What are the new rules about how real estate agents get paid?

What are the new rules about how real estate agents get paid?

While both buyers and sellers typically use real estate agents, traditionally, only sellers have paid their agents directly. New commission-related rules went into effect in August which changed how agents can earn commission.

To get a handle on these rules and what effect they may have in Central Florida, we posed some questions to Orlando based Realtor® Amy Moline of KeyBella Homes/EXP Realty. Amy has helped several of our clients buy or sell property and is a regular speaker for the Financial Planning Association on real estate matters.

Welcome Amy, there is quite a bit of confusion about the new rules, so we are pleased that you are answering some questions. Let’s start with the basics:

What’s new with real estate commissions?

Before the rule change, Sellers would pay the Listing Agent, then the Listing Agent would “share” a portion of the commission to the Buyer Agent. With the new rule changes, the Seller could still do that or choose another option.

One new option has the Buyer Agent, upon making an offer, send a commission agreement that is directly between the Buyer Agent and the Seller. The listing Broker/Agent is not part of that agreement. In that agreement the Seller agrees to pay the Buyer Agent an agreed upon percentage.

How much are these commissions?

In the past, the going rate has been a total of between 4%-7% of the sale price, depending on the market. Back in 2009 – 2011, some listing commissions were as high as 7%, because with over 27,000 homes for sale around Orlando it was much more work to sell a home. In 2022, you could see as low as 4%, due to low inventory and multiple offers. The average in the very recent past has usually been in the 5%-6% range, but that amount is now paid differently.

Today, the Listing Agent commission is agreed upon between the Seller and the Listing Agent prior to the listing going on the market. That rate still seems to be 2.5% – 3%. Meanwhile, Buyer Agents are writing Buyer Agreements with Buyers and are usually requesting to get paid 2.5% – 3% from the Buyer – however, that amount is being passed to the seller during negotiations using the Seller to Buyer Broker Commission Agreement.

Amy Moline, RealtorDo buyers have to have a contract with an agent and if so, are they long term?

Yes, Buyers must have a contract with a Buyer Agent/ Realtor to view a home in person. Some agreements are short, and some are long. There is a possibility of seeing a home through the Listing Agent without a contract, however, the Listing Agent would need to be available to open doors for Buyers and the Buyer technically has no representation.

Buyers should hire a qualified and experienced Realtor to be their Buyer Agent. The amount of negotiating, oversight, knowledge of the market, and understanding of the home buying process can help buyers save money and have a significantly better experience.

Have sellers stopped offering a commission split to the buyer’s agents?

No. With about 47% more houses for sale in the Orlando area today than at the end of 2023, the majority of Sellers are paying Buyer Agent commissions, and some Sellers who were not going to pay have decided to pay the Buyer Agent during the negotiating of the offer.

When the market returns to a Seller’s market (and at some point, it will again), I expect Sellers to pay less of the Buyer Agent commissions as more competition will give Sellers more leverage. This will then mean that Buyers could pay more of the Buyer Agent Commissions directly.

Have buyers offered to pay their agent directly instead of splitting the commission charged to the seller?

No. This is currently not the norm. What I am seeing in this harder market is that Buyer Agents have been attaching to their offer a Seller to Buyer Agent commission agreement.

Are commissions now fixed or still negotiable? By buyer and by seller?

Commissions have always been and remain negotiable. However, if the rate you want to pay is much lower than the going rate, you could be at a disadvantage as good agents will be more inclined to work with clients who appreciate their higher value.

Have you seen any changes in commission levels thus far as a result of these rules?

At this time, I have not seen many changes in the amount of commission. What I have seen is an increase in the amount of additional negotiating and time spent counteracting misinformation. Realtors on both sides of the transaction are having to adjust their process for all of this which seems to prolong the process of coming to an agreement between Sellers and Buyers.

Thank you for answering our questions and for helping our clients over the years, Amy.

To learn more about Amy and connect with her, see her personal page with KeyBella:  https://www.keybella.com/agents/274447/Amy+Moline.

You may also reach Amy by calling or texting her at 407-506-7447 or via email at [email protected].

Attention Business Owners

As we reported in April, the Corporate Transparency Act (CTA) requires the disclosure of the beneficial ownership information (otherwise known as BOI) of certain entities from people who own or control a company. With potential penalties for willfully not complying with the reporting requirement of civil penalties of $500 per day (up to $10,000) and a felony offense with up to two years of jail time, this is a matter that requires attention. Entities in existence on January 1, 2024, must file with the Financial Crimes Enforcement Network (FINCEN) before January 1, 2025. Entities formed in 2024 have 90 days from registration to file.

