White Paper: The Impact of Commission Changes on the Real Estate Market – A Case Study from Dublin, CA

Introduction

The real estate market in California, particularly in cities like Dublin, is undergoing significant shifts driven by changes in buyer agent compensation models and market dynamics. This paper presents a case study from our recent listing in Dublin, CA, where a Below Market Rate (BMR) property was listed at $300,000—substantially lower than the median home price of $1.3 million in the area. Despite the capped appreciation enforced by the city, the listing garnered significant attention and offers, providing a valuable insight into the evolving landscape of real estate transactions.

The Dublin Case: BMR Property Listing

Our firm recently listed a BMR property in Dublin, CA, for $300,000. This price stands in stark contrast to Dublin's median home price of $1.3 million, reflecting the capped value enforced by the city as part of its affordability initiative. Despite the price cap, the property received over 11,000 views and attracted 21 offers.

The Offer Process: A New Dynamic

The listing process unfolded in two distinct phases, reflecting a shift in buyer behavior and agent compensation trends.

Phase 1: Buyer Broker Compensation

In the first phase of reviewing offers, all offers requesting buyer broker compensation were eliminated. This decision highlights a critical shift in the way transactions are being handled under new commission structures. Traditionally, buyer agents were compensated by sellers, but the dynamics are changing. Sellers and their listing agents are increasingly prioritizing offers that do not ask for buyer broker compensation, signaling a new era in commission structures. Only offers without buyer agent compensation requests moved forward to the next round of consideration.

Phase 2: Proof of Funds and Seller’s Costs

In the second phase, the remaining offers were evaluated based on financial capacity and buyer willingness to cover seller’s closing costs. Offers were scrutinized on two main factors:

• Proof of Funds: Buyers needed to demonstrate strong financial backing, particularly through higher down payment amounts.
• Closing Cost Coverage: Only offers that committed to covering all of the seller’s closing costs were considered for final selection.

The winning offer in this case exemplifies the shifting landscape: it included no buyer agent compensation and committed to covering all the seller's fees (anticipated to be no more than $10,000). This is a clear example of how buyer behavior and offer structures are evolving in response to new commission models.

Implications for the Real Estate Market

This case study serves as a test case for how the changes in buyer agent compensation are influencing the real estate industry. The high number of offers and the elimination of those seeking buyer broker compensation suggest that we are at the forefront of a larger trend.

Level Setting the Market

The nature of this BMR property—where the appreciated value was capped by the city—represents a perfect example of how market conditions are being equalized. Buyers are no longer able to negotiate based on rapid appreciation, but must instead rely on the strength of their financial offer and their willingness to absorb costs traditionally borne by the seller. In many ways, this is leveling the playing field, as compensation structures that once benefited agents are now being scrutinized or eliminated.

Short- and Long-Term Effects

Whether this shift represents a sprint or a marathon toward new market norms remains to be seen. What is certain is that the dynamics of real estate transactions are changing, and this Dublin case shows how commission adjustments could shape future deals. As sellers become more selective about offers that do not include buyer agent compensation, buyers may need to shift their focus toward better financial positioning rather than relying on traditional commission structures.

Conclusion

This BMR listing has provided a valuable case study for understanding how commission changes may reshape the real estate industry. By favoring offers without buyer agent compensation and focusing on proof of funds and seller cost coverage, sellers and listing agents are signaling a shift away from traditional models.

As we continue to list properties in Dublin and other areas, we will monitor these dynamics closely. Our next test case will involve a traditional single-family residence (SFR) and an investor seller, allowing us to further evaluate how these changes affect different types of transactions. The insights from these listings will provide critical information for understanding how the real estate industry will evolve in response to these new trends.

Stay tuned for our upcoming findings as we explore how these commission changes are shaping the future of real estate.