adding the commission to the negotiated price, which then becomes the contract price, may seem unconventional. However, this model offers several compelling benefits that align with the evolving needs and expectations of buyers, sellers and agents alike.
More transparency, flexibility and a potential reduction in costs create a win-win scenario for everyone involved. As the real estate industry continues to innovate and adapt, this approach could pave the way for a more efficient, transparent and client-centric future.
Embracing this new commission structure could redefine how we think about real estate transactions, promoting greater trust and cooperation within the industry. The potential benefits are clear; now it’s up to the real estate community to explore and adopt this promising path forward. Let’s keep moving forward with less fear, more skill and a lot more to smile about.
Darryl Davis has trained and coached more than 100,000 agents globally.
To learn more, visit http://www.DarrylSpeaks.com/Online-Training.
Darryl Davis explains this new commission structure …. It’s just a different package . It all boils down that in reality the buyer pays the commission and always has. It is the total purchase price no matter how you word it.
Nobody wants to pay for anything but if they sit on the other side they charge high fees . Realtors are not overpaid at all. If I add up all my time when hand holding a buyer or seller from start to finish , all the outside of my job description conversations and „therapy sessions “, concierge services , late night or early morning frantic calls – I won’t even reach a great hourly rate. It takes a lot of passion to stick in that industry for almost 40 years . This lawsuit is the result of a litigious society.
Adding buyer broker commission to buyer financing will be the only way we will get paid, whether or not it’s a good thing remains to be seen as it will impact many buyers ability to qualify for a loan. However when the tide changes and it becomes a buyers market I wonder how many will ask the seller to pay full commission again?!
Real estate mortgages are generally for financing the purchase of real estate only and lenders generally do not want to see anything else in the purchase contract other than real estate. I am not a mortgage broker i am a real estate agent but I believe this is due to a FANNIE MAE FREDDIE MAC requirement. So in order for the lenders to finance the selling agents commission, wouldn’t the Feds have to first agree to change their requirements?
Michel, I was thinking the same thing. You know that won’t happen very fast.
@DarrylDavis. Adding buyer agent commission is great, except you are forgetting about the sky rocketing home prices and that young and first time buyers and don’t forget our military who put their lives on the line for us, may not be able to purchase a home because now a commission amount must be added into the purchase and the debt to income ratio is now off balance.
If we are being told that total commissions are ‘baked’ into the market value as critics say, then the list side reduction should translate to the property’s market value as well.
And pity the appraisers trying to establish the value.
Absolutely fascinating read! The concept of revolutionizing commissions in the real estate industry is a breath of fresh air. It’s high time we embrace a win-win approach that benefits both real estate professionals and clients. This innovative perspective not only aligns incentives but also promises to elevate the overall experience in buying or selling properties. The traditional commission structure has often been a point of contention, and this article sheds light on a much-needed transformation. Kudos to the author for presenting a compelling case for change and offering insights into how this win-win approach can pave the way for a more efficient and equitable real estate market.