Real estate agent commissions have been the subject of a lot of conversations recently.
The August 2024 NAR lawsuit ruling sparked this conversation.
Full disclosure: I’m a licensed real estate agent in Colorado who actively helps buyers and sellers with their transactions.
Prior to the ruling that came down in August, lots of sellers grumbled about paying agent commissions, but for the most part, they DID pay them. It was considered “the cost of selling a house.”
The ruling was supposed to change how houses were sold, but in reality, sellers have been covering the cost of the buyer’s agent for so long that many buyers simply do not have the money to pay their agents themselves, especially in the lower or entry-level price range.
What I’m seeing is that sellers ARE still offering buyer agent compensation simply because their houses won’t be shown if they do not.
And buyers are still using real estate agents because the process can be daunting, and they need someone to walk them through it.
Enter the Investor
You’re savvy, you’re familiar with the process, you’ve done this before. You might be able to get a deal based on these new realities:
- You have an agent that you can afford to compensate.
- You don’t need an agent because you’re so experienced.
- You won’t make it complicated.
- You are an agent.
Sellers may not be conscious of what they’re actually paying their agent. Make sure you’re stating in the cover letter when you submit your offer that you’re covering buyer agent commission. They may get a higher offer that doesn’t offer buyer’s agent compensation, which reduces what goes into their pocket.
Make your offer stronger by covering costs that are typically seller-paid items.
Research shows that For Sale By Owner (FSBO) listed properties sell for significantly less than those listed with a real estate agent. However, this study showed a 0% price difference when comparing the local MLS vs FSBOMadison.com.
I think this particular study is too small to be accurate. I used to live in Madison and used FSBOMadison to sell my house. At the time, it was the largest listing site in Madison – with more homes listed on it than on the MLS. This isn’t the case with most FSBO’s.
I think NAR’s version of the FSBO data is also skewed. You can make data say anything you want it to say, and NAR has a vested interest in promoting real estate agents.
The truth lies somewhere in the middle. Houses sell for less when not listed with an agent, but buyers are also factoring in no commissions when making their offers.
Final Thoughts
If you’re an experienced investor, you could be able to find a deal by representing yourself or offering to pay your agent’s commission when purchasing a home listed by its owner.
The owner feels like they’ve gotten a great deal by saving on commission, and you’re paying less out of pocket, even with your agent commission factored in.
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