I have a duplex listing on the market at 233 Glen Park Ave, and in the next two weeks I’ll be putting a condo on the market at 91 Forest Lane as well. Both of these listings are in San Rafael, and both of my sellers are offering to pay buyer’s agents 2.5% commission. A recent analysis of transactions in our Coldwell Banker San Rafael and Mill Valley offices shows that over 80% of sellers are still offering to pay for buyer’s agent commissions.
One trend we are seeing from San Francisco agents is sellers offering to pay varying commissions, but not letting buyer’s agents know how much until an offer has been submitted. For example, if an offer is submitted over the asking price, they might be offering 3%. If it’s at the asking price then 2.5% and if it’s under the asking price then it’s 2.0%. I personally don’t like this type of structure because not knowing up front about the commission may stop buyers from making offers. There’s a chance that no commission is being offered at all, or a severely reduced commission, in which case buyers will need to come up with extra cash to pay for their agent representation. Buyers might ask themselves, if sellers aren’t being up front about the commission they are offering, what else might they not disclose about the property?
In the real estate business, there are all variables that increase the likelihood a buyer won’t make an offer. We don’t want to give buyers an additional reason not to make an offer. Let’s take my new condo listing as an example. It’s a one bedroom, one bathroom unit and most people interested in buying it will either be first time home buyers stretching to get in, or people downsizing. The first time home buyers will have a difficult enough time coming up with the money to buy so we don’t want to throw up the commission road block. People downsizing might be in a better position to come up with the extra cash for commission, but downsizers will also likely be sensitive to spending more with their eyes on retirement.
Unfortunately, it is once again getting more expensive to get a mortgage. This means people need to pay more for the same homes at the same prices which is not good for the market. Rates this week rose again and are back up in the high 6’s. With the Fed meeting next week there is an expectation of the short-term lending rate coming down a quarter point, but this is already baked into the current mortgage interest rates. If they decide to do something unexpected, like another ½ point reduction or no reduction at all we will see movement in the market. As it stands, don’t expect any significant mortgage rate relief in the near future.
For the time being buyers need all the help they can get. Sellers offering commission can be the difference between a house sitting on the market and selling. This is especially true when 4 out of 5 homes on the market are offering commissions. With interest rates approaching 7% again, I don’t think now is a good time to stop offer buyer’s agent commissions. If interest rates come down significantly and we see an influx of buyer demand in the spring of 2025 this could change.
*** Thank you for reading my blog! If you or any of your friends and family ever have any real estate questions, please feel free to contact me at andyfalk2112@yahoo.com or 415-250-8025. I’m always happy to help!