Home buyers and sellers face the prospect of major changes to how much and in what way they pay their real-estate agents, following the historic verdict against the National Association of Realtors and large residential brokerages.
There are many new rule changes regarding “Offering” a Buyer’s Agent Compensation (We no longer use the term Commission). Those changes could range from minor tweaks to the commission system to a more radical restructuring of the residential real-estate industry, such as more people buying homes without using agents or buyers paying their agents by the hour.
By way of a quick summary, a federal jury found NAR and large brokerages conspired to keep costs artificially high and awarded $1.8 billion in damages, which could be tripled to more than $5 billion under antitrust rules.
The Cascade Team provides buyers and sellers with choices, control, and complete transparency.
While it’s a confusing topic for both consumers and real estate agents alike, The Cascade Team has put together some Questions and Answers on the topic.
Real Estate Commission FAQ
Why was this rule change put into effect?
For more than 30 years, the compensation framework in the real estate industry was structured for the seller to pay the listing firm and for the listing firm to "share" its compensation with the buyer brokerage firm. This framework was a vestige from "sub-agency" where every broker represented the seller, and brokers did not work directly for the buyer. Sub-Agency was eliminated in the mid-1990s with the adoption of the Agency Reform Act (RCW 18.86) and the creation of buyer agency. Yet, the "commission sharing" structure remained.
Rules and the listing agreement will be revised to provide for a direct offer of compensation from the seller to the buyer brokerage firm. The concept of "commission sharing" by listing firms will be removed from the Rules and the listing agreement. Of course, the seller and listing firm can work together to determine the amount of compensation, if any, to offer the buyer brokerage firm. The listing agreement will be reformatted to clearly differentiate between the listing firm's compensation and the buyer brokerage firm's compensation.
The revisions further enhance transparency regarding broker compensation and create additional opportunities for consumers and brokers to discuss and negotiate compensation. The changes provide greater flexibility for consumers and brokers when selling and purchasing real estate and promote innovation and competition in the market.
Again, these revisions further enhance transparency regarding broker compensation, create additional opportunities for consumers and brokers to discuss and negotiate compensation, provide greater flexibility for consumers and brokers when listing and purchasing real estate, and promote innovation and competition among member brokers. These revisions are critical to the evolution of the real estate brokerage industry and will help brokers and agents to better serve their clients for years to come.
Do I have to offer a Buyer's Agent compensation?
No, Under the proposed settlement and in accordance with NWMLS regulations the requirement that a seller offer compensation to the buyer's broker has been eliminated.
Surprisingly, many people think that real estate brokerage compensation rates are “set” in their area, and they must pay a specific percentage of the sales price to the agent to get their services. This is not the case. In fact, you can pay whatever you and the agent have agreed upon.
What is a “Fair” amount to pay for real estate compensation?
“Fair” is whatever you and the agent decide is fair, and just as you are not under any obligation to pay more than you want, the agent is not under any obligation to do business with you if they are not going to earn what they expect.
Buyer agents will have a Buyer Brokerage Services Agreement with their clients. This agreement will guarantee them a certain commission. That commission can be negotiated as part of the offer and paid from the seller’s proceeds, the buyer can pay their agent directly, or a combination of both.
Who pays the Buyer’s Agent compensation?
It can be the seller or the buyer because it is negotiable who pays the Buyer Agent commission. Commissions are negotiated through an addendum to the Purchase and Sale Agreement. Just like the negotiations in an Inspection Addendum or Financing Addendum.
Under the new rules it is clear the Buyer Agent commission is part of the negotiated purchase price, and it is clear who is paying them, who they represent, and what amount of purchase price that represents.
It is all about better transparency in the process. Agents will still be compensated. Everyone will be clear on who represents who and it conforms with the law that states “ALL” real estate commissions are negotiable.
And honestly many Buyers and Sellers didn’t understand how that worked.
Now the Buyer Agent commission can be directly negotiated. In competitive situations with multiple offers, it may end up where the agent’s required commission is as big a factor as final sales price. For example, on a $2 million home an agent asking for a 2.5% commission would represent a $50,000 fee, whereas an agent asking for a 1% commission would be a $20,000 fee. That $30,000 difference in buyer’s agent commission can be the difference in the lower commission offer getting the home.
