By MARGARET NELSON
For decades real estate agents across the country, and here in Alaska, have been splitting a commission fee paid by the seller of 5 to 7%. Not anymore. Changes resulting from a legal settlement go into effect today, which may end up costing more for a buyer to purchase a home, and less for a seller to sell.
As of today, Alaska sellers will not “automatically” be offering to pay the commissions for licensees (agents are called licensees in Alaska) who represent buyers. This change is happening across the United States as the National Association of Realtors (NAR) and Multiple Listing Services (MLS) agreed to new rules to settle class action lawsuits brought in 2023 that accused them of keeping commissions artificially high. The Realtors agreed to pay $418 million in the next four years to home buyers, of which our local Alaska MLS is participating, as well as change some of its practices. All denied any wrongdoing.
New Real Estate Rules
- Buyers & sellers negotiate commissions
- Buyers may pay their licensee fee
- Sellers cannot list commission to buyer licensee in MLS
- Buyers must sign a representation agreement outlining fees & services
Prior to the lawsuit, it was customary for an Alaska home seller to pay between 5% and 7% commission on the sale, which was then split between the seller’s licensee and the buyer’s licensee.
Under the new rules, sellers no longer have to pay a buyer’s licensee at all, can agree to pay it, or only pay a portion. It’s all negotiable. Buyers will then have to pay the buyer’s licensee’s commission not covered by the seller. Both buyer and seller are free to negotiate those fees with their licensees. While commissions were always negotiable, this brings more clarity to the process.
Buying or selling a home is already confusing to most and the process gets more complicated every year. I predict that this will have the most impact on buyers who already have to come up with down payment funds and closing costs. Add a commission onto their plate and homebuyers will have difficulty coming with the funds. This situation is exacerbated, since mortgage lending rules do not allow commissions in loan closing costs.
Thousands of dollars are at stake, so it will be more important for the buyers and sellers to understand how commission plays a role in buying or selling a home.
In Anchorage, the average sale price of a home in 2024 is $366,600, according to Alaska MLS. Based upon a 5% commission that translates into $18,330, which in the past was split between the buyer’s and seller’s licensee.
Now the seller could be paying less, but the buyer, who in the past has normally not paid any of the costs, would pay more and in this case up to $9,000 more.
What this means for buyers
Under the settlement, buyers will be required to sign a written agreement with your licensee which details commissions and/or fees. This agreement essentially states that licensees do not work for free and what the licensees expect to be paid for the services representing you as a buyer. I
f your buyer’s representative is unsuccessful in getting the seller to pay all or part of the commission, through negotiations, the licensee will expect the buyer to pay for buyer’s representation services. Buyers and their licensee will agree on what services will be performed and at what rate of pay. The pay can be via commission, an hourly rate or a fixed fee. Again, it’s all negotiated.
What this means for sellers
As part of the NAR settlement agreement, Sellers are no longer required to compensate buyer’s licensees, and if they agree to do so, they do not have to tell in advance what they are willing to pay buyers’ licensees. That commission cannot be posted in MLS listings, per the settlement.
Allegedly the prior practice was “anti-competitive”, and consumer advocates argued that it left sellers paying the full commission. And they said buyers were not taking advantage of their bargaining power but relied on selling licensees to control that part of the transaction. Time will tell how this plays out.
In the near term, not much will change as the industry learns to deal with the new rules moving forward. But I do expect that buying a home will become more expensive while selling a home will become less expensive. Some argue home prices will drop and others that this system means licensees will make less money on the transaction. I believe other factors such as limited supply of homes and the interest rates will be mitigating factors. Nonetheless, buyers and sellers will need to learn the nuances of all the fees they pay in buying and selling their homes.
My advice to all my clients — buyers and sellers — is the same as it has always been: Make sure you interview real estate licensees to determine can successfully work with them on a complex transaction. This purchase for most people is the largest single transaction in their lives. A thorough understanding of the service you will obtain, and the fees involved for those services is most important.
Margaret Nelson is a real estate investor and broker/owner of Denali Real Estate headquartered in Anchorage. She has more than 30 years’ experience in residential and commercial real estate and property management.
“ The Realtors agreed to pay $418 million in the next four years to home buyers”
Plus Kamala and her $25k for first time home buyers………
Oh….and their price cap on products……
These commies aren’t doing a very good job of hiding it.
So now buyers will be more motivated to work solely with the listing agent to avoid the issue raised above. No wonder Ms. Nelson has such a big smile on her face, no more split commissions. This would appear to benefit the realtor far more than the clients.
No. It’s not splitting the commission. Now it will just be 3% instead of 6%. OR whatever the parties agree to. Think of it this way: You a paying a professional to WORK for you. To represent you. To help you get the best deal or negotiate with savvy. When the buyer pays, that licensee has a real obligation to him/her. There’s more incentive…in my view… to find that ‘just right’ home. The agent will be proving their value. But again, the POINT of this settlement is to clarify that everything always has been–and STILL remains–negotiable.
