Maker Real Estate has always charged less than the competition and delivered better service. We will continue to do that.
On March 15, the National Association of Realtors (NAR) announced it was paying $418 million and changing its practices to settle a lawsuit brought by past sellers who felt the practice of paying buyers’ agents by sellers was unfair and anti-competitive.
As a result of this settlement, listing agents starting in this summer will no longer be able to offer compensation to buyers’ agents via the MLS. Sellers may still pay buyers’ agents, but the practice of a “typical” commission being offered via the MLS is going away.
Maker Real Estate has always left what is offered to buyers’ brokers up to our sellers, but have traditionally advocated for offering 2.5 percent of the sales price in compensation.
While tradition-minded brokerages will no doubt figure out back-channels to continue to offer conventional commissions to buyers’ brokers, in the wake of this announcement, we’re recommending that our sellers offer no compensation to buyers’ brokers. We believe that buyers should determine the value of their representation. We also believe that this will result in lower commissions overall for our sellers.
In practice, buyers will need to decide whether to pay their agent out-of-pocket at closing or include it in the purchase agreement with sellers and improve their offers to cover the commission. This allows the commission to be negotiated during the offer process, and we believe most buyers won’t want to pay their agents the 2.7 percent or higher that has traditionally been offered. After all, every penny they ask for from sellers’ proceeds will weaken their offer and increase their monthly payments going forward.
Example: In the summer of 2023, Maker Real Estate represented the sellers in an off-MLS deal in St. Paul in which no buyers’ broker compensation was offered. The sellers were asking $370,000. When the buyers decided they wanted an agent to represent them, they increased their offer to $375,000 and used the $5,000 overage to pay a commission to their agent. This allowed our clients to receive the asking price they wanted and the buyers’ agent to be compensated (albeit at a substantially lower commission than if the home had included the “traditional” 2.5 percent). We believe most transactions will work out this way, with the sales price being increased to cover any commission requested by the buyers’ agent.
Will this plan negatively affect a home’s marketability?
Although it goes against traditional thinking and what national brokerages have been preaching for years, based on a study of 2023 sales, we don’t believe the commission offered to buyers’ brokers affects a home’s time on market or ultimate price.
For example, in Ramsey County sales on the MLS in the second half of 2023, almost all buyers’ brokers commissions ranged from 0 to 3 percent, with only 0.17 percent of sales offering more than 3 percent.
Among all commission ranges between 0 and 3 percent, there is no quantifiable trend in Days On Market (DOM); although 2.7 percent resulted in the shortest days on market, offering more than that did not reduce that time and had the same time on market as 0.01-2 percent.
Out of 5,288 sales recorded on the MLS, here is the breakdown of commissions offered and how it affected a listing’s days on market:
| Commission Percentage | % of all sales | Average DOM |
| 0 | 0.32 | 20.00 |
| 0.01-2.00 | 1.65 | 24.90 |
| 2.01-2.49 | 1.40 | 51.44 |
| 2.50 | 15.79 | 29.83 |
| 2.51-2.69 | 0.51 | 29.77 |
| 2.70 | 78.25 | 24.74 |
| 2.71-2.99 | 0.47 | 33.24 |
| 3.00 | 1.44 | 46.63 |
| 3.01 or more | 0.17 | 26.00 |
The amount of commission offered also did not have a quantifiable effect on the “sales price to list price” ratio. For all commission levels offered, the average sales to list percentage (meaning the percentage of the asking price that sellers received) fell within a range of 99.88 percent and 101.76 percent, with the lowest return on commissions between 2.71-2.99 percent and the highest return at exactly 2.70. Increasing commissions from 2.70 to 3.00 led to a decrease to 101.15 and there was a smaller than 0.6 percent difference between offering 0 percent (100.10) up to 2.69 (100.61).
We believe the higher average sales to list at 2.70 percent can be explained by its large sample size (4,138 sales) compared to other amounts, as well as a perception by some agents that any property offering less than 2.70 percent on the MLS must have a defect. Since no properties will be able to offer a commission via the MLS beginning in July, this perception will be nullified. And in combination with its larger sample size, 2.70 had a narrower range of values (70.9 percent of asking price to 134.29) compared to lower commissions (50.91 to 138.86).
The truth is, buyers select the houses they’re interested in, thanks to easy availability of listings on the internet, and with a historic shortage of listings available, are highly likely to ask their agents to work for a lower commission in order to purchase the home they want. It makes more financial sense for estates to seek the lowest total commission, especially when its impact on time on market and percentage of asking price received has negligible impact.
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