Buyer Agent Commissions

By: realestateprofessional.news

Fact check: will a higher buyer-agent commission drive up listing times?

We use data-driven insights to debunk myths around buyer-agent compensation and explore the value of multiple listing services.

Recent changes to the National Association of REALTORS® (NAR) have sparked a flurry of speculation about the future role of buyer-agent compensation and its potential impact on the US housing market. In a previous article, we dispelled some of the myths surrounding buyer-agent compensation that have cropped up in the wake of the NAR settlement. In this follow-up story, we share data-driven insights to dispel even more common misconceptions and highlight the critical role of multiple listing services (MLSs) in ensuring a fair and efficient marketplace for all.

Myth 1: Buyer-agent compensation drives up listing times

The data paints a clear picture: there is no correlation between offering higher buyer-agent compensation and a longer time on the market for a property. In fact, a weak positive correlation exists, suggesting that homes with higher compensation offers might even sell slightly faster. This debunks the notion that agents prioritize properties based solely on maximizing their commission.

Myth 2: High commissions lead to high home prices

Studies analyzing three-bedroom, fee-simple homes sold between 2020 and 2023 in the Bright MLS service area reveal a negative correlation between buyer-agent compensation and list prices. This means homes with higher compensation offers are often listed at lower prices, potentially benefiting both buyers and sellers. Factors like property characteristics, neighborhood demographics, and mortgage rates play a much larger role in determining the final sale price.

Myth 3: MLS “steers” buyers away from lower-commission properties

While the proposed changes prevent MLS from displaying buyer-agent compensation offers, the data doesn’t support the claim that agents steer buyers based solely on this factor. Buyers and sellers can still negotiate compensation freely, and research shows no evidence of widespread avoidance of properties with lower commission offerings.

The importance of MLS

MLS platforms create a transparent and efficient marketplace, providing comprehensive listing information to all potential buyers. This ensures a level playing field and prevents sellers from keeping properties off the market through “pocket listings,” a practice that often exacerbates housing inequalities. MLS listings allow buyers to access a wider range of properties, ultimately leading to a more informed and competitive market.

Data confirms the value of buyer agents

Research overwhelmingly shows that most homebuyers utilize real estate agents and value their expertise throughout the complex buying process. Agents navigate the intricacies of the market, protect buyers’ interests, negotiate on their behalf, and help secure the best deal. Their knowledge and guidance are crucial, particularly for first-time homebuyers or those unfamiliar with the complexities of real estate transactions.

Potential consequences of a less transparent marketplace

With the changes to MLS, there is a risk that more homes will be sold outside the platform, leading to a less efficient and potentially less fair market. This could disadvantage first-time homebuyers and buyers with moderate incomes who may choose to forego representation due to perceived cost concerns.

Key takeaways:

Buyer-agent compensation has no significant impact on selling time.
High commissions don’t drive up home prices; other factors like property characteristics and mortgage rates play a larger role.
MLS listing provides immense value to both buyers and sellers by ensuring transparency and accessibility to all available properties.
Buyer representation remains crucial for a smooth and successful homebuying experience, especially for navigating complex negotiations and securing the best deal.

The data clearly debunks the myths surrounding buyer-agent compensation and the potential impact of upcoming changes. MLS remains a vital tool for a fair and efficient housing market, and the importance of buyer representation is undeniable. As the market evolves, it’s crucial to prioritize transparency and access to information for all participants, ensuring a level playing field and promoting a healthy housing ecosystem.

* Bright MLS conducted research across six states and the District of Columbia. The data analyzed includes listings that were entered into its system on or after January 1, 2019 and sold sometime between January 1, 2020 and December 31, 2023.

If you are interested in selling real estate, please allow Target Auction Company the opportunity to detail the benefits of our auction platform and provide you with a free consultation. We can offer the information and advice needed to make a sound decision regarding the sale of your property. We can be reached by email, at 1-800-476-3939 or visit www.TargetAuction.com.