Home sellers in Massachusetts have followed a familiar process for decades when listing their homes for sale.
Under the old model, sellers typically compensated buyer’s agents upfront through the multiple listing service (MLS).

This commission structure facilitated cooperation between agents, with the buyer’s agent earning a portion of the sale price directly from the seller.

However, new real estate commission rules have shifted this practice, allowing sellers to offer compensation upfront.

A federal lawsuit and subsequent settlement have transformed the real estate industry. It has fundamentally changed the management of commissions in property transactions.

The settlement with the National Association of Realtors (NAR) has allowed substantial modifications affecting buyers, sellers, and agents. It has established a new environment where transparency, negotiation, and buyer representation are prioritized.

I will provide you with an in-depth review of the following information so you can make the best home-selling decision:

• Why sellers used to offer buyer’s agent commissions upfront
• How the new rules change compensation structures in real estate transactions
• Why withholding upfront compensation can benefit sellers in certain situations

As a Massachusetts Realtor for almost forty years, I can tell you that the recent commission changes have come as a shock to many agents.

Change is always challenging in New England. After all, we are Yankees at heart. For me, I don’t see it as a big deal. You adjust and move on. Buyers and sellers will now have decisions to make. My job as an agent is to give them the pros and cons of their choices.

Let’s explore how these changes could impact your decision when selling your home.

Should I Offer a Buyer’s Agent Commission Upfront?

The Traditional Model of Buyer’s Agent Compensation

In the past, the real estate market operated on a straightforward commission structure. When sellers listed their properties, the listing agents would post the property details on the MLS, which also specified the buyer’s agent commission.

This upfront Realtors commission, usually a percentage of the final sale price, incentivized buyer’s agents to show the property to their clients. This arrangement also provides transparency, as agents and buyers know the financial terms.

Typically, the seller covered the total commission fee, splitting it between the listing agent and the buyer’s agent. This split payment method meant sellers directly contributed to the buyer’s agent’s earnings without considering if buyers were paying their agents separately.

New Real Estate Commission Rules Give Sellers a Choice

With recent rule changes, sellers now have a choice: they can offer buyer’s agent compensation upfront. This shift in policy has introduced greater flexibility for sellers, who can evaluate whether to include buyer’s agent compensation in their listing.

While some sellers may continue with the traditional approach, others opt to skip this upfront payment, knowing buyers may have already agreed to compensate their agents. Sellers are given the choice when signing the standard Massachusetts listing agreement.

I am in the camp of not offering a buyer’s agent a commission upfront. I will explain to my sellers that it is in their best interest to compensate a buyer’s agent if everyone else is doing so but to let the agent ask for their fee.

The buyer and their agent will do this in the standard Massachusetts offer-to-purchase form.

The choice to offer—or withhold—upfront compensation allows sellers to adjust their selling costs based on the market and buyer situation.

You may want to have this as one of your questions when interviewing Realtors.

Let’s examine each point in more detail to explain why sellers might benefit from withholding upfront buyer’s agent compensation under the new real estate rules.

1. Buyers Might Already Be Paying Their Agent

In the current real estate landscape, many buyers enter agreements with their agents, specifying that they will directly pay the agent for their services.

This shift reflects a growing trend towards transparency and personalization in real estate transactions, where buyers explicitly outline their financial obligations upfront.

As a Massachusetts seller, understanding the buyer’s payment arrangement with their agent can influence how you structure your commission offering.

If the buyer is already committed to paying their agent, offering an additional commission on your end may lead to duplicative costs.

In this case, sellers would be funding the buyer’s agent when the buyer is fully prepared to handle that expense themselves.

Choosing not to offer this compensation upfront allows the seller to avoid unnecessary expenditures. It places the responsibility for the buyer’s agent fee squarely with the party benefiting from the agent’s services—the buyer.

Sellers can potentially save thousands of dollars, which they can allocate to other areas of the transaction, such as property repairs or marketing enhancements.

2. Potential to Negotiate Buyer Contributions

By not setting an upfront buyer’s agent commission, sellers retain the flexibility to negotiate various aspects of the sale that suit their financial interests.

When a seller offers compensation upfront, they set a fixed expense without knowing the buyer’s financial situation or willingness to negotiate.

