A home seller’s guide to navigating new real estate commission rules

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Under new real estate commission rules, it is now clear that home sellers have a wide range of choices when deciding how to sell their property. Photo courtesy Getty Images.

The process of selling a home significantly changed on Aug. 17 when new real estate rules took effect as part of the National Association of Realtors’ court settlement over how broker commissions are negotiated.

In light of these new rules, the association has created a resource guide to help home sellers understand the new process and options available for offering compensation as they begin working with an agent who is a Realtor.

Under the new guidelines, it is now clear that it’s up to the seller to determine offers of compensation.

Sellers have a wide range of choices when deciding how to sell their property. This includes choosing to pay only their agent a commission fee or deciding to also offer a commission, or other form of compensation, to the buyer’s agent.

Here’s what sellers need to know as they consider their marketing strategies and options related to offering compensation to a buyer’s agent:

What is an offer of compensation and why make one?

An offer of compensation is when the seller, or their agent, compensates another agent for bringing a buyer to successfully close the transaction on the sale of their home.

Compensating a buyer’s agent can be a compelling strategy for attracting potential buyers: Offers of compensation help reduce out-of-pocket costs for prospective buyers, which in turn may bring more potential buyers to a property.

These costs can be especially significant for first-time buyers, lower- to middle-income buyers or those from underserved communities.

Are offers of compensation mandatory?

No. It is up to the seller to determine if making an offer of compensation is the best approach for selling their property. Agents who are Realtors — a licensed real estate agent who belongs to the National Association of Realtors — can help answer a seller’s questions and guide them to make a decision that works for them.

As a seller, does my agent need my permission to offer compensation to a buyer’s agent?

Yes. Your agent can only offer compensation or make a payment to a buyer’s agent if they have your written approval and signoff on the amount.

What types of compensation can I offer?

Many options are available for sellers to discuss with their agent. These could include a flat fee paid directly to the buyer’s agent or allowing your agent to share a part of their compensation with the buyer’s agent. You also could consider offering a buyer certain concessions, such as covering closing costs, to make the total home purchase more affordable for them.

How will a buyer’s agent know if there is an offer of compensation?

If you approve an offer of compensation, it can be shared through common marketing methods such as flyers, signs, brokerage websites, social media posts, or simply through a phone call or email. Under the new rules, offers of compensation, however, cannot be listed on Multiple Listing Services (MLSs), which are private databases that are created, maintained and paid for by real estate professionals to help their clients buy and sell property.

Do I have to advertise an offer of compensation if I decide to make one?

No. Advertising can help get the word out to bring more buyers to the table, but you also can choose not to advertise and instead negotiate the offer in a purchase agreement.

You mention concessions – what does that mean?

A seller concession is different from an offer of compensation. It is when a seller covers certain costs associated with purchasing a home for the buyer. Concessions can make homeownership more accessible for buyers by reducing upfront expenses. These can cover things like some transaction costs or property repairs.

Visit facts.realtor for more information and resources for home sellers and buyers.

Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.