Real estate commissions are negotiable

Coins, moneyI shouldn’t be surprised, but so far, I have not noticed any negotiation on commissions paid to a buyer’s agent. Commissions for agents who assist the home buyer used to be listed in the MLS (multiple listing service) for every home for sale.

That all ended last year after the National Association of Realtors lost a lawsuit.  Sellers often want to negotiate for a lower commission, but when a buyer makes an offer and asks the seller to pay a buyer’s agent commission, sellers are paying it with no negotiation.

As a small company, I don’t have a ton of data for this, and real estate brokers are not allowed to discuss how much they charge or are paid amongst themselves. All I can say is that the commissions that are being paid out to buyers’ agents are pretty consistent and appear to be the same as what they were when they were listed in the MLS.

Redfin reported that the average percentage of commission paid to buyer’s agents has gradually fallen since the NAR settlement was announced, although the decrease “is small and the dollar amount paid to buyer’s agents has held steady.”

It could be that because sellers often pay the buyer’s agent’s commission, buyers don’t feel the need to negotiate. I am not sure why sellers negotiate with their agent for a lower commission and then turn around and pay the buyer’s agent with no negotiation.

There is a point to this post, and that is that real estate commissions are always negotiable, and so are any fees charged by your real estate agent. There are many excellent real estate agents in the area looking for work every day, and it is always alright to negotiate and to pay less.

If you are a home seller, your agent should not be advertising the fact that you will pay the buyer’s agent commission. There is a better way.

Got Realtor?

small houseBeginning August 17, 2024, an MLS Participant “working with” a buyer will be required to enter into a written agreement with the buyer before touring a home, including in-person and live virtual tours.

Real estate agents can show houses to home buyers without having a written agreement with them, but Realtors® can not because they belong to the National Association of Realtors. The organization made the new rule as part of a settlement from a lawsuit.

I have always been a fan of having a contract to represent potential home buyers before showing them houses because I need to know that if they buy a house, I will get paid. Yet, I am not a fan of the new rule especially as it applies to my own listings.

I used to be able to show people my own listings without any kind of an agreement. Kind of like how people can come into an open house without having a signed agreement with the hosting agent.

The new rule is awkward for potential home buyers who are not ready to commit to an agent, but we have a workaround for that. Buyers can sign a showing agreement. The agreement could be one house or for one day or for any period of time that makes sense to both the buyer and the agent.

The new rule is enforced by the NorthstarMLS. I have been following the rules but I think they are hard to enforce.

If you plan on buying a house and would like to tour a home that is listed for sale by a Realtor, you may need to sign an agreement to tour that house. Read the agreement before signing it and remember that commissions are always negotiable. Home sellers will often pay the buyer’s agent but that payment needs to be spelled out in the purchase agreement.

If you plan on buying a home this year, start by finding a Realtor®.

Cold weather home buyer/seller tips

It has been a couple of years since we have had a real Minnesota winter with double-digit below-zero temperatures and windchill in the -20 to -40 degree range so I thought I would post a refresher for cold weather home buyers and sellers.

There aren’t as many people out house hunting on bitterly cold winter days but those out are ready to buy today.

icicles

 

Here are some winter tips for home sellers:

1.  Leave some lights on so we can open the lock box and unlock the door.

2.  Remove the snow and ice from the walkway.  Clearing the sidewalk makes it less likely that someone seeing your home will fall on their a$$ and sue yours off.

3.  Place a walk-off mat near the front door big enough for four pairs of shoes.  This small act of kindness will keep my feet dry because I won’t end up standing in a puddle made by my clients and it will keep your floor dry and your home cleaner.

4.  If your home is vacant please have it winterized, that means that you have the water turned off.

5.  Light is a good thing, especially in the winter.  You want to make it look warm and inviting.   If you normally live like cave people with every blind drawn and every shade pulled consider making some changes so that your home will sell quicker and you will get more money for it.

7.  If your home is occupied and you have a bunch of burglar alarms and maybe some barbed wire and a guard dog consider easing up on the red alert status.  (this has nothing to do with the weather . . I was on a roll)

Here are some tips for home buyers:

1.  Wear shoes or boots that are easy to slip on and off.

2.  Go to the restroom before you begin house hunting.  Homes that are winterized have no running water.

3.  If you are interested in a home that you saw in the dark please schedule an appointment to see it when it is light out before you make an offer.