Think. I heard one realtor put it this way: When the Seller pays the full commission, who is the buyer’s agent working for? Answer: themselves! Naturally, they would be reluctant to show a home to a buyer knowing there is 1% or even zero offered by the seller. It might be their buyer’s “perfect” home…but their agent won’t tell them about that home or steer them away from it when the buyer inquires. That’s the reason why sellers were always told to offer a high commission in the first place.
Now, when the BUYER is paying the commission, who is the agent/licensee working for?? The BUYER!!! This will very much incentivize a licensee to work harder for the buyer. They can show the buyer homes that haven’t yet come on the market, so they could make an offer without competition from other buyers…and other such opportunities known to the licensee. The licensee will have to step up their services a notch or two (although there are already some outstanding ones out there) to convince buyers that they have the experience to guide them in the home buying process. It is suspected that the marginal ones may even drop out of real estate all together.
Granted, a seller may be more sympathetic to a first time home buyer. They don’t have a lot of cash up front. But if it’s a $1million house, the seller might assume the buyer can pay his own agent/licensee. Bottom line, everything has always been negotiable. It’s just that over the years, buyers and sellers had come to believe that these rates were set in stone and possibly the realtors were not stressing hard enough that everything was negotiable. A lot of people think this will be a good thing all around, but we’ll see how it shakes out in coming months.
A lot of supposition here. Pretty big leaps in logic. “Naturally they will be reluctant….” Please don’t judge others by your own values. You know nothing of others motivations. Thanks.
What this means is that both buyers and sellers have been getting ripped off for years and years. The threat of higher costs to either one is typical of the real estate industry – making you think that saving money is a bad thing. Both buyers and sellers now have a chance to save but will have to watch out for the usual skullduggery of the “licensees”.
It may even turn out to be a better thing! The seller never ever had an obligation to pay any compensation to the buyer’s agent/licensee. That fact was getting lost and folks had begun to think–or were being told falsely–that 6% was the industry standard, when in fact it had always been negotiable. So the settlement was about clarifying all that. And remember, the buyer has always paid (it’s a hidden cost) b/c the price of a home reflected (or should have) the commission. It’s included in the overall asking price for the house. Now, a first time home buyer on a tight budget may have a harder time. But those looking to purchase an 800-1,000k home ought to be able to pay their own agent/licensee. Or hire a real estate lawyer. It’s an incentive for the buyer’s rep to work a little harder. There’s a lot of options if we all remember that everything is negotiable.
You’re exactly right… Ripped off for years. How can being more transparent be seen as a bad thing. Only by those who profit off the unaware buyers and sellers.
Realtors are a profession like any other profession and have a right to earn a living helping people through what has come to be a bit of a complex process. They have to pass an exam to get their license and I hear AK is one of the harder exams in the country. If I’m thinking about it right, it’s like a car salesman. He doesn’t get paid a salary or by the hour. He is paid on commission and the price you pay for your car includes his commission (it’s a hidden cost). You see, ‘somebody’ has to pay him that commission. A GOOD realtor is worth what they get paid; be it 3%, 2.5% or 2%. What would YOU work for?
No one HAS to hire a realtor to buy or sell a house. You can DIY it! Or hire a real estate lawyer.
Did someone force you to use a realtor? I’ll bet you accuse your doctors of”ripping you off” too. Car repairs too high? You’re being “ripped off”. Don’t use professional services if you don’t want to pay them. Simple enough. Or elect a communist who will price fix everything for you.
FreedomAK, good one. You summed it up perfectly.
Buying and selling? I found out how crooked and what a bunch of liars these real estate persons are. There is no reason for a seller to go thru selling their home through an agency or a real estate person. Selling a house you own can be done by owner. Go to your financing on your house and ask for their help with a contract. They are obligated to by law to show you the agreement and give details. And, an attorney fee is totally miniscule to check the paperwork and close the deal with the buyers financing.
Do tell what law obligates a “financing agency” to provide you with a real estate contract and assist you with it?
Full disclosure. I’m a real estate broker and have been for 23 years.
The fact is the majority of people are perfectly capable of selling their home on their own. The majority of people also CHOOSE not to.
The more interesting fact is the vast majority of folks that spend their time squealing about how evil real estate agents are are generally so ignorant of the ACTUAL law of real estate transactions they probably should be required to let somebody else handle the transaction.
We’re capable of selling our own homes but choose not to? How about a more transparent process so when we do call an agent, we’re not automatically giving them 6% for the transaction, no matter how much work they do or how well they do their job. The fees were always negotiable but who was actually negotiating and were buyers and sellers aware of the negotiation? So many reasons for the lack of trust in real estate licensees. The only ones against the new changes are those in the industry that now realize they have to make buyers aware of their commission and it will not be handed off so easy.
