Decoding Buyer's Commission: What To Expect in 2024

 

As we enter 2024, it's crucial for you as a real estate agent to have a deep understanding of the buyer's agent commission structure and how it may evolve in the months ahead.

With lawsuits, regulations, and industry scrutiny mounting over issues like mandatory MLS listings, unilateral offers of compensation, and NAR's Clear Cooperation Policy, definitive changes could arise that transform traditional commission models.

The buyer's agent commission has remained relatively unchanged for decades—typically a percentage of the final sale price negotiated between the buyer and their agent. 

However, as an agent in 2024, being fluent on trends and changes that impact this critical fee structure will be vital for your success.

With home prices reaching record highs in recent years, buyers are more cost-conscious than ever.

And regulations surrounding commission disclosures aim to make an historically opaque process more transparent.

As a result, today's buyers evaluate agent fees with heightened scrutiny, and that is unlikely to change in 2024.
 
 

Ylopo CEO Howard Tager and Ethan Beute of Follow Up Boss recently led an insightful webinar exploring the future of real estate commissions.

They hosted a dynamic discussion with industry thought leaders Keith Robinson, Chief Strategic Officer at NextHome, and James Dwiggins, CEO & Co-Founder of NextHome.

As hosts of the acclaimed Real Estate Insiders Unfiltered Podcast, Robinson and Dwiggins brought valuable perspectives on emergent trends.

Over the wide-ranging session, Tager and Beute engaged the experts on an array of pressing topics impacting agents, teams, brokers, MLSs, and consumers amidst the shifting commissions landscape.

This article discusses some of the core issues discussed in the webinar, in a way that empowers you as you advise and guide your buyers on what to expect when working with an agent in 2024. 

We'll explore emerging trends like rising transparency on fees, increased use of buyer broker agreements, more negotiation on commission rates, and a shakeup that rewards high value agents while exposing those not driving sufficient value.

Read on for insights you can leverage to strengthen your value proposition and partnerships.

 
 

Chapter 1: Understanding Commission Basics

Before diving into the potential changes ahead, let’s level-set on what angent commission actually entails so you can navigate through the process.

In a typical real estate purchase, the seller agrees to pay an overall commission that is then split between their listing agent and the buyer’s agent.

This commission generally ranges between 2-6% of the final sale price.

For example, on a $500,000 home sale with a 5% commission rate, the total commission fees would amount to $25,000.

Another one:

 

This full commission amount is paid by the seller, who contracts it as part of listing their home on the market.

  • The key takeaway – while technically paid by the seller, the commission effectively gets built into the home’s sale price. Since market factors determine appropriate listing prices, buyers ultimately contribute to the commission their agent receives.

This is why a commission can impact negotiations. 

Savvy buyers may aim to reduce commissions to increase their bargaining power on bids.

And as transparency rises around what an agent earns, more buyers may take this approach in 2024.

 
 

Chapter 2: Pressures Driving Commission Changes

With this foundation on typical commission structures, what pressures are shaping how real estate transactions may evolve in the coming years that you should keep top of mind?

Lawsuits & Investigations

The biggest catalyst has been growing legal scrutiny from the Department of Justice (DOJ) and class action lawsuits claiming anti-competitive practices around buyer’s commissions.

These cases allege issues in how the National Association of Realtors governs MLS listing data and broker compensation.

While still ongoing, early unfavorable rulings have put pressure on the industry to settle.

Experts predict these legal challenges could force changes around commission policies and buyer agent agreements in 2024 as part of broader settlements.

Transparency & Perceived Value

Consumer desire for transparency around fees has also grown.

With more information at their fingertips, buyers want to understand exactly what service costs they are paying – and they expect commensurate value.

As a result, you must better demonstrate your unique value-add to justify earnings.

Those who communicate their competitive differentiation and negotiate to reflect true services provided will thrive.

Increasing Negotiation

Between market forces and legal outcomes, experts expect commissions to become more openly negotiated in 2024 and beyond.

Savvy agents are proactively developing flexible compensation models and getting better at negotiating on behalf of their buyers.

With added transparency and potentially new MLS rules, buyers themselves may also start demanding lower or unique commission structures from their agents.

This makes it vital to articulate your value and have personalized commission conversations early in the buyer relationship, rather than waiting for them to negotiate with you.

Meet buyers where they are, understand their goals, and collaborate on fee structures that work for both parties.

The key is framing fees fairly based on services rendered, not an automatic percentage. Each situation is unique. Customizing your model along with the boundaries below sets you up for reasonability and transparency:

  • Disclose all fees upfront

  • Link fees to detailed services provided

  • Establish minimum fees to cover your costs

  • Benchmark rates against local market averages

  • Reserve premium fees for premium value-added services

  • Adjust fees lower if requesting less service

 

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Chapter 3: Showcasing Your Value

With commissions undergoing transformation, the question is - how can you showcase value and lock in buyer partnerships quickly against this fluid backdrop?

Consider these 4 proven tactics:

1. Lead With Your Why

Why did you get into real estate?

Share your origin story!

By revealing what motivates you, buyers connect with the human side of working with an agent vs. algorithms or direct access models.

Pull at their heartstrings while demonstrating this is not just another transaction for you. You genuinely want to guide them to their perfect home.

2. Clarify Your Special Sauce

What is your superpower? Showcase your unique background, niche, network, or approach to moneyball offers with custom data.

Pull back the curtain on why you’re different – is it as simple as 10 years navigating local regulations or next level closing rate data analytics?