4.  Flashlights can be handy when touring houses.

5. Bring a tape measure.

 

We start 2025 high

According to FreddieMac Mortgage interest rates are at 6.91%, which is high.  We started 2024 at about 6.5% which was also high.  While some real estate companies and agents advocate buying now and refinancing later, I believe it is better to wait until rates go down before buying unless you are paying cash.

Refinancing is expensive partly because mortgage interest is front-loaded which means we pay the most interest on the first payments. Refinancing means starting over and paying more interest and less principal. Also, a job loss or change in your finances may make refinancing impossible.

When people don’t buy it slows the economy and rates go down. Do you really want to pay all of that interest to the bank each month?

When will rates go down? I am not making any predictions. I’ll just say that they will go down when they go down. I think 5% or lower is the sweet spot for home buyers.

Mortgage interest rate chart
Mortgage interest rates as of January 2, 2025

Is it personal property or a fixture?

Built-in entertainment center and bookcases

The bookcase to the left of the fireplace in the picture is part of the house and included in the sale. It is built-in, which makes it a fixture. The shelves to the right of the fireplace are free-standing and therefore personal property and are not included in the sale.

In Minnesota “fixtures” are included when purchasing a home. A built-in dishwasher and the kitchen sink are both fixtures. The washer and dryer are usually not built-in and are considered personal property. Personal property can be included in the home sale, but the buyer needs to specifically ask for it.

How do we know if an item is a fixture or personal property? There are some gray areas, but we can usually work it out by negotiating and then putting it in writing.

Light fixtures are sold with the house but sometimes the homeowner wants to keep the fixture. In that case, I recommend removing it before the house goes on the market.

Here is a list of items that are considered fixtures:

Built-in fireplace, whether indoor or outdoor, or a built-in fire pit.

Built-in microwave oven.

Shelves attached to brackets or screwed into the walls for stability

TV attached to wall (in some cases, the TV may be removed if it’s on brackets and not built in, but the brackets may not removed)

40-pound built-in fountain

In-ground pool

Built-in hot tub

Bathroom mirror on a bracket

Custom-designed window treatments and draperies; rods screwed into the wall

Plants and landscaping

Bathroom towel rods and hooks

Window Blinds

Built-in refrigerator

Built-in dishwasher

Children’s play area set in concrete

Dog kennel attached to house

Door knocker, door knobs

Light fixtures

Built-in sandbox

Garage door opener (and remote controls)

Painted mural

 

Houses are smaller in 2024

blue house
small house

The median size of a newly built single-family home in the first quarter of 2024 was 2,140 square feet, according to the U.S. Census Bureau. During the same time period in 2023, it was 2,256. That shrinking trend tracks with data collected by the NAHB and the U.S. Census Bureau’s Survey of Construction.

In 2023, the median size of a new single-family home was 2,233 square feet, down 9% from 2015
In 2024, the median size of a new home was 2,179 square feet, the lowest since 2010.

Why are homes getting smaller? For years they were getting bigger. Buyer demand for small homes is up, partly due to lower costs.

As the owner of a small home with what I call a “micro kitchen”, I have always felt that smaller is better. Smaller means less cleaning and maintenance and less space to heat. It can also mean less storage space for storing all that excess stuff.

When I look for houses that I would like to own I am always looking for homes that are smaller than what I have now. Yes size does matter. It really is a matter of personal preference. Space costs money and it takes time too.

As does the “micro kitchen,” it has an efficient layout. It is a galley-style kitchen that opens into a dining room. There is plenty of food prep space because of an antique kitchen queen with a pull-out counter just outside the kitchen.  There is enough cupboard space but some of it is in the dining room. I have too many pots and pans and have started moving the cookware I do not use to some shelves in the basement.

Most people don’t keep a case of creamed corn and a large Dutch oven under their antique buffet in the dining room but it works for me.

One thing we learn from living in a small house is how to get the most out of verticle space and we learn to put our stuff away to avoid that cluttered look.

When searching for your “dream house” dream smaller and enjoy the advantages of having less house.