Five Reasons You Should Offer a Buyer's Agent Commission When Selling You Home

Should You Offer a Buyer's Agent Commission When You Sell Your Home?
Dennis Day and Judy Gratton of the  Edge Group Team and EXP Realty, offer Five strong reasons why you should. 
Are you prepared to navigate the new landscape of real estate in Washington State? This episode promises to equip you with everything you need to know about the recent changes in real estate laws, especially the new mandate requiring written contracts between buyers and their agents. Judy and Dennis uncover the implications of this shift, from how buyers must now directly pay their agents to what sellers should consider when offering commissions to buyers' agents. 

We break down five critical reasons why sellers might still want to offer these commissions, highlighting benefits like market perception and smoother transactions.

As we wrap up, we extend our gratitude to our loyal listeners on platforms like Apple and Spotify. Your engagement and support are the driving force behind our podcast. Reflecting on the central themes of gaining an edge and right-sizing your life and home, we encourage you to stay tuned for more practical advice and insightful discussions in our upcoming episodes. Thank you for being an integral part of our community. Until next time, take care!

Transcript

Speaker 1: 0:01

Hello everyone. This is Dennis Day with Getting your Edge Out of Right Size, your Home Life podcast, and we have a show today that's about some changes in the real estate agency buyers agency and this is really confusing, but it does affect sellers and buyers. Judy the co-host, welcome, and can you kind of give an explanation of what happened in Washington State anyways?

Speaker 2: 0:27

I absolutely can, dennis, and thank you so much for asking.

Speaker 2: 0:31

Good to see you and happy birthday, thank you I thought you were going to get away with that, but you can't. On January 1st in the state of Washington a law was passed by the state that requires that real estate agents must have a written contract to represent a buyer and that contract spells out how much they're going to get paid and what the options are regarding how they get paid, because the pay now is technically the responsibility of the buyer. But now, even to show a property there must be a written contract. That is the law, and we can do non-exclusive contracts, we can do one day contracts, we can do one property contract, but you will be asked by your real estate agent if they want to get paid at all to sign a contract, because without a signed contract the agent doesn't get paid at all and I don't know of too many agents who are willing to work for free. But the bottom line is it is the responsibility of the buyer to pay the agent that they hire for their services, and it's going to seem very strange to buyers who have bought before, because that was never the case. Commission is offered by the seller at all. Then does the buyer still want to look at those homes? Or do they not want to look at homes where the seller is not offering any commission Because they don't want to fall in love with something where they don't have the cash to pay their agent.

Speaker 2: 2:19

Then you may see buyer's agents asking for a concession from you the seller to pay their commission. And the reason that that happens is that a lot of buyers require financing and they are coming up with money for the down payment, whatever it is the amount is. Coming up with money for the down payment, whatever it is, the amount is. They're coming up with money for their required closing costs that they have to pay, no matter what. If they're doing financing, there's a title insurance policy that they have to pay for for the finance, the lender. There's half of escrow. There could be prorated taxes and homeowner association dues and things like that roughly 3% right there. So asking them to come up with another two and a half or 3% maybe would knock them out of being able to buy your home at all. It's really confusing. It's hard to explain, but it does affect the seller because they have to make choices too and they're going to be seeing offers coming towards them asking that they pay a commission as a concession to the buyer's agent.

Speaker 1: 3:41

Thanks, judy, for that explanation of the new law. And yeah, it is pretty confusing. And although this law seems as if it only concerns buyers, it now requires sellers to make critical decisions about how they will present their home for sale to buyers. So we're going to present you with five reasons why a seller should offer to pay a buyer's agent commission. We think it's sound business practice that will increase the seller's final price. So let's take a look. This is historically. This is what the practice was before January 1st. So the buyer made an offer, seller accepts. Buyer gets a loan or pays through cash At closing. The loan pays the sellers on behalf of the buyers transferring money from bank to sellers. The seller pays listing agent a commission as negotiated. Seller pays the buyer's agent commission as negotiated, and this is all up front.

Speaker 2: 4:37

The seller understood at that point in time what monies would be paid out of their earnings. Yes, okay, what?

Speaker 2: 4:43

monies would be paid out of their earnings. Yes, okay, they paid the listing agent for the services they were done, but it was never really explained to them why they were paying the buyer's agent. True, and do remember that even when the buyer gets a loan, they may be putting some down payment. They could pay cash completely and take the lender out, but most buyers use a loan and their down payment would be part of the money going to the seller that was our standard practice and it worked for years.

