Commission Transparency - NAR

How to inform your sellers of the buyer agency commission when listing their home.

The recent settlement involving the National Association of Realtors (NAR) has led to significant changes in how real estate commissions are discussed and handled. One of the most impactful changes revolves around the transparency of the buyer's agency commission as part of the listing agreement. For real estate agents, this shift means navigating a new landscape where clear communication and education are more important than ever. Here’s how agents can effectively approach the conversation about buyer’s agency commission with their clients in light of these changes.

Understanding the New Requirements

Under the NAR settlement, real estate agents are now required to disclose more information about the buyer's agency commission, including how these commissions are split between the buyer's and seller's agents. The goal is to increase transparency and ensure that consumers fully understand the financial aspects of their transactions. This change encourages open discussions about commissions and requires agents to be more proactive in explaining the value they provide.

1. Start with Education and Transparency

The key to approaching the conversation about buyer’s agency commission is education. Many sellers and buyers may not fully understand how commissions work or why they are structured the way they are. By starting the conversation with a clear explanation, you can demystify the process and build trust with your clients.

Action Steps:

• Explain Commission Basics: Begin by explaining how real estate commissions work, including the standard practice of the seller paying the commission, which is then split between the listing and buyer’s agents. Clarify that the commission covers various services provided by both agents, including marketing, negotiations, and guidance throughout the transaction.

• Discuss the Value of Buyer’s Agents: Emphasize the important role buyer’s agents play in the transaction. Explain how they help buyers find properties, negotiate offers, and navigate the closing process. Highlight that a fair commission ensures buyers receive the representation they need to make informed decisions.

  
  

2. Highlight Your Unique Value Proposition

In a market where commission discussions are becoming more transparent, it's crucial to communicate the unique value you bring to the table as a listing agent. By focusing on your expertise, marketing strategies, and commitment to client success, you can help clients see why working with a full-service agent is worth the commission.

Action Steps:

• Outline Your Services: Provide a detailed breakdown of the services you offer as part of your listing agreement, including professional photography, staging consultations, online marketing, open houses, and more. This will help clients understand the breadth of work involved in selling their home.

• Share Success Stories: Use case studies and testimonials to demonstrate how your strategies and expertise have led to successful sales. Highlight examples where your negotiation skills or marketing efforts significantly impacted the final sale price.

  
  

3. Be Prepared to Discuss Commission Flexibility

With the NAR settlement encouraging transparency, some clients may be more inclined to discuss commission rates and negotiate terms. Being prepared for this conversation is key. While you should stand by the value you provide, it’s also important to be open to discussions about commission flexibility where appropriate.

Action Steps:

• Know Your Bottom Line: Understand the minimum commission rate you’re willing to accept while still providing high-quality service. Be prepared to explain how lower commissions might impact the level of service or marketing a property receives.

• Offer Tiered Service Options: Consider offering different service levels at varying commission rates. This allows clients to choose the package that best fits their needs and budget while still ensuring you’re compensated fairly for your work.

  
  

4. Address Common Misconceptions

Many clients may have misconceptions about commissions, especially with the increased focus on transparency. Addressing these head-on can help alleviate concerns and ensure a smoother conversation.

Action Steps:

• Clarify Who Pays the Commission: Make it clear that in most real estate transactions, the seller typically pays the total commission, which is then split between the listing and buyer’s agents. Explain that this practice is designed to ensure that both parties are represented fairly.

• Explain the Role of Commissions in Buyer Representation: Some sellers might not understand why they are paying for the buyer’s agent. Explain that offering a competitive commission to buyer’s agents helps attract more potential buyers and ensures those buyers have professional representation, ultimately benefiting the seller.

  
  

5. Use Tools and Resources to Support Your Conversation

Leveraging tools and resources can make these conversations more straightforward and effective. Providing visual aids or written materials can help clients better understand commission structures and the value of professional real estate services.

Action Steps:

• Provide a Commission Breakdown Sheet: Create a simple, easy-to-understand document that breaks down how commissions are typically split and what services are included in each portion.

• Use Market Data: Share local market data that shows the correlation between commission rates and the speed or price of sales. Demonstrating that homes offering fair commissions often sell faster or for higher prices can help justify your rates.

  
  

The NAR settlement brings a new era of transparency and accountability in real estate transactions. For agents, this is an opportunity to reinforce the value of their services, educate clients, and build trust through open and honest communication. By approaching the conversation about buyer’s agency commission with clarity, confidence, and a focus on education, you can help your clients understand the importance of professional representation and ensure a successful partnership.