You are correct. Anybody who is interested in purchasing a home without involving a real estate licensee can get “blank” sales paperwork at a local title company. They might offer some advice, too. And a few hours with a lawyer should relieve any stress.
I never use an agent to buy or sell real estate. FSBO works great. Do a little studying and negotiate your own transaction. Saves big $$$.
As for capital gains on home sales, hang on to your wallets. Kamala Harris will seek double or triple on your CG. She needs to do this to pay for the next 10 or 20 million illegals she would allow into our country. Reason enough to vote for
TRUMP! (Who happens to be one of the greatest realtors/RE investors in the world).
How is Harris gonna do that?
Tax policy and law are not an executive branch function, that falls to Congress.
And wouldn’t the dems have to win all three before this could happen?
My limited understanding has always led me to believe that real estate commissions in Alaska are negotiable 100% of the time. They are simply part of the cost structure of the full sale price. Under the smoke and mirrors assertion that sellers paid the commission, don’t forget it was the buyer that bought the commission covering check to the closing table. Other side of the coin? Sellers took home a smaller check. It is and always will be simply a cost in the purchase and sale of a piece of real estate.
The author is described as “broker/owner” of Denali Real Estate. Most of us know the difference between a broker and an agent. Therefore, we know she is not an agent but rather a broker.
In the article, she says, “agents are called licensees in Alaska.” However, both brokers and agents have licenses. Therefore, if we hear someone is a licensee we must somehow know they are an agent and not a broker?
The semantics don’t matter. The term licensee can refer to either broker or agent. A broker can list and sell a home under his or her own license. A licensee or “agent” must operate under the license of a broker. They are at the entry level and do not have the insurance coverage or experience necessary to withstand a lawsuit. I was a licensee in Honolulu County (Oahu) before moving to AK in 2008. It’s not double speak. The author was explaining the lingo in this particular profession. All professions have lingo, brother.
No. It’s not splitting the commission. Now it will just be 3% instead of 6%. OR whatever the parties agree to. Think of it this way: You a paying a professional to WORK for you. To represent you. To help you get the best deal or negotiate with savvy. When the buyer pays, that licensee has a real obligation to him/her. There’s more incentive…in my view… to find that ‘just right’ home. The agent will be proving their value. But again, the POINT of this settlement is to clarify that everything always has been–and STILL remains–negotiable.
If the buyer is a reasonably intelligent person and no financing is required, can the buyer represent himself or herself in the transaction? The way I figure this, if I represent myself, have sufficient cash, know how to arrange for an inspection, and can set up closing with a title company, I can save half of the total commission due at closing? This seems like a reasonable part of the negotiations, right??
I’d say yes but exercise caution: it would be easy to fall for a scam if you don’t have a good title company or if you’re unfamiliar with escrow. The person you work with in a title company is also someone you interview and with whom you negotiate a fee. A cash transaction is a whole lot of dough, so it is extremely important to make sure the document process and move outs happen as they should, BEFORE money moves from one hand to another.
… in my opinion. WAS (past tense) a licensee in another state a long time ago… and even I feel I know the process “well enough to be dangerous.” A lot has changed since 2008 and continues to change to this day. For the same reason so many folks just take their taxes to a CPA (to avoid expensive mistakes), I personally would shield myself with good professionals in a cash transaction. Your life’s savings depends on it.
The new changes are a step in the right direction for an industry riddled with scammy real estate agents who profit off uninformed buyers and sellers. Now, they must have buyers agree to exactly how they will be paid. If agents are so worried about first time homebuyers, they should give them a break on the commission when they pay out of pocket. I look forward to more changes like this that improve the industry for buyers and sellers.
You can sell $1million of stock and pay $19.99 for the trade. Up until now selling a $1million dollar home cost $60,000. Seems like we got ripped off by these fine community members! Remind them how much you appreciate them at your next Rotary Club meeting.
Great conversation. I don’t see much changing once it turns back from a sellers market to a buyers market. Sellers will be paying to have someone buy their home. As for $19.99 to sell $1million in stock, it takes a computer seconds to sell your stock. What realtor is going to spend nights and weekends away from their families, fishing camping etc. to make $19.99😂 but I get the desire to save money.
Do it yourself. A real estate agent is a glorified used car salesperson. Anyone with a 10th grade education can do it.
That attitude is exactly why so many shysters got real estate licenses in Honolulu County prior to 2008… when I was a licensee, ~1% of the population of Oahu had a real estate license. That’s a huge number. It was totally realistic to get licensed and never participate in a transaction.
I’ve heard about this too. The better way is to just pay a real estate attorney $1500 to review the R/E contract and get legal advice on proceeding forward. Attorneys don’t need real estate licenses.
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