I’m a fairly fluid person, and I’ve been known to either lead my clients or follow their lead depending on how they prefer to work. Not that I’m big on astrology, but I am a Libra, and I tend to seek balance in my professional and personal lives. 2024 may be a year where we strive for balance between buyers and sellers on the subject of commissions.
Currently 99% of the listings in the market have the sellers offering to pay commissions to both their agents and the buyer’s agents. This is how it has always been since I’ve been in the real estate profession, even though it’s never been mandatory that sellers offer to pay commissions to both sides. It’s been customary, and that may not be a boat that sellers want to rock until we see a greater movement towards buyers paying their own agent’s commissions.
The reasoning is simple. If all things are equal and you have two properties on the market that are similar in price and amenities, but one has a seller offering to pay both commissions and the other has the buyers paying commission to their own agents, the one seller offering to pay both commissions will have a greater probability of selling first. That’s because buyers are already saddled with down payments and closing costs, adding a broker’s commission on top of that will only make an already daunting task more challenging if not impossible.
If one of my clients wants to try selling without offering commission to the buyer’s agents, I will be willing to try. The issue that I need to advise clients of is that if a property doesn’t sell and we need to entertain a price reduction, in our market price reductions of 5-10% are most effective. Hypothetically the sellers offering a 2.5% commission to the buyer’s agents could be the difference between selling at the original asking price and having to execute a price reduction to sell.
All that being said, with interest rates coming down and low inventories, 2024 should be a better environment for sellers to not offer commissions to both sides. Had interest rates remained in the 8% range then 2024 would have been a horrible time to have sellers stop offering commissions. And in general, starter homes are probably not the best homes to not offer buyers agents commissions. That’s because those buyers are the most financially stretched, and expecting them to come up with the additional money for commissions could be a real deal breaker.
If nothing else, 2024 will be another interesting year in real estate sales, especially with the new challenges the commission structure will present.