When homeowners decide to list their home, the #1 question on their minds often is “What is my home worth. The #2 question is: "What is with the change in commissions I heard about on the news?"
What’s Changing?
Real estate agents in Minnesota and Wisconsin disclosed commission rates paid to the buyer's agent upfront, but in many states, this was not the standard practice. Because practices were not consistent nationwide, a class action lawsuit ensued, resulting in changes to how commissions paid by the seller to the buyer’s agent are handled. In the past, the commission offered to a buyer’s agents was included in the professional real estate databases (MLS) used by agents to list properties for sale. However, the new practice stipulates that these databases can no longer list the commission the seller will offer to the buyer’s agent. Instead, this information will now be part of the purchase agreement.
3 Key Aspects of the Change
1. Removal of Commission Disclosure from MLS
The Multiple Listing Service (MLS) databases will no longer display the commission the seller is offering to the buyer’s agent. This change aims to standardize practices and ensure that commission details are negotiated and agreed upon in the purchase agreement.
2. Inclusion in Purchase Agreement
The commission offered to the buyer’s agent will now be detailed in the purchase agreement. This ensures that all parties are aware of the commission structure at a crucial stage in the transaction. MN & WI agents were already including this information in the listing contract, buyer contract and at the time of the purchase agreement and other states are now required to do the same.
3. Enhanced Consumer Protections
By shifting the disclosure to the purchase agreement, the practice aims to protect consumers from any potential misunderstandings or hidden fees that could arise during the transaction.
What Does This Mean for Home Sellers?
For homeowners looking to sell their property, this change in practice may initially seem confusing, but it brings several advantages. Importantly, it is still usually in the homeowner's best interest to offer a commission to the buyer’s agent. Buyers already need to come up with money for the down payment and closing costs, and if they also must cover the commission, it can make purchasing a home difficult. Offering a commission to the buyer’s agent can make your property more attractive to potential buyers, easing their financial burden and facilitating a smoother transaction. Moreover, buyer representation is crucial in real estate transactions, ensuring that buyers have professional guidance and support throughout the process, which can also lead to a more successful sale for the seller.
2 Potential Challenges
While the change introduces important benefits, it may also present some challenges:
1. Transition Period: Agents and consumers may experience a transition period as they adjust to the new process.
2. Increased Complexity: Including commission details in the purchase agreement may add a layer of complexity to the negotiation process.
Conclusion
The change in real estate commission practices aims to provide uniformity nationwide. However, agents in Minnesota and Wisconsin have already been communicating with their clients about commissions in the listing contract, buyer's representation contract, and purchase agreement. If you have questions about these changes, reach out to us, Kathy Anderson and Kenzie Meyers with The Home Finder Team at Coldwell Banker Nybo & Assc. We are here to help you navigate this new landscape and ensure a smooth and transparent transaction process.
Kathy Anderson | 507-358-5111 & Kenzie Meyers | 507-271-0557
