Greater Boston real estate agents aren’t losing sleep as new commission rules roll out

New rules that dictate how residential real estate agent commissions work are set to go into effect across most of the United States on Saturday, but Greater Boston real estate experts aren’t exactly bracing for tectonic shifts in the way they do business. 

A $418 million National Association of Realtors legal settlement earlier this year delivered new policies around how agent compensation works. The standard practice typically entailed a home seller covering the cost of both the listing and buyer’s agents through compensation that is typically between 5 percent and 6 percent of a home’s sale price. The seller’s agent then typically agrees to split the commission with the buyer’s representative. 

The new practice calls for decoupling this arrangement, meaning agents will no longer be able to note on the Multiple Listing Service, or MLS, whether a seller is offering to pay the buyer’s agent commission. Further, buyers who utilize a real estate agent to find a new home will be required to sign upfront agreements that outline how much their agent will be paid. 

While that sounds like huge changes, local real estate agents and brokers don’t see them as giant hurdles in terms of future deal-making.

“In reality, this is all much ado about nothing. Commission rates have never been set. They’ve always been negotiable,” said Maggie Gold Seelig, founder of the luxury boutique firm MGS Group Real Estate. “Agents, buyers, and sellers have a choice of what rates they are willing to pay or work for. It’s like a doctor; you get a choice of who you want to work with and at what rates.”

While there may have been a standard practice regarding commissions, Seelig emphasized that these were always up for negotiation. 

“There’s always been transparency in any of this,” she added. “I can’t think of a seller I sat down with who didn’t want to discuss how fees work.”

But not every buyer may have known to ask whether there is any wiggle room on commissions. Further, those in the local real estate orbit note that this is merely a rules change rather than anything legally binding. 

Much of the existing way of doing business in residential real estate is still there, but buyers and sellers will just have to navigate a few more hurdles of negotiation along the way.

“No laws have changed, so what has changed is a rule in the Multiple Listing Service,” said Theresa Hatton, CEO of the Massachusetts Association of Realtors. “That rule is that there will be no broker-to-broker compensation offered in the Multiple Listing Service. Broker-to-broker compensation is still valid. It’s still available. It’s still a great marketing tool for sellers to use to attract folks that are working with buyer agents and their buyers, so that portion just can’t be communicated through the Multiple Listing Service.”

Instead, brokers can put in the comment section of an MLS listing to contact the seller’s agent to discuss compensation terms. There can also be compensation terms noted on listing fliers, social media, or alternatives to the MLS like the Top Agent Network, a distribution platform only the top 10 percent-producing agents in a local market can access. 

Given the upfront nature of buyer agent agreements now required, some herald this as a win for more concrete guidelines after years of some buyers not realizing they can negotiate commission rates. 

“The changes following the NAR settlement create more transparency in the real estate industry with regards to how agents and consumers work together,” a Zillow spokesperson said in a statement to Boston.com. “More transparency in real estate is a good thing — it’s Zillow’s founding principle and something we’ve always championed. Agents provide a valuable service and should be fairly compensated, and consumers should understand how fees work and that they are negotiable.”

The same spokesperson noted how tedious the homebuying process can be: Half of home buyers said the process made them cry, according to a Zillow report published in 2022. While some experts would argue that transparency could dry those tears, others say the right agent is still the key to success — and that the new process helps buyers find an agent who is right for them. 

“Buyers have the chance to sort of interview their agents and find out who’s going to really work with them closely,” said Christopher Baird, a Boston-based Redfin agent. “It’s about building that relationship.”

But others also point out that the new process can potentially limit one’s potential pool of homes to view and even lead to protracted negotiations over agent compensation. If a buyer wants to look at only those homes in which the seller agrees to cover the entire commission fee — which has been the norm until now — that could mean some homes for sale are non-starters. 

Further, there’s a chance a seller and buyer have different outlooks on how much their agents should be paid in the first place. 

“What will be interesting to see is when sellers offer a different amount than is in the buyer’s agent agreement, and that will now become just another layer in a negotiation that’s already complex about relatively short dollars,” Seelig said. 

Don’t necessarily bank on the new guidelines ushering in a new era of affordability, either. Greater Boston housing market is still high-cost and undersupplied, and any broker compensation negotiation in the homebuying process is unlikely to move the needle drastically.  

Those interviewed for this story emphasized the continued need for seller and buyer agents. On the seller side, Seelig said, it’s important to focus on the overall sale price rather than the smaller percentage cut a broker might take for handling the marketing, staging, and sale of a home. 

“Create as little barrier to entry as possible and offer the buyer’s agent a fee,” she said. “Why not have the most buyers coming in to see a property?”

For buyers, all of those interviewed emphasized the importance of retaining a real estate agent or broker — especially at a time when negotiations on home prices and commissions can be as important as ever. 

“It is so important to have representation in a huge financial investment. It’s not as though it’s an airline ticket that you can return the next day or cancel,” Hatton said.

“This is a big deal, so definitely seek representation. Work through your offer to get the seller to compensate for it, if that’s necessary for you. Just don’t go it alone.”