The Why here is the most important detail:

• Lending regulation does not allow for many fees to be a part of the loan for good reason - commissions and other fees are not allowed

• Buyers purchase of the property dictates the purchase price and ultimately defines the Seller’s net funds from the transaction

• By sourcing the commission funds for the transaction from all parties from the Seller’s proceeds, the commissions are paid by the buyer through the loan - the seller credits these as credits to the transaction

• The Seller’s Agent will prepare a seller to expect offers to include this as a solution for many offers and will show examples of what is most likely and provide a range of scenarios to be prepared for

• Buyer’s Agent will prepare the buyer to expect a range of scenarios for making offers as well - It is possible that by offering to pay out of pocket for commissions, this offer would be more appealing to a seller (and some sellers may decline offers including credits) - being prepared for all scenarios will be ideal when planning for success

As a real estate professional, I perform my services as your agent in exchange for a fee (typically a percentage of the purchase price of the home you buy or sell). This rate is negotiable and has a range based on the services I provide. I typically do my best and save my clients money to the best of my ability. I tend to imagine my clients like family and provide the same service I would to my own family.

Ultimately, my Broker is the principal agent in the transaction and provides behind-the-scenes support and protections (for me this includes errors and omissions insurance, for example).

An excellent agent will be adept in explaining the process and details of the arrangement. In a listing consultation, I make it a point to share a range of expected property valuation. Further, I review a detailed seller’s net proceeds estimate. In this conversation, I will go into detail on commissions and how and why they are structured the way they are. At this time, it is common to explore options (negotiate commissions).

It will always be ideal for sellers to expect that buyers will ask for seller credit for their commissions for their agent. This is the only way that these expenses will not come from the buyer’s pocket during the transaction as lending rules restrict these from being in the mortgage.

Sellers are typically in the position of gaining funds from the sale of the property, however it is possible for sellers to come out of pocket or commission and other taxes and fees should the net proceeds from the transaction not cover the expenses.

While sellers may elect not to cover commissions, this may severely limit the number of buyers who fit the needs to purchase a property not willing to consider some seller credit to the transaction. It is always true that it takes a willing, qualified, and able buyer to purchase a property. Sellers should have a reasonable expectation for what their most likely net proceeds will be with and without credit from the purchase of the home (which is funded and made possible by the buyers money).

As an Agent representing a seller in a transaction, it will continue to be commonplace to expect to pay both buyer and seller commissions as a part of the closing costs of the transaction. While it is true that the purchase price agreed to will include taxes, fees, and commissions, it is my best practice to provide an as detailed as possible estimate of net proceeds for any offer. This will take into account these expenses and mortgage payoff to reflect a “net proceeds”. Of course, a buyer’s offer which includes less request for seller’s credit will net more to a seller potentially, but the reality for the future will almost certainly include a deeper review of individual offers and how each requests credits and how much credit these offer for the purchase.

As we proceed beyond May of 2024, it will likely become commonplace to have deeper conversations about commissions with buyers. Buyers have more variables to consider and more hurdles to overcome as they work with their Agent to purchase a property.

When planning to make an offer on a property, we will review the comp value of the property (based on the most recent, most similar, nearest sales data).

We will review your specific needs for seller’s credits as well. These may include closing cost credits (these do have legal limits that we will review). As a buyer, we will have also agreed to commissions based on the services agreed upon. We will likely include these as a credit request with the offer.

In the event that a seller will not pay these fees, it will be possible to explore the possibility of paying for these expenses out of pocket - or - we may pursue other properties that fit your specific needs.

(The solutions pre May 2024 in which these hurdles were solved in advance had significant benefits for both buyers and sellers, however our increased frequency to negotiate these topics post May 2024 will net a deeper understanding and agreement on these fees within a purchase.)

