Intel Broker’s Guide: When A Seller Won’t Foot The Buyer’s Agent Bill



This report is available exclusively to subscribers of Inman Intel, the data and research arm of Inman offering deep insights and market intelligence on the business of residential real estate and proptech. Subscribe today.

Homesellers hoping to capitalize on recent settlements and simply pocket the share of the sale that once went to the buyer-side commission are set to meet substantial resistance from their listing agents, according to an Intel analysis of brokerage guidelines and agent intentions.

Many brokerages have established policies for pushing back against this new demand from sellers, which agents have already been fielding as the industry barrels toward a new landscape.

The primary reason for this pushback? There’s a widely held industry belief that a hardline seller approach to not cover the buyer-side commission would actively harm the sale.

“For the near-term I believe the strategy will have a negative impact on the salability of the property, but once things settle in I believe it will be less of an issue,” wrote one brokerage leader in Madeira Beach, Florida. “Perhaps the lower-tier price points will have a more difficult time with a no buyer-side fee being paid, but negotiations can overcome the hurdle.”

Intel embarked in April on a project of documenting how brokerages are preparing for this moment. 

By asking 620 real estate professionals detailed questions about their seller and buyer clients, Intel aimed to paint a picture of what guidelines brokerages have adopted, how big a headache this has been to date and what the initial months of transition may look like for the brokerage world.

This exercise found that the industry’s resistance to these seller demands is widespread, but that it takes many nuanced forms and flavors — some passed down from a brokerage’s top leaders, others drawing from agents’ years of experience in the field.

In the full report below, see how your brokerage stacks up among the most widely used policies and guidelines today.

The rising stakes

There’s no escaping this — not today, nor in the months to come. 

The majority of agents surveyed in late April reported that at least some of their recent seller clients have inquired about whether they are obligated to cover the buyer’s agent commission.

  • 23 percent of agent respondents told Intel that more than 1 in 10 of their recent seller clients asked about whether they need to cover the buyer’s side. Nearly half of this group said more than half of their seller clients had asked about it.
  • For another 32 percent of agents, at least a few clients made similar inquiries — but a very small share, fewer than 10 percent.
  • For 45 percent of agents, however, that number for now is still zero.

Clearly a large number of agents are now fielding at least a few of these requests, even in the early months of 2024. And even more consumers are likely to hear about the policy changes as NAR’s potential settlement gets closer to going into effect.

And when sellers choose to go through with this in the intermediate period, agents believe the effect could potentially kill deals — shrinking the buyer pool for the seller’s home, wasting valuable agent time on both sides of the transaction, and adding tension to the agent-client relationship.

It’s a particularly fraught scenario when a first-time buyer is involved, agents say.

  • 38 percent of agent respondents told Intel that their typical first-time buyer might withdraw from consideration for a home if they learned the seller refused to cover the buyer’s agent commission. Only 29 percent of agents said the same of their typical repeat buyer client.
  • Only 22 percent of agents said their typical first-time buyer would be willing to directly pay their agent’s full fee at closing in order to secure the home in this scenario. That’s compared to 32 percent of agents who said the same of their typical repeat buyer.
  • Agents were a bit less likely to say their typical first-time buyer would be open to upping the price offered in exchange for the seller covering the buyer-side commission. Just over 43 percent of agent respondents told Intel their first-time buyers would be open to raising the price, while 47 percent said their repeat buyers would consider it.

The picture that emerges from this?

Ultimately, agents expect that whenever a seller presses forward with a strategy of not covering the buyer’s commission, it will risk more potential deals falling through as some buyers drop out. This is especially true when first-time buyers are involved, but even a number of offers from repeat buyers might be put at risk.

That stubborn seller might expect some counteroffers, but most would be contingent on the seller reversing course and covering the buyer-side commission in exchange for more favorable terms elsewhere.

Relatively few buyers will ultimately opt to pay their agent’s fee directly at closing, at least at first, agents believe. Renters who are searching for their first home may not be in a position to cover this fee at all, and repeat buyers may simply shop elsewhere.

Guidelines vs. instincts

About 1 in 3 agents who replied to Intel in April say their brokerage has recommended a specific approach to a seller client who insists on not covering the buyer commission.

Intel went deeper, asking this slice of agents what they’ve been told to say to clients.

These results — which closely aligned with the responses given by brokerage leaders — paint the clearest picture Intel has yet gathered on how brokerages are advising their agents to respond.

If a seller client insisted on not covering the buyer’s agent commission, how has your brokerage recommended you respond?

  • 48% — Encourage the seller to use this only as a start to negotiations, but ultimately be willing to cover the buyer-side commission
  • 17% — Advise the client they may need to lower the list price if they’re unwilling to cover the buyer-side commission
  • 11% — Push back and recommend that the seller cover the full amount the buyer has agreed to pay their agent
  • 4% — Agree without trying to persuade the client
  • 21% — Other

Right away, it jumps out that agents are being advised against taking an extreme position with a client. 

Brokerages that have a policy appear to be strongly recommending that agents advise their sellers against taking a hardline approach on the buyer’s commission, while at the same time stopping short of a complete rejection of their client’s wishes.

Of the many respondents who selected “other” in response to this question, most gave a response closely aligned with the idea that clients might need to lower the list price if they stick with a hard demand not to cover the seller fee.

In general, brokerages want their agents to help sellers understand they are hurting the marketability of the listing by only appealing to buyers who can cover their agent’s fee directly, as one agent from St. Louis, Missouri, explained.

“I don’t feel there is one strategy,” the agent wrote to Intel, “but the seller obviously loses a competitive advantage and takes buyers out of their buyer pool if they do not offer buyers agent compensation. Showing them the reasons why and figuring out options is the best route.”

For agents whose brokerage has not yet settled on a policy in this area, Intel asked what their go-to response is in cases like this.

These agents, flying on their own, gave remarkably similar responses — with a couple of exceptions.

  • 15 percent of agents without a brokerage policy said they would push back and simply recommend the seller cover the full amount the buyer has agreed to pay their agent. That’s nearly 5 percentage points higher than the group of agents whose brokerage has given them guidance.
  • This stronger negative response comes almost entirely at the expense of the more nuanced “this may hurt the listing” advice preferred by brokerage leaders.

Largely, these results demonstrate that agent instincts are already in alignment with policies at the brokerages that have provided them. 

But when a brokerage doesn’t establish guidelines for dealing with these types of sellers, some of their agents may end up pushing back harder with clients than the brokerage would be comfortable with.

That said, brokerage leaders who have yet to arrive at a policy argue there’s good reason to wait — ranging from a lack of clarity on what the policy change means to a desire to have their policies undergo greater legal scrutiny.

“We train on the subject but feel establishing a set policy would put us in a position for litigation,” wrote one North Carolina brokerage leader. “Our job is to educate the public and to do that we must be [knowledgeable].”

Methodology notes: This month’s Inman Intel Index survey was conducted April 19-May 1, 2024, and received 620 responses. The entire Inman reader community was invited to participate from the website, and a rotating, randomized selection of community members was prompted to participate by email. Users responded to a series of questions related to their self-identified corner of the real estate industry — including real estate agents, brokerage leaders, lenders and proptech entrepreneurs. Results reflect the opinions of the engaged Inman community, which may not always match those of the broader real estate industry. This survey is conducted monthly.

Email Daniel Houston





Source link