Who Pays The Buyers Agent?

I saw an article recently about the results of a survey done of home sellers that found that nearly half of them didn’t realize they pay the buyers’ agent commission when they sell their home.

Sellers pay the buyers’ agent in almost all home sales in St Louis…

While I don’t know for sure, I would guess that the people surveyed were homeowners that planned to sell their homes, rather than sellers that already had their homes listed for sale.  I say this because the standard listing agreement used by St Louis REALTORS® spells out the total commission being charged the seller, as well as the portion of the commission that will be paid to the buyers’ agent which I would think, would cause the seller to realize they are paying commission to the buyers’ agent.

While the seller, when presented with the listing agreement, could opt to not offer to pay commission to the buyer’s agent, the MLS rules require that all listings in the MLS (which is most of the St Louis home sales) include an “offer of compensation” for the buyers’ agent, which will come from the seller.  Therefore, the sellers have to either offer to pay the buyer’s agent or forego having their listing in the MLS, hence why sellers pay the buyers agent in nearly all instances.  It’s probably worth noting at this juncture that this practice has come under attack in a recent class-action lawsuit filed by Christopher Moehrl against The National Association of REALTORS®, Realogy Holdings Corp, HomeServices of America, Inc, Re/Max Holdings, Inc and Keller Williams Realty, Inc.  The suit, which can be accessed using the link below, seeks to ban this type of commission arrangement.

Christopher Moehrl v The National Association of REALTORS®

Does Commission Rate Paid To A Buyers Agent Affect Sale Price Or Time To Sell?

If you want to start a debate amount the real estate community that will go on forever and most likely not have the participants reach a consensus, just bring up the topic of my headline:  Does the commission rate offered to a buyers agent affect how much a listing will sell for or how quickly it will sell?  Without getting into any philosophical or ideaoligcal debate on the topic, I wanted to just look at the data to reveal what it shows on the topic.

With this in mind, I pulled MLS data from our database for homes sold in the past 12 months in the counties of St Louis and St Charles, in the price range of $200,000.  I then pulled the data into 3 groups based upon the percentage of commission offered to buyers agents.This data was pulled into the three tables below which reveal, among other things, the median time for homes to sell and the percentage of the original list price they sold for.

What does the data show?  The tables below go into more detail, but here’s a quick recap:

  • 77% paid commission of 2.7%-2.99% to the buyers agent.
    • These homes sold for a median of 97.01% of the original list price and sold in a median time of 25 days
  • 17% paid commission of 2.5%-2.69% to the buyers agent.
    • These homes sold for a median of 96.23% of the original list price and sold in a median time of 39 days
  • 5.5% paid commission of 3% or more to the buyers agent.
    • These homes sold for a median of 94.92% of the original list price and sold in a median time of 38 days

So what is the answer?  Interestingly enough, there isn’t a clear cut answer from the data below as to whether paying less than the most common commission rate to a buyers agent of 2.7% negatively impacts the seller as the stats are very close.  However, what is fairly clear is that paying a higher commission rate of 3% or more to the buyers agent certainly doesn’t result in the home selling for a higher percentage of the list price, in fact the data reveals they sold for less, nor do they sell faster as they sold over 50% slower than the listings with a 2.7% commission rate.

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2.5% – 2.69% Commission Payout To Buyers Agent

St Louis County and St Charles County - 2.5% - 2.69% Commission To Buyers Agent

2.7% – 2.99% Commission Payout To Buyers Agent

2.7% - 2.99% Commission Payout To Buyers Agent

3.0%+ Commission Payout To Buyers Agent

3.0%+ Commission Payout To Buyers Agent