Speaker 1: 5:12

Then came the lawsuit and then, even before the law, before the lawsuit was settled, state of Washington decided hey, let's make some changes.

Speaker 2: 5:21

So here we go, I think they saw that there needed to be more transparency. You know, it wasn't explained to the seller why they were paying the buyer's agents.

Speaker 1: 5:31

So buyers make an offer, sellers accept, buyer get a loan, closing the loan pays the sellers and the seller pays the listing agent. That's negotiated between the listing agent and the buyer before they sign the contract.

Speaker 2: 5:46

Correct Still negotiable.

Speaker 1: 5:47

Now the seller may pay a buyer's agent commission. That's the new or they may not. If some of the procedures follow through, the seller in the listing will not even have to list if they're making a, giving a commission or not. We don't really know what's going to happen. Okay, so in my mind personally this is my, I think technically the buyer pays the selling agent and the buyer's agent because without a sale, without their loan or their cash, there is no sale and there's no commissions to anybody. That money comes from the buyer. So let's look at our first of five reasons Market perception. Offering a buyer's agent commission can enhance the market perception of a property. It signals that the seller is serious, honest. Cooperative can improve the overall attractiveness of the listing and encourage more proactive responses from it just looks good. Buyers are excited about homes where they know that they're not going to have to come with out-of-pocket cash to pay the buyer's agent.

Speaker 2: 7:02

Because a lot of times they don't have it. And if you say, I don't care, they can go buy a lower priced home, true, they can do that, but then you just lost a buyer and again, that way you'll show some more reasons here that is going to be detrimental to your bottom line.

Speaker 1: 7:20

Our second reason professional negotiations, professional negotiator if the buyer has an agent, they know they're working for the buyer. They just facilitate a transaction. Handling the negotiations, ensuring that the buyer's interests are met, also keeping the seller's terms in mind. This can lead to more efficient, less stressful negotiations than the seller and the peace of mind for the buyer. Let's get an example that say buyer's agent brings an offer to the seller and there is no commission. Now they could be the higher offer, but is that buyer going to be able to pay out of pocket?

Speaker 2: 7:57

And even worse, if there is no commission, if it's an absolute no at this point in time, the buyer may have told their agent not to show them your house at all. So again, you just lost a potential buyer.

Speaker 1: 8:13

Right that buyer agency agreement, there can be stipulations that the agent doesn't show properties that don't meet a certain criteria of buyer agent commission. So you're missing out on a pool of people who would come to your home if you don't offer this Reason three to offer a buyer's agent commission. So you're missing out on a pool of people who would come to your home if you don't offer this Reason three to offer a buyer's agent commission. All right, Increased buyer traffic. I think that's really the crux of the thing is that when you're saying no, I'm not going to offer this in this transaction, that you're going to limit the number of buyers and agents who come to your home or look at your home.

Speaker 2: 8:49

That is very likely to be the case. That is very likely to be the case because the buyers will say, no, I don't want to see a home. That is an offering to pay your commission because I don't have the cash to pay you, and the lender will not finance the commission. It's weird because they're doing it anyway, but it's called the purchase of the house. Then it transfers over to you and that may very well be why it started in the first place. But if you just say to a lender, will you finance the commission Right now, they're going to tell you no because that's not a tangible thing that they're financing. So when they loan money, there's something they're loaning it on.

Speaker 1: 9:36

Yeah, they want some kind of collateral.

Speaker 2: 9:40

Not the body of the well, you have the buyer agent if it doesn't get paid.

Speaker 1: 9:45

The agent's job, the listing agent's job is to get as many eyeballs on it through the internet or bodies through it some way. The more people who come through that home, looking at this home, the greater chance A you're going to have a sale and B you're going to get asking price or, if you got the right market, you might get a bidding war. But if you decrease the pool, the likelihood of that happening diminishes, it shrinks.

Speaker 2: 10:17

Yeah, it definitely does.

Speaker 1: 10:20

Reason four selling your home faster With a buyer's agent. Commission sell faster. Agents are incentivized to prioritize these listings, which can result in a quicker sale compared to properties who don't. If you want to sell your home faster, you offer a buyer's commission.

Speaker 2: 10:41

We collect data and we can get access today. I just did this the other day to see. The data tells us exactly how many offers it will take on average in a given location to get to pending to get a contract signed around. Pending to get a contract signed around. And in the particular case that I was looking at, in one area it only took five showings by agents and a different area in the same state it took 18 to 20. So you need those showings.

