The recent settlement involving the National Association of Realtors (NAR) marks a significant shift in the real estate landscape, particularly for homeowners looking to sell their properties. The settlement has made it optional for sellers to offer compensation to buyer brokers, a practice that was previously standard in many real estate transactions, and this was the case here in Queens too. This change introduces new considerations for Queens’ homeowners, as the decision to offer buyer agent compensation—or not—can impact various aspects of the sale process.
Understanding the NAR Settlement
The settlement arose from allegations that the NAR’s rules regarding buyer broker compensation were anti-competitive. By making this compensation optional, the settlement aims to increase transparency and potentially lower costs for buyers. However, it may actually raise the cost of buying because if a seller is not offering out buyer broker compensation and a homebuyer wants representation, they will now need to pay their agent directly, in addition to their down payment, closing costs, repairs, etc.
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For sellers, this change means a new set of strategic decisions because the questions become, is it worth offering out buyer broker compensation? Can it work against you if you don’t offer out buyer broker compensation? And will offering out buyer broker compensation increase the activity and/or exposure of your listing?
Below is a breakdown of the pros and cons of offering out buyer broker compensation under the new landscape:
The Pros and Cons of Offering Buyer Broker Compensation
Pros
1) Increased Buyer Interest: Offering compensation to buyer brokers can make your property more attractive to agents, who may be more likely to show your home to their clients. This can lead to more showings and, potentially, more offers. Since the NAR settlement, we have had agents who call us on our listings and one of the first question they ask is “Are you offering out buyer broker compensation?”. Right or wrong, this is something we have experienced and it is something that we believe will continue because moving forward, some listings will be offering out buyer broker compensation and some will not. It will not be visible on our MLS anymore so buyer brokers will most likely be calling listing agents to find out. If a listing is offering buyer broker compensation, it may make that house more attractive because for that property, the buyer would not have to pay their agent directly.
2) Faster Sale: With more buyers and agents viewing your home, you might receive offers more quickly, reducing the time your property spends on the market. This goes right in line with proper pricing, effective marketing, and easy accessibility. Ultimately, if you have maximum exposure and no possible deterrents, then it will most likely lead to a quicker sale.
3) Competitive Edge: In a competitive market, offering buyer agent compensation can give your listing an edge over others that do not offer such incentives. For example, if one house is asking $800K and the seller is offering out buyer agent compensation, and another house is asking $800K but the seller is not offering out any buyer agent compensation, the potential homebuyer may see more value in the first one because buying that house would mean that they would save on paying the buyer agent directly. If the buyer agent’s compensation agreement states 2% (as an example), then that would save the buyer $16,000 ($800K x 2%). This is a good way to look at it because moving forward, some houses will offer out compensation and some will not, and the ones that do may gain a competitive advantage as a result.
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Cons
1) Higher Costs: Offering compensation to buyer brokers means an additional cost for you, the seller. This could reduce your net proceeds from the sale. While offering out compensation will give you maximum exposure, your overall closing costs will be higher as you will be deciding to pay both brokers.
2) Market Dynamics: In some markets, the absence of a buyer broker commission may not significantly impact the interest in your home, especially if the market is hot and buyers are plentiful. If your area and property type is in a strong seller’s market, then the truth is that the demand may be so high that you don’t even have to offer out buyer agent compensation. A good agent will be able to help you determine if your area and property type are in a buyer’s, seller’s, or balanced market.
3) Complex Decision-Making: Deciding whether to offer compensation, and how much to offer, adds another layer of complexity to the selling process. Homeowners will need to carefully evaluate their local market conditions and consult with their listing agent to make an informed decision. This will be the key moving forward as it is not a given as it was in the past. Previously, pretty much any seller that listed with an agent would be offering out some type of buyer agent compensation. Now that it is fully optional, a conversation with your agent will be a key factor in deciding whether to offer out compensation, and if so, how much to offer.
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Making the Decision: Key Considerations
1) Local Market Conditions: The impact of not offering buyer broker compensation can vary greatly depending on your local market. In a seller’s market with high demand, the absence of such compensation might not deter buyers. In a buyer’s market, however, offering compensation could be more critical to attracting interest.
2) Consult with Your Listing Agent: Your real estate agent can provide valuable insights into how offering—or not offering—buyer broker compensation could affect your sale. They can share data on local trends, share stories from the field, and help you weigh the potential benefits and drawbacks.
3) Evaluate Your Financial Situation: Consider how the additional cost of buyer broker compensation fits into your overall financial picture. While it might seem like an added expense, it could facilitate a quicker sale or a higher sale price, potentially offsetting the cost.
4) Consider Buyer Perceptions: Some buyers may perceive a listing with no buyer broker compensation as less appealing, especially if they need to cover the broker’s fee themselves. This perception could affect the number of offers you receive and the competitiveness of those offers.
The Early Stages: What to Expect
As the Queens real estate market adapts to these changes, it’s difficult to predict exactly how things will unfold. Initially, there may be a period of adjustment as both sellers and agents navigate the new landscape. As mentioned before, what we may begin seeing is a mix of listings offering buyer agent compensation and some offering no buyer agent compensation. In our opinion, the offering of buyer agent compensation may just become a way of making a property look more competitive in comparison to other properties on the market. Monitoring local trends and staying flexible in your approach will be key.
In conclusion, the NAR settlement introduces a new level of choice for Queens homeowners looking to sell their homes. While the option to offer or withhold buyer broker compensation adds complexity to the selling process, it also provides an opportunity to tailor your strategy to your specific market and financial goals. By carefully considering the pros and cons and consulting with your real estate agent, you can make an informed decision that best supports your selling objectives. If you are thinking of selling within the next year and would like to schedule a free consultation, feel free to Contact Us anytime 🙂
