Real estate agents are clashing at the closing table and transactions are being delayed over a question that used to be clear: Who is paying the buyer’s agent commission?
“You have one agent saying the other party is paying, and they are pointing fingers at each other,” said Rich Milesky, president of Penn Suburban Abstract, a title and closing company in McCandless.
“We have never had that before,” Mr. Milesky said. “It was always clear that the seller side paid the commissions for both sides.”
The disputes are usually ironed out within hours. But Mr. Milesky said he has seen the arguments spiral into threats of lawsuits and drag on so long that the homebuyer needed temporary housing and the seller was unable to close on their next house.
It’s one of the unintended consequences from a recent National Association of Realtors (NAR) settlement, which upended the industry’s long-held rule that sellers cover both the listing and buying agent’s commissions.
Now sellers are only on the hook for the listing agent’s commission, leaving buyers to foot their own agent’s bill unless the seller agrees upfront to cover it.
And that’s the problem.
As the title agent, Mr. Milesky said, he drafts a settlement statement, which is an itemization of all the charges associated with the transaction, including the commissions paid. When agents don’t agree on who is paying the buyer’s commission, the closing is halted.
The closing officer is often caught in the crossfire.
“The agents are arguing with each other and looking at us — the title agents — to be the judge and jury, which we cannot be.”
The NAR settlement was expected to shake up the traditional model for who pays commissions, but also lower the cost of commissions paid by home sellers and buyers.
But that doesn’t appear to have happened. Real Estate commissions have always fallen between 5% and 6%, and a September 2024 survey released by Clever Real Estate, an online broker, found the average real estate commission in Pennsylvania is 5.35%, which is slightly higher than the national average of 5.32%.
Which means they haven’t really fallen at all.
John Petrack, vice president of the Downtown-based Realtors Association of Metropolitan Pittsburgh, said it was unrealistic to expect the NAR settlement to result in massive commission cuts.
“The cost of doing business is the cost of doing business,” Mr. Petrack said. “It isn’t going to drastically fall because of some lawsuit in Missouri.
“If anything, it gets more expensive every day.”
According to Clever Real Estate, the average listing agent in Pennsylvania charges a commission of 2.75%. The average buyer’s agent commission is 2.60%, for a combined 5.35%.
A home costing $200,000 would have realtor fees of $10,460; a $400,000 house would carry $21,400 commission; and a $670,000 would cost $35,845 in agent commissions.
Under the new system, sellers often offer to pay for the buyer’s agent from the proceeds of the sale rather than ask buyers to come up with their portion out of pocket.
Sellers offer the concession to make their home more enticing to buyers.
Disputes arise when the two parties have not reached an agreement about paying the buyer’s agent commission prior to the closing stage, Mr. Milesky said.
He said different brokers interpret the new rules differently and each broker does business a little differently because this is an evolving area of the business.
“The unfortunate part of this is when the buyer and the seller suffer because disputes are not settled quickly,” he said.
“The NAR ruling basically says the market will figure this all out,” Mr. Milesky said. “I’m sure it will. But we’re still in the infancy stage of trying to figure it out.”
