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Fannie & Freddie Allow Sellers to Pay Buyer Agent Commissions on Top of Concessions

Hey there, Vibers! Frank Garay here from The Real Estate Vibe. Let's talk about something that's been stirring things up in our world lately: buyer agent commissions and who pays for them.

Now, you might have heard about a settlement the National Association of Realtors (NAR) is trying to reach. This settlement basically says that sellers wouldn't have to pay the commission for a buyer's agent. That got a lot of folks riled up, because here's the deal: typically, when a seller agrees to a commission, say 5%, to sell their house with a listing agent, that agent splits the commission with the buyer's agent. In most purchase agreements, the buyer's agent will request their cut, usually around 2.5%.

So, with this potential change, the worry is that buyers will now be on the hook for even more money – not just closing costs and mortgages, but also paying their agent out of pocket, which would be a new "closing cost" expense to be paid by the buyer. This could be a big hurdle, especially for first-time buyers and folks in underserved communities who are already struggling to scrape together a down payment and closing costs.

But hold on to your hats! Here's some good news: Fannie Mae and Freddie Mac, the bigwigs in the mortgage world, have stepped in to help. They say that if a seller pays for the buyer's agent commission (a buyers closing cost expense), it doesn't count as a closing cost concession.

Let me break that down. Normally, there's a limit on how much a seller can contribute towards a buyer's closing costs on loans guaranteed by Fannie Mae and Freddie Mac (which is most loans). For example, when a buyer is putting 5% down, this seller concession limit is 3%. Now, Fannie and Freddie are saying that you can add the buyer's agent commission on top of that 3% limit. This is a powerful guideline change.

So, in a purchase agreement, a buyer's agent can now write the offer to ask for 3% from the seller for the buyers closing costs and request their commission to be paid on top of that. Problem solved right? Sure! That is, if a seller agrees to it... If they don't then, not so much. But in the interim, it's a great guideline change for home buyers that could keep a lot of deals together.

But Frank, what about the long run?

That's a great question. Now, this is just my two cents, but I do think this will lead to some changes down the road. Here's what I'm thinking: when sellers agree to pay for a buyer's agent commission, the amount might start to shrink a bit. Maybe what used to be a 2-3% commission for the buyer's agent might become 1-2%. The reason I'm thinking this is because the media at large has painted the picture that sellers will now pay less in commissions, and they'll be looking for some kind of reduction from what's been "the norm".

The bottom line is this: if you're thinking about buying or selling a home, this whole kerfuffle with the NAR settlement probably won't have a huge impact on you. We're still waiting to see what government agencies like FHA, VA, and USDA will do, but my guess is they'll follow suit with Fannie Mae and Freddie Mac.

I just wanted to keep you all – home owners, buyers, sellers, and my real estate agent friends – in the loop with what's going on.

As always, if you have any questions about buying, selling, or this whole commission thing, don't hesitate to reach out. Let's chat and get you on the path to your real estate goals!


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About the Author

Frank Garay is a distinguished figure in the mortgage industry, with a career that began in 1987 and spans several decades of exceptional service. He co-founded the National Real Estate Post in 2009, a video blog that quickly amassed over 250,000 subscribers, becoming a staple for real estate professionals nationwide. In 2010, Frank was honored as one of the Inman 100, marking him as one of the most influential people in real estate.

Frank's expertise has also been showcased on national television, where he has been a featured guest on the Fox News show "After the Bell." His insights on real estate and mortgage trends during these appearances have solidified his reputation as a trusted industry expert.

Currently, Frank leads Mortgage Masters of California, where his deep market knowledge continues to drive success. He also hosts the Loan Officer Breakfast Club, a thriving platform for mortgage originators to connect and learn.

If you have any real estate or mortgage needs, do not hesitate to reach out to Frank Garay. His vast experience and proven leadership make him an invaluable resource for navigating the complexities of the housing market. Connect with Frank for expert guidance and superior mortgage solutions.

Reach out to Frank Garay at 707-695-6313, for your real estate and mortgage needs and experience the difference that expert advice can make.

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