Buyer Agents will now have what is called a Buyer Brokerage Services Agreement with their clients. This agreement guarantees them a certain commission.
The Buyer Agent may submit the offer along with an addendum asking you to pay them 2.5% of the purchase price. ($25,000 on a $1M home) That addendum must be agreed to and signed off on by the Buyers as part of their offer. (So, the buyers will understand this “Ask” may affect the competitiveness of the offer they are submitting.) If you counter back on that commission amount the buyer may be required to pay the difference directly to their agent, OR the agent will have the opportunity to adjust their commission down to the offered amount.

Is compensation negotiable?
YES!
Fact: Real estate brokers’ compensation rates are not regulated in any state and are ALWAYS 100% negotiable.
Compensation is negotiated through an addendum to the Purchase and Sale Agreement. Just like the negotiations in an Inspection Addendum or Financing Addendum.
Sellers may choose commission as a percentage or a flat dollar amount.
The buyer agent may submit the offer along with an addendum asking you to pay them 2.5% of the purchase price. ($25,000 on a $1M home) That addendum must be agreed to and signed off on by the Buyers as part of their offer. (So, the buyers will understand this “Ask” may affect the competitiveness of the offer they are submitting.)
You could accept this request, deny it, or counter back at a different number.
You could even offer LESS
If your home is listed at $1M and the buyer’s offer comes in under $1M and their agent asks for a 3% commission…. You could choose to accept the lower offer or counter back AND you could also LOWER the compensation you are offering down to $5,000 or some other number.
Surprisingly, many people think that real estate brokerage compensation rates are “set” in their area, and they must pay a specific percentage of the sales price to the agent to get their services. This is not the case. In fact, you can pay whatever you and the agent have agreed upon.
What is a “Fair” amount to pay for real estate commission?
“Fair” is whatever you and the agent decide is fair, and just as you are not under any obligation to pay more than you want, the agent is not under any obligation to do business with you if they are not going to earn what they expect.
What will most likely happen is Buyer’s agents will have what is called a Buyer Brokerage Services Agreement with their clients. This agreement will guarantee them a certain compensation.
How will it work if Buyer commissions are no longer displayed on the MLS?
Compensation is now negotiated through an addendum to the Purchase and Sale Agreement. Just like the negotiations in an Inspection Addendum or Financing Addendum. Most of the time the buyer's agent commission will be paid out of the seller’s net proceeds through escrow just like it has been done for the last 30+ years. In some cases, if the seller is not willing to cover the full amount, and if the buyer’s agent will not adjust their commission to what the seller offers, then the buyer may have to make up this difference directly.
What happens when a Buyer Agent has a Buyer Brokerage Services Agreement?
“This revision allows greater flexibility for sellers when listing a property, while affording buyers and buyer’s brokers a vehicle for negotiating the compensation for the buyer’s broker’s services.
Sellers and their agents won’t be allowed to offer a commission to buyers’ agents within their listing.
However, that doesn’t mean that a seller isn’t allowed to pay buyers’ agents a commission. It just can’t be published in the listing.
And buyers will now be required to sign a written agreement with an agent in order to work with them, which will likely require them to agree to a certain amount of compensation. That doesn’t necessarily mean the compensation has to be paid out of the buyers’ pocket; it could be an agreed-upon amount that will be negotiated into the purchase price paid for through the proceeds of the sale.
From Optional to Mandatory
Buyer Brokerage Services Agreements have been around for quite a while. And now they are legally required by Washington State. These agreements offer crucial safeguards for everyone involved and are similar to how long-standing seller listing agreements have always worked.
Safeguarding Your Interests
These agreements shield you from potential conflicts of interest, mandate agents to adhere to specific professional guidelines, and ensure transparency about the Buyer Agent’s legal responsibilities and compensation. This all leads to a clearer understanding from the start as we team up on your upcoming home purchase.
Can the Buyer Agent “Ask” for higher commission?