Without a predefined commission, sellers have more room to negotiate with buyers on other transaction elements. For instance, a seller might propose that the buyer cover certain closing costs instead of a reduced overall price.

Alternatively, sellers can leverage the lack of an upfront commission to discuss other concessions, such as repairs or upgrades to the property.

This approach can make the transaction more adaptable to the unique needs of both parties.

The ability to negotiate enables sellers to craft a deal that more precisely meets their financial goals. It encourages both parties to be open about their priorities and find mutually beneficial solutions.

By avoiding an automatic commission payout, sellers can retain more control over the transaction’s financial terms.

3. Reducing Overall Transaction Costs

Reduced Massachusetts Seller Commissions

Home selling can be costly, from staging and marketing to repairs and closing costs. Traditionally, sellers were expected to absorb a significant portion of the transaction’s financial burden, including the buyer’s agent commission.

Says can significantly reduce their total transaction expenses by withholding this upfront cost.
Consider that buyer’s agent commissions typically range between 2% and 3% of the home’s final sale price.

A $400,000 property amounts to $8,000-$12,000. By not committing to this expense upfront, sellers can redirect those funds to enhance the property’s appeal or cover essential closing costs.

For instance, investing in a pre-listing inspection, minor repairs, or cosmetic upgrades could increase the property’s value and marketability, potentially attracting more buyers.

Moreover, saving on the commission cost might allow sellers to offer a more competitive listing price, which could attract a larger pool of interested buyers.

This can be a significant advantage in a competitive market, as buyers often prioritize price when purchasing. With reduced transaction costs, sellers also have more flexibility to adjust their pricing strategy, allowing for a potentially quicker and more profitable sale.

4. Increased Buyer Transparency

The new commission structure highlights the costs associated with a buyer’s agent, which many buyers may have overlooked.

With the responsibility for agent fees no longer automatically falling on the seller, buyers are now required to confront the actual cost of their purchase, including their financial commitment to their agent.

This transparency can lead to more informed decision-making by buyers, who must now account for their agent fees within their budgets.

Instead of viewing the buyer’s agent commission as a hidden cost covered by the seller, buyers are encouraged to actively assess how much they’re willing to invest in their representation. This might make them more selective about the services they seek from their agents, fostering a more intentional client-agent relationship.

In addition, buyers who fully understand their obligations are less likely to be surprised by costs at closing, reducing the likelihood of deal fallout or last-minute renegotiations.

By making these costs explicit, both parties are likely to be more aligned on the financial aspects of the transaction, promoting smoother negotiations and potentially faster closing times.

As a result, sellers benefit from dealing with financially prepared buyers who clearly understand their obligations and are less likely to encounter misunderstandings or disputes over commission fees. This transparency contributes to a more straightforward transaction process, fostering a better overall experience for both parties.

Avoid Dual Agency

While discussing agent compensation in Massachusetts, I would be remiss not to discuss dual agency. Dual agency occurs when one agent “represents” the buyer and seller in a real estate transaction.

When a seller allows a real estate agent to practice dual agency, the agent becomes a neutral party. In effect, the person you have hired to be your fiduciary and pay them tens of thousands of dollars for their advice can no longer give it.

Providing you with counseling and advice would be contrary to the buyer’s wishes. I cannot emphasize this enough—dual agency benefits only the agent.

See all the reasons why dual agency is bad.

When you sign a listing agreement, you will have a choice to accept or reject dual agency. I highly recommend working with an agent who does not participate in this awful practice.

Randall Luna of Elevate Realty Group gives guidance, which I agree with.

Conclusion

The new real estate commission rules allow sellers to make strategic decisions that align with their financial goals. By withholding upfront buyer’s agent compensation, sellers can save money, increase flexibility during negotiations, and promote transparency for buyers.

This approach allows sellers to reduce transaction costs and ensures they are working with informed buyers who understand the full extent of their financial obligations.

In today’s changing Massachusetts real estate market, sellers who leverage these advantages can position themselves for a more profitable and streamlined home sale process.

Please contact me if you are considering selling your property in the Metrowest, Massachusetts area. I would welcome the opportunity to interview.