I am selling my home in Kansas City, do I need to pay the buyers agent?

by Mike Russell

In the fall of 2023 there was a landmark legal case in the state of Missouri, it was argued that there was collusion between the National Association of Realtors and major real estate companies to inflate real estate commissions and that whether or not it was fair that sellers be required to offer compensation to a buyers agent to have their home listed in the local Multiple Listing Service or (MLS). The Plaintiffs won the case and along with a monetary award, the National Association of Realtors and the real estate companies agreed to change their practices.

There has been a lot of confusion to what those changes are, when they go into effect and who will benefit. To thoroughly exppalin the changes, it might be best to start with what the current system is. The seller hires a listing agent to represent them in the sale of their home, they agree to a listing price and what services the listing agent will provide and then the seller and the listing agent agree to a commission which was normally a percentage of the final sales price. As part of the agreement there would be a stipulation as to how much of that commission would be paid to a buyers agent if they succesfully brought a buyer to the transaction.

This is where the plaintiffs believed the collusion started, for the longest time it was considered that the commission to sell a home was 6% with 3% going to the listing agent and 3% going to the buyers agent. While real estate commissions by law were always negotiable it wasn't readily known by most sellers and the fact that a buyers agent could be offered less than 3% was highly discouraged. Most sellers just accepted this as the cost of doing business and rarely challenged this norm.

This takes us to where we are today. The agreed upon changes by the National Association of Realtors and most real estate companies are required to go into effect by August 17th 2024. The major changes surround buyers agent compensation, not only will sellers not be required to offer compensation to a buyers agent, the previous field where offers of compensation were listed on the MLS have been completely removed. Here is what those changes will look like:

Sellers will still hire a listing agent and they will agree upon a listing price and the services the listing agent will provide, the seller and the listing agent will agree on a fee or compensation (which is 100% negotiable) for those listing services.

The seller will get to decide how much compensations they wish to offer the buyers agent, this can be a percentage of the sales price, a flat fee or they can choose not to offer any compensation. This compensation will need to be communicated to the buyers agent by the listing agent.

Buyers agents will be required to have a written agreement with buyers prior to viewing homes with them. This agreement will outline how much the buyers agent will be paid and by who. These agreements can be exclusive, non exclusive and even be property specific.

There is expectation that it will take a while to fully understand how these changes will affect the real estate market but the purpose of the lawsuit and the changes were to bring greater transparency to the real estate transaction and clearly show how real estate services are paid and who is representing who.

I am selling my home in Kansas City, do I need to pay the buyers agent?

by Mike Russell

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