Distill then demonstrate your “secret sauce” throughout the search journey so value is felt, not implied.

3. Set Proper Expectations

Forecast a realistic timeline aligned with market dynamics, along with expected challenges of today's landscape like inventory shortages or competitive bids.

Deliver on promises big and small throughout the process to build trust and credibility.

From prompt replies to insightful neighborhood perspectives, make sure you over-deliver after you set expectations upfront.

4. Continue Courting After Closing

The agent-buyer relationship doesn’t end after closing!

Check in quarterly as a trusted real estate advisor and nurture a lasting rapport.

Share market insights, connect them to referrals, uncover future needs... you become their lifetime real estate resource.

These nurturing touches drive loyalty and repeat business even years later.

>>Want more advice on how to NOT sell yourself short in this new era of commissions? Read the following resources from NAR for more tips:

 
 

Chapter 4: What Buyers Can Expect in 2024

With these market dynamics in mind, what guidance should you provide buyers when working with a real estate agent in 2024?

Here are 5 key predictions:

1. More Buyer Broker Agreements

Across states and brokerages, formal buyer broker agreements could become standard procedure.

You can get ahead of this by securing these agreements upfront with buyers, outlining services, compensation details, representation commitments, and other helpful clarifications.

This not only streamlines negotiations down the line, but further demonstrates the value you bring buyers from the start.

2. Added Transparency Around Fees

If industry lawsuits result in settlements, rules around commission data access on MLS may change.

Regardless, you should proactively increase transparency with buyer clients around activities performed and hours logged per deal.

Quantifying efforts better justifies earnings.

3. Rise of Flexible Commission Models

Rather than the traditional compensation split, you may consider offering pricing options – flat fees, hourly rates, subscription-based plans, cash bonuses.

This allows buyers choice in what works best for their needs while meeting you halfway as their trusted advisor.

4. More Negotiation of Commission Rates

Across the board, experts advise preparing for increased negotiation around commissions – between agents and brokerages, buyers and agents, buyers/agents and sellers/listing agents.

Focus on skillfully communicating value and tailoring pricing accordingly to stand apart.

Assure buyers you aim to collaborate on rates reflective of what you deliver.

5. Higher Accountability for Quality Service

With added transparency and choice comes greater performance accountability.

You must demonstrate market expertise guiding clients to good deals, smooth transaction management, and clear communication every step of the way.

Set the expectation with buyers that they can expect tailored guidance, insights that build confidence, and a true partner invested in their priorities when working with you.

 
 

Chapter 5: Preparing Buyers for Changes Ahead

One thing that experts emphasize is keeping clients informed, setting clear expectations upfront, and empowering them to take an active role in decisions.

Here are tips on exactly how to accomplish that:

Guide Them Through the Process

Take time to educate buyers on real estate agent commissions and typical transaction processes.

Arm them with knowledge that better positions you both to craft optimal agreements.

Validate Touted Expertise

Encourage buyers to choose you by validating expertise about target neighborhoods, providing proof points on deal records and satisfied clients, and offering client references.

This establishes you as a capable partner right off the bat.

Set Expectations Early

Have candid conversations when first meeting with buyers to align around needs and preferred working styles on both sides.

Cover topics like communication frequency, negotiation approach, pricing models, anticipated home search effort and areas.

Facilitate Agreements in Writing

Secure buyer broker agreements that clarify representation commitments, scope of services you will provide, commission rates locked in, and other helpful specifics.

Get signatures before viewings so everyone starts off on the same page.

Keep Them in the Loop About Commission Rates

Keep buyers apprised that commission percentages are negotiable, especially with added transparency on industry standards.

Openly discuss options comfortable for both parties.

Remember, your sweat equity during the home search itself carries value too.

Be Open to Service Quality Evaluations

Encourage buyers to assess how well you meet defined expectations and proactively address concerns throughout the buying journey.

  • Do you demonstrate sufficient expertise?

  • How responsive are you?

Feedback allows you to modify agreements accordingly.

Provide Ongoing Education

Commit to keeping buyers plugged into industry news to make informed decisions, while expecting you to provide up-to-date market insights that influence strategy. Maintaining an educational mentality remains integral to your service.

Prepare Financing Plans

If helpful in their situation, advise buyers on mortgage financing options that allow them to finance agent commissions to reduce out-of-pocket expenses later. Explore possibilities together.

The key for you as agents is to increase transparency and communication around changes ahead, while underscoring the value you bring.

Equip buyers with insights to navigate 2024’s landscape.

Commit to adaptable fee structures fair for both sides.

And promise service and guidance that builds lasting trust and advocacy.

Final Thoughts

While 2024 outcomes remain fluid, proactive agents and informed buyers can control smart moves today:

  • Agents should lock in buyer agreements upfront, increase transparency around deals, demonstrate unique value in niche services, get savvy negotiating rates, and guide clients through changes with care.

  • Buyers need to self-educate on commissions, scrutinize prospective agents, set clear expectations, formalize representations in writing early, negotiate fees delivering best value and continuously evaluate guidance.

No one knows exactly how lawsuit settlements, possible MLS changes or further transparency will play out.

But when disclosure improves and consumers see behind the curtain, real estate professionals must be ready.

Ultimately, embracing change often advantages those providing real service wired to evolving needs. Industry legal pressure simply accelerates adaptations that raise the bar.

In the end, added transparency and choice benefits overall market health.

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About the Author

Aaron “Kiwi” Franklin

Head of Growth