We have been advised that our firm should refrain from assisting with filing for several reasons, including the unauthorized practice of law. You are not required to engage an attorney to file but if you want assistance, your corporate attorney is likely where you should start. Nonetheless, we can provide information from credible sources. The AICPA has an FAQ that covers the basics.

For more detailed information, including if a business is exempt from filing, the FINCEN website is the authoritative source. They offer a FAQ page – https://www.fincen.gov/boi-faqs, and a  Compliance Guide – https://www.fincen.gov/boi/small-entity-compliance-guide. You can file here – https://www.fincen.gov/boi.

Making News…


Will the election impact what happens with my taxes and the stock market? – MarketWatch

I own stocks with my wife. Should we wait until one of us dies to sell them? – MarketWatch

Afraid of market volatility? Learn to ride the investment wave – Florida Today

I’m about to start my first ‘real’ job. Is it worth it to enroll in the 401(k) right away? – MarketWatch

I accidentally overfunded my IRA last year — how much trouble am I in? – MarketWatch

In the News…


For the second year in a row, Moisand Fitzgerald Tamayo, LLC was named to list of America’s top 250 independent financial planning and wealth management firms by Forbes. The firm has been similarly recognized at various times by USA Today, Financial Advisor, the Financial Times, Advisor HQ, and RIA Biz

Moisand Fitzgerald Tamayo, LLC continues to contribute to the advancement of the financial planning profession with four members of our team being elected to serve on the 2025 Board of Directors of the FPA of Central Florida. Will Wallace is a Director at Large, Casandra Garrett is the chapter liaison to the state-wide consortium of FPA chapters, the FPA of Florida, Tommy Lucas, CFP®, EA  is the chapter Secretary, and Brad Brescia is President-elect. 

If you are a member of an organization in need of a personal finance speaker, we are happy to talk with your group’s organizers about helping out at no cost.

Tommy Lucas, CFP®, EA  provided financial tips for Business News and assisted CNBC reporters on the following topics, a couple of which were syndicated to NBC affiliates:

This ‘back of the napkin math’ shows whether you could have a surprise tax bill, expert says – NBC10 Philadelphia

Some investors can ‘capital gain harvest’ to avoid year-end mutual fund payouts, advisor says – NBC New York

Younger retirees can face a ‘phantom tax’ on Marketplace health insurance — here’s how to avoid it – CNBC

Brad Brescia CFP® suggested to CNBC that one way of reducing the possibility of bad markets ruining a retirement is to employ flexible spending plans in “As you near retirement, this overlooked risk can ‘make or break’ your portfolio, advisor says”

Charlie Fitzgerald, CFP® added his thoughts to a CNBC article, “Here’s when exchange-traded funds really flex their ‘tax magic’ for investors.”

Notable


$3.4 billion scammed from persons age 60 and older in 2023 (InvestmentNews).

Nearly half of Americans have no retirement savings (Federal Reserve Survey of Consumer Finances).

23% of current workers say they have no retirement plan and only 1 in 5 are very confident they will be able to fully retire with a comfortable lifestyle, according to a recent Retirement Outlook of the American Middle Class report by Transamerica.

13% of retirees said they have saved more than they need for retirement, one-third have about the right amount, 53% say they should have saved more and 70% of retirees wish they had started saving earlier, according to another study by Pew Charitable Trusts.

 

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Moisand Fitzgerald Tamayo, LLC is an Orlando, Tampa and Melbourne, Florida based fee-only financial planner serving central Florida and clients across the country. Moisand Fitzgerald Tamayo, LLC specializes in providing objective financial planning, retirement planning, and investment management to help clients build, manage, grow, and protect their assets through all phases of one’s life and the many transitions in between. If you have any questions or would like to discuss anything further, please give us a call or send us a note. If you are not a client and wish to receive emails notifying you of new posts – no more than once per month – fill out the subscription information in the sidebar to the right. For more frequent updates, follow us on FacebookLinkedIn, or Twitter.  

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About Dan Moisand

Dan Moisand is a fee-only financial advisor with Moisand Fitzgerald Tamayo, LLC. He is a regular contributor for multiple outlets, including Florida Today, MarketWatch, and The Wall Street Journal. His writing and financial advice have also been featured in Financial Planning, Investment Advisor, Wealth Manager/Advising Boomers, Forbes, Smart Money, and The New York Times, among other publications. He is the only two-time winner of the Journal of Financial Planning’s “Call for Papers” competition and has been named a top financial planner and advisor by multiple publications. Investment News named Dan one of the “twenty most influential men and women” in the history of financial planning. He currently serves on the Board of Directors for the CFP (Certified Financial Planner) Board.

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