The real estate landscape has seen some significant shifts in recent years, and one of the biggest talking points in 2024 was the changes to real estate agent commission structures. These changes were sparked by federal and state regulations aimed at making commission structures more transparent, and reducing the perceived burden on home sellers. But despite the media buzz and regulatory changes, when it comes to Washington State, not much has changed when it comes to how commissions work. Let’s break down what’s changing (or not) and why commissions still matter.
The 2024 Commission Shake-up
In early 2024, the U.S. Department of Justice reached an agreement with major real estate groups, including the National Association of Realtors (NAR), which resulted in modifications to the way commissions are structured. One of the most significant aspects of this change is the requirement for greater transparency when it comes to commission splits between buyer’s agents and seller’s agents.
Previously, the seller often paid the commission for both agents involved in the transaction—meaning the seller would cover both their own agent’s commission and the buyer’s agent’s commission. The main issue the settlement aimed to address was a perceived lack of transparency about seller’s options when it came to paying commissions, and how this split between listing and buyer agents worked.
With these new rules, parties to a real estate transaction now have more clarity on real estate commissions, leading to more choice and control over agents’ compensation. While this does provide more transparency and aims to make the process more fair, it’s not a radical change in how commissions are negotiated.
So, What’s the Situation in Washington State?
While these changes are significant on a national level, in Washington State, there’s been less of an immediate impact. Commissions in Washington State have always been negotiable. The trend towards more transparency is certainly in line with local practices, but there has not been a major upheaval in how commissions are structured or how they’re handled in terms of the buyer’s and seller’s agents.
Real estate agents in Washington have historically been able to negotiate their commissions freely, and sellers are still able to structure the commission in a way that incentivizes both the seller’s agent and the buyer’s agent. The typical arrangement where the seller covers the commission for both agents remains largely intact.
Why Do Commissions Matter?
You may be asking, why does it even matter who pays the commission, or whether commissions are transparent? The short answer is that commissions directly impact how agents approach a transaction, and by extension, how a property is marketed, shown, and ultimately sold.
The Speed of Sale
A well-incentivized buyer’s agent is more likely to bring interested buyers to the table, leading to faster offers. This is important in a competitive market like Washington, where multiple offers are common. If a buyer’s agent feels adequately compensated, they’re more motivated to show homes to their clients, advise stronger offers, and help move a transaction forward.
Seller’s agents, on the other hand, are also more likely to be motivated to get the best price and terms for the seller when they feel they’re properly compensated. A motivated seller’s agent will market the home effectively, host open houses, and advocate for the seller during negotiations. Seller’s agents will also have a larger budget to maximize the market tools at their disposal. Commissions aren’t just an agent’s paycheck—they’re a tool to ensure the agent is aligned with the client’s interests.
The Price of a Home
Commissions can also affect how much a home ultimately sells for. If a seller’s agent is incentivized to bring in qualified buyers, they’ll work harder to market the home effectively. Likewise, if the buyer’s agent has the right incentives, they’ll be more likely to work on behalf of their clients to negotiate a competitive offer.
A well-compensated buyer’s agent may also push for a more competitive offer, ensuring that a property’s true value is recognized. While commission rates are not the sole factor in a transaction’s final price, they play an important role in ensuring all parties are motivated to act quickly and aggressively.
The Key Takeaway: Commissions Are Negotiable, But Incentives Matter
It’s crucial to remember that real estate commissions have always been negotiable. Whether you’re a buyer or seller in Washington, you’re always able to discuss and negotiate the percentage that works best for you. However, just because you can negotiate, doesn’t mean you should underestimate the value of having both agents motivated and incentivized to do their best work.
Incentivizing both the buyer and seller agents ensures that each party has the resources and motivation to help make the transaction a success. Buyers need representation that’s working in their best interest, and sellers need an agent who can effectively market their property, negotiate terms, and close a deal.
While the recent changes may lead to more transparency, the core principles behind commission structures remain the same: commissions are a way to ensure that agents are motivated to act in the best interest of their clients. Whether you’re buying or selling, it’s important to understand how commissions impact the speed and price of a sale, and why it’s often best to keep both agents incentivized for the best outcome.
At the end of the day, the structure may have evolved, but the importance of fair compensation for real estate agents in Washington State—and beyond—remains the same.