Full-Service Representation of a Seller will include:

• Valuation Range review using customized data

• Strategic vision based on market dynamics for your specific property

• Basic marketing - may include:

  • Multiple Listing System

  • Online presence

  • Photography

  • Open-Houses

• Transaction Management

• Data and file retention

• Transaction audit

• Errors and Omissions Insurance Policy

Full-Service Representation of a Buyer will include:

• Valuation Range review using customized data for each offer

• Strategic vision based on market dynamics for your specific property

• Strategic plan for any specific needs (move out date, rent back of this property post sale, repairs and credits, timeline needed, etc)

• Additional ongoing reporting and adjustment for maximum result

• Transaction Management

• Data and file retention

• Transaction audit

• Errors and Omissions Insurance Policy

• Review by peers within my office for shared insights

Basic Representation of a Buyer will include:

• Valuation Range review using customized data for each offer

• Strategic vision based on market dynamics for your specific property

• Strategic plan for any specific needs (move out date, rent back of this property post sale, repairs and credits, timeline needed, etc)

• Transaction Management

• Data and file retention

• Transaction audit

• Errors and Omissions Insurance Policy

Typically (and throughout the industry’s history), commissions are paid from the final settlement during the transaction and are attributed to the seller’s side of transaction debits/credits.

However, the purchase of the property - the money being used to pay these transaction expenses is the funds from the buyer. In reality, the buyer and seller both participate jointly to buy an sell the home - and thus, funds mingle to make the magic happen.

In the Las Vegas market, it is typical for sellers to pay the transfer taxes in a transaction, although this is not true in all markets. While it is true that settlements will reflect this as a debit from the seller and a credit to the buyer, without the buyer’s money purchasing the property, there would be no money to pay - without the purchase, there would be no transfer tax to pay.

This industry has solved these complicated details with elegant solutions, and are infrequently covered in great detail during the process because they are standard practices and because buyers and sellers infrequently have interest in this level of detail.

Similarly, commissions face a hurdle or being unable to be added to mortgage. Much like other topics covered during the buying and selling process, some expenses can and others cannot be included in the loan. Thus, the elegant solution of sourcing these funds as a credit from the seller to the buyer is an industry-wide practice.

It appears as of March of 2024, that the future of what we call this process and how we talk about it will continue to change and develop. However, regardless of calling us “sub-agents” (how it was in the 1900s), or cooperative (how it was through the 2000s), or seller credits - how I expect it will be for the future. The fact remains that buyers purchase of the home funds money to be paid for the fees associated with the transaction.

a. The MLS would have to prohibit sellers and listing brokers from making any offers of compensation to buyers or buyer brokers on the MLS – and from disclosing listing broker compensation or total broker compensation – on the MLS. Moreover, the MLS could not, with certain exceptions, facilitate or support any non-MLS mechanism for listing brokers or sellers to make offers of compensation to buyer brokers. Sellers could, however, offer buyer concessions on an MLS (for example, for buyer closing costs) as long as the concessions are not conditioned on the retention of, or payment to, a cooperating broker.

b. The MLS would have to require that any MLS participant working with a buyer would have to enter into a written agreement with the buyer before the buyer tours any home. The agreement would have to specify the amount or rate of compensation that that the buyer broker will receive from the buyer and the amount that the buyer broker will receive from any other source. The agreement would also have to provide that the buyer broker could not receive any compensation for brokerage services that exceeds the amount or rate agreed to in the agreement between the buyer and the broker.

c. The MLS would have to prohibit MLS participants from representing that their brokerage services are free or available at no cost unless they receive no financial compensation from any sources for their services.

d. The MLS would have to require REALTORS® and all MLS participants to disclose to all prospective buyers and sellers in conspicuous language that broker commissions are not set by law and are fully negotiable.

e. The MLS would have to prevent any system by which participants could filter out MLS listings based on the existence or level of compensation offered to the buyer broker.

f. The MLS would have to rescind any rules that are inconsistent with the above provisions and would have to develop, or provide, educational materials that reflect these provisions.

Buyers agree to purchase a home for a fair market price. If an appraisal is performed, then the Appraiser includes a deep and specific valuation on the property and when paired with a loan, the Appraiser’s valuation is the maximum lendable amount.

When fully funded with the Buyer’s funds, the final settlement including commissions are paid out. The funds distributed some from the proceeds of this transaction (when the funds exceed the costs of the transaction). When paid from proceeds, the least amount of out of pocket expenses are made possible.

While these funds are distributed from a seller credit, the source of this money are from the buyer.

If a seller is unwilling to participate (or in the event that the selling expenses exceed the revenue of the transaction), it is possible that a buyer would need to come out of pocket to pay Buyer’s Agent commissions. As these are not allowable in loans due to lending regulations, the industry does its best to find elegant solutions and make each transaction as smooth and efficient as possible.