Speaker 1: 11:21

And our fifth reason and this is a biggie it will increase the sale price of your home. I was kind of surprised at this, but I really researched this. An offering a commission can lead to a more competitive bidding, as buyers agent bring more interested buyers to the table. This competition can drive the final sale price above asking price, maximizing the seller's return on investment price. Maximizing the seller's return on investment is from Northwest MLS, nar, agentadvice and realestatenewscom. Listings that offer a buyer agent commission sell over asking price 20 to 30% of the time. Listings that don't offer the commission only sell above asking price 10%. Which would you rather be 25% to 30% or the 10%? We want to look at the buyer's situation too. Judy, you mentioned this already, but most buyers are putting every single dime into the purchase of their home. They don't I mean particularly first-time buyer. They don't have a whole bunch of extra savings to pay a buyer's agent. Buyers can't finance that commission.

Speaker 2: 12:34

No, they cannot.

Speaker 1: 12:36

Banks won't let them.

Speaker 2: 12:37

They can finance your house and pay the commission from the money that you get at your house. That's how we've always done it and that's how it can be done. But if you say, like I said, finance my buyer's agent commission, the answer is no, there's nothing there to finance most buyers will agree not to view properties that require them to pay all or some of the commission.

Speaker 1: 13:03

So that's negotiated with that buyer's agency agreement. The buyer agent and the buyer are saying, okay, at what point do I stop showing you? And some buyers will say, no, I want you to show me everything, regardless of buyer's agent commission. Some of them will say, well, look, I can only pay so much, so anything that's going to require more than that I don't want to see. I don't want to fall in love with a home that I can't eventually get. That's it.

Speaker 2: 13:35

Because they just flat out won't have the money to make that happen if they have to pay the buyer's agent agreement. And the seller needs them. Needs them to boost the showings, so we get to pending. Needs them to boost the escalations, so you get the highest price. But you want to take advantage of all the options to get the highest price. So not considering offering a buyer's agent commission as a concession to the sale from the money that really came from the buyer in the first place is kind of shooting yourself in the foot a little bit.

Speaker 1: 14:17

Now there isn't a guarantee that if you don't offer a buyer's commission, that you're not going to get full pricing, you're not going to get that sale I mean. And there's also no guarantee that you offer a commission, that you're going to get, you know, a fabulous over asking price bidding war. There's a bit of a return on investment, though. I'm offering the buyer's commission, I'm getting more buyers and then I'm getting more eyeballs, I'm getting more people, there's more offers, I'm getting a competition getting into a bidding war, and that's where the seller can really excel. There will be sellers out there who really want to take everything they can possibly get and they'll be happy that they saved on that buyer commission. Whether they could have made more is, you know, it's impossible to say, but likelihood they missed out.

Speaker 2: 15:11

The numbers show that they do. You know we can't promise that, but on average the numbers show that they do. The reports and we collect a lot of data in this industry show that they do.

Speaker 1: 15:22

That's our recommendation. You've got five good reasons why you should really consider offering buyer's agent commission, and I think it's a good investment. I think it'll bring more eyeballs, more bodies, to your listing, to your home, and it's going to make the sale faster and for a better price.

Speaker 2: 15:43

Most likely.

Speaker 1: 15:44

Without saying that, without the 100% guarantee. Okay, that's it for today. Wow, I hope this information was helpful to you.

Speaker 2: 15:54

Not too confusing. It was very yeah.

Speaker 1: 15:57

I know Things probably won't settle down until after August. They're just fluctuating all the time. We say one thing, we're going to do this, then they change their mind. I think this is also that buyers need to have an agent, because it's just going to be that much harder to negotiate. You've got another layer to negotiate.

Speaker 2: 16:23

And if you're confused, please feel free to reach out to us and we'll try even more to explain it. To negotiate, and if you're confused, please feel free to reach out to us and we'll try even more to explain it to you. You can find our phone number where Dennis and our email address.

Speaker 1: 16:35

My email address is dennisdayre at outlookcom. Judy, you want to give your email.

Speaker 2: 16:43

It's my name, judy Gratton J-U-D-Y-G-R-A-T-T-O-N at JudyGrattoncom Easy one to remember.

Speaker 1: 16:55

Okay, sellers, you're going to have to be making tough decisions about this if you put your own up to sale. So this is a really important conversation with your listing agent Time. Thanks for watching everybody, or listening on Apple or Spotify, wherever you get your things. This is Getting your Edge Out of Right Size. Your Home and Life podcast. Thanks for being here. Take care. Bye-bye.