The New Real Estate Commission Rules: More Harm Than Good? – Brian Maser The Condo Experts

The New Real Estate Commission Rules: More Harm Than Good? – Brian Maser The Condo Experts

In the wake of recent changes to real estate commission structures, the industry faces a seismic shift that will ultimately hurt both buyers and sellers in the short term. While the intent behind these changes is to create more transparency and fairness in the home-buying process, the reality may prove far more complex and detrimental to all parties involved. In short, the changes have shifted the perception of how real estate commissions should be paid, even though they were always negotiable. However, they failed to offer a clear solution for where buyers would find the extra money to cover these costs. As a result, everyone will likely feel the strain before things eventually balance out.

A Misguided Perception

One of the primary motivations behind the new rules is the perception that real estate agents have been steering buyer clients toward homes that offer higher commissions. However, this assumption ignores the evolving nature of the home-buying process. In today's market, most buyers find their homes online, making decisions based on their personal preferences rather than being swayed by their agent’s commission structure. Buyers are savvy; they choose homes that appeal to their needs and desires, not simply the ones their agent may push.

Furthermore, part of this shift is driven by media narratives that have transformed the conversation from one of transparency—intended to protect less sophisticated buyers—into a critique of how realtors are allegedly overpaid and how commissions supposedly force prices higher. In reality, commissions have always been negotiable, and great agents add tremendous value to a transaction. Poor agents, on the other hand, can indeed cause financial pain, but the blanket portrayal of all agents as overpaid is both misleading and damaging.

The Burden on Buyers

Under the new commission rules, if the seller chooses not to offer a commission to the buyer’s agent, the responsibility falls directly on the buyer. This shift places an additional financial burden on an already stretched budget. Funds that might have been earmarked for essentials like furniture, home improvements, or even securing a mortgage now have to be redirected to cover the costs of professional representation. This added expense could deter many buyers from hiring an agent, increasing the risk of costly mistakes in what is often a complex and overwhelming transaction.

Furthermore, asking buyers to cover these costs at closing will likely exacerbate affordability issues. With rising home prices and mortgage rates already stretching budgets, the added expense of agent fees could push some buyers out of the market entirely or force them into purchasing less desirable properties. Additionally, where will buyers find the money to cover the buyer agent’s commission? They need these funds for their down payment, and for investors, this adds more costs on both the purchase and the eventual sale, depending on their offers. Ultimately, this could mean sellers end up getting less for their properties, as there is only so much money to go around.  Banks needing to protect their risk and cash-to-loan ratios may have a hard time adding the Buyer commissions into the loan, but could offer some support as they sort this out as well.

The Impact on Sellers

Sellers, too, will feel the sting of these changes. The traditional 5-6% commission split between listing and buyer’s agents created a balanced system where both parties had a stake in the transaction’s success. Now, with buyers possibly shouldering the commission costs, sellers may find that fewer buyers are willing—or able—to make competitive offers. This could lead to a stagnation in the market, with homes taking longer to sell and prices potentially softening as a result.

Sellers naturally want to achieve the highest possible price for their property and pay the least in commission as well, but this shift in commission structure merely moves money from one side of the table to the other. And in fact, more agents can try and steer their Buyers away from homes that don’t offer commission, thus bringing them less seller leads.

A Shift Toward Professionalism—But at What Cost?

One potential silver lining in this scenario is that the new rules could lead to a culling of less experienced agents. The days of part-time realtors handling one or two deals a year may be numbered, leaving the field to seasoned professionals who can expertly manage both sides of a transaction. These professionals might also develop tools to support buyers and sellers while leveraging more technology to reduce the time and effort required from realtors. While this could elevate the overall quality of service, it also risks creating a barrier to entry for new agents, thereby reducing competition and potentially driving up costs for consumers.

Moreover, the shift could pave the way for do-it-yourself scams as unrepresented buyers attempt to navigate the process without professional guidance. While some new businesses may emerge to assist with these tasks, the risk of costly mistakes looms large until a more robust and reliable system is established.

Adapting to the New Normal

The real estate market is resilient and will eventually adapt to these changes. However, in the short term, we may see more harm than good as buyers, sellers, and agents struggle to navigate the new landscape. At The Condo Experts, we are advising our clients to maintain the status quo if they want to achieve the best results today. By continuing to offer the standard split commission, sellers can avoid the chaos that is sure to arise from this abrupt change, which lacks clear guidance. Buyers will struggle to pay for their agent while still trying to purchase a home, leading to situations where they may forgo representation altogether. This could result in lawsuits, broken relationships as buyers leave their agents to go directly to the seller’s agent, and attempts to save on fees entirely.

Good luck to all—while the intention behind the new commission rules is understandable, the execution may cause more pain than progress. The best approach for now is to stick to traditional practices until the market finds its footing and the best practices emerge. As with any significant change, there will be growing pains, but with careful consideration and adaptation, the industry will eventually settle into a new equilibrium. Until then, we recommend keeping things as normal as possible to avoid unnecessary disruption.

Brian Maser – founder / broker of The Condo Experts