The New Way of Doing Business in Real Estate: Understanding the Shift in Buyer and Seller Compensation

The New Way of Doing Business in Real Estate: Understanding the Shift in Buyer and Seller Compensation

By Kim Donahue, Kim and Dave Luxury Team

The landscape of real estate is evolving, and as professionals committed to staying at the forefront of industry changes, it’s crucial for us to help buyers and sellers navigate these shifts. One significant change that’s gaining momentum involves how compensation is handled between listing agents, buyer’s agents, and, ultimately, the parties involved in a transaction.

Traditionally, when a home was listed, the listing agent would specify a compensation amount to be shared with the buyer’s agent. This amount was typically factored into the total commission the seller agreed to pay. However, this practice is rapidly changing, and here’s why: it’s akin to a listing agent publicly sharing the least amount of money a seller is willing to accept.

In today’s market, transparency and strategic negotiation are more important than ever. Let me break it down:

Shifting the Focus to Net Proceeds for Sellers

As real estate professionals, our primary responsibility when representing sellers is to help them achieve their financial goals. This means focusing on net proceeds – the amount a seller walks away with after all expenses are paid, including agent commissions.

When a listing agent advertises a predetermined compensation to be shared with a buyer’s agent, it inadvertently impacts how negotiations are conducted. Buyers and their agents may interpret this as a starting point for reducing the overall purchase price, rather than focusing on crafting an offer that meets the seller’s bottom line while addressing the buyer’s needs.

The New Approach: Crafting Offers That Work for Everyone

Instead of pre-setting a buyer’s agent compensation, the focus now is on encouraging buyers to craft offers that are compelling to the seller based on the overall value proposition. This strategy allows the seller to prioritize offers that meet their financial needs without being boxed in by a fixed compensation model.

From a seller’s perspective, this is liberating. It shifts negotiations away from a set percentage and instead focuses on the final net proceeds. A buyer can still negotiate their agent’s fees into the offer – but it’s done within the context of what works best to get the deal done.

Empowering Buyers and Their Agents

For buyers and their agents, this shift represents an opportunity to align compensation with value. Buyer’s agents are still paid for their expertise, but instead of relying on the listing agent’s pre-set offer, their compensation becomes part of the buyer’s overall strategy in securing the home.

By integrating the buyer’s agent fees into the purchase offer, we empower buyers to present deals that make financial sense for everyone involved. The key is not in how much compensation is being offered but in how well the offer addresses what the seller needs to make the sale.

A New Era of Transparency and Strategy

As the market continues to evolve, our approach must also adapt. We’re entering a new era where transactions are driven by clear communication, strategic offers, and a deeper understanding of each party’s needs.

For those of us at the Kim and Dave Luxury Team, it’s about helping our clients make informed decisions in this new environment. Whether you’re buying or selling, understanding these changes is key to navigating the market successfully. As always, our goal remains to provide unparalleled service, guiding you every step of the way toward a successful transaction.