Big changes in the way broker commissions are paid just took effect nationwide this past weekend on August 17th. There’s a lot for future home sellers to know so they can decide what strategy will best benefit them.
It’s going to be a bit disjointed over the next few months as the industry adjusts to a new way of doing business. Different geographical regions and brokerages may have different types of paperwork and procedures, so I’m speaking here about only San Francisco.
Here’s what you need to know if you’re planning to list your San Francisco property:
Previous commission structure. Sellers traditionally paid broker commissions. The listing agent would charge an overall fee which was split with the buyer broker and agent. The fee has always been negotiable. (And for the record, a broker is the real estate company and an agent is a licensed professional working under that broker. The “buyer broker commission” refers to the total amount paid to both the broker and the agent involved in the transaction.)
Reasons for the change. A group of home sellers in Missouri filed a lawsuit against the National Association of Realtors (NAR), alleging that NAR and its member brokerages violated antitrust laws by requiring sellers to pay buyer agents and not clearly stating that commissions were negotiable. They also raised concerns about buyer broker commission amounts being displayed in the Multiple Listing Service (MLS), suggesting that agents were choosing which homes to show based on these amounts. NAR settled the lawsuit in March 2024 and agreed to make significant changes to the buying and selling processes as part of that settlement.
What to expect in SF real estate now:
- Sellers will only negotiate their listing broker fee with their agent. The updated listing agreements no longer include a buyer broker fee.
- Sellers may still choose to offer buyer broker compensation, but this amount can no longer be listed in the MLS.
- Agents will communicate any buyer broker fee offers through other marketing channels.
- Buyers’ agents will need to include paperwork with their client’s offer if they request a buyer broker fee.
- If a seller opts not to pay a buyer broker fee, buyers will need to cover this fee themselves as part of their mandatory buyer broker agreement.
- The fee will be included in the buyer’s overall closing costs (typically 1-2% of the purchase price, not including the broker compensation). Buyers will need to plan their finances accordingly to cover all closing costs.