The Buyer Agent may ask for any commission amount that their client agrees to. (2.5% of the purchase price on a $Million Home that would be $25,000) That addendum must be agreed to and signed off on by the Buyers as part of their offer. (So, the buyers will understand this “Ask” may affect the competitiveness of the offer they are submitting.)
This revision allows greater flexibility for sellers when listing a property, while affording buyers and buyer’s brokers a vehicle for negotiating the compensation for the buyer’s broker’s services.
The Seller still has no obligation to agree to pay the higher commission, and as the Buyer Agent works solely for the buyers benefit it may fall to the buyer themselves to make up the difference in the offered commission and the commission amount guaranteed in the Buyer Brokerage Services Agreement.
You could even offer LESS
Just because a buyer agent asks for a certain amount of commission, that does not mean you have to agree to it. The commission paid to the buyer agent by the seller from the net proceeds of the sale is completely negotiable. So, if a buyer agent asks for 3%, you could counter back at 1% or anywhere in between. That amount can be negotiated until everyone is satisfied. The buyer agent can even agree to lower the commission requirement in their Buyer Brokerage Services Agreement and to accept what is negotiated.
If the Buyer Agent asks for a commission but the offer is lower than the asking price, can I offer a lower commission?
YES! You can offer less.
Just because a buyer agent asks for a certain amount of commission, that does not mean you have to agree to it. The commission paid to the buyer agent by the seller from the net proceeds of the sale is completely negotiable. So, if a buyer agent asks for 3%, you could counter back at 1% or anywhere in between. That amount can be negotiated until everyone is satisfied. The buyer agent can even agree to lower the commission requirement in their Buyer Brokerage Services Agreement and to accept what is negotiated.
Many Buyer Agents offer “rebates” to their clients. How does this rule change affect that?
Additional options have been added to Buyer Brokerage Services Agreements to enable the buyer brokerage firm to reduce its compensation and have the seller credit the amount of the reduction to the buyer's obligations at closing. Note that such credit is subject to approval by the buyer's lender. Another new option on the form is a simple reduction in the buyer broker compensation paid to the firm. This option could be used in situations where a buyer and buyer's broker agreed to a lesser amount of compensation in a buyer representation agreement or a reduction to make the buyer's offer more competitive. There is also an "Other" box that the parties may use to agree on different compensation terms.
This new legislation also effectively separates the processes of buyer and seller agent commissions, and that is going to have significant changes as well.
While some awkward situations are sure to come up as agents adjust, the difficult conversations prompted by the new legislation will help their buyers through a much more transparent transaction. Another plus: Under the revised law, brokers will not have to wrestle with clients who do not want to sign agreements, for example, because another agent at another brokerage did not ask them to.
Can a Buyer Agent reduce their commission to make the offer more favorable?
Another new option is a simple reduction in the buyer broker compensation paid to the firm. This option could be used in situations where a buyer and buyer's broker agreed to a lesser amount of compensation in a buyer representation agreement or a reduction to make the buyer's offer more competitive. There is also an "other" box that the parties may use to agree on different compensation terms.
For example: In competitive situations with multiple offers it may end up where the agent’s required commission is as big a factor as final sales price. For example, on a $2 million home and agent asking for a 2.5% commission would represent a $50,000 fee, whereas an agent asking for a 1% commission would be a $20,000 fee. That $30,000 difference in Buyer Agent commission can be the difference in buyer (two) with the agent asking for 1% getting the home over buyer (one) with the agent requiring 2.5%.
What if a Buyer comes unrepresented and wants to purchase my home?
If the buyer is unrepresented the listing agent will be required to handle both sides of escrow, confer with the buyer’s lender, collect data, and clear all sides for closing. There will be a separate section on the listing agreement where the listing broker indicates.
1. Compensation for marketing the home and negotiating the offer.
2. Additional fee if the buyer is unrepresented.
In the past the default would have been for the Listing agent to claim both the Listing and Buyers compensation.
Under the new forms this is now broken out and can be clearly negotiated in advance what would happen if the buyer came unrepresented into the transaction.
Questions About Real Estate Commissions?
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