Sweeping new rules go into effect today that change the way real estate agents are paid for helping you sell or buy a home.
The changes, the most dramatic to hit the industry in a century, overturn the notorious system of commission payments charged by real estate agents.
Before August 17, an agent working on behalf of a seller charged his or her clients a commission of around 5-6 percent, much more than almost anywhere else in the world.
For example, the sale of a million-dollar home would entail a $60,000 commission for the selling agent, which was typically split with the buyer’s own real estate agent.
These fees were built into home prices, helping to inflate values and pushing real estate agents toward homes with higher commissions.
After a series of successful lawsuits arguing that the practice violated antitrust laws by allowing brokers to collude to raise commission prices, the National Association of Realtors (NAR) agreed to pay $418 million and agreed to change the rules.
A major change is about to affect the way homes are bought and sold in the United States.
“Buyers will decide, through negotiation, how much to pay their agents,” explained housing and mortgage expert Holden Lewis.
The first change will prevent agents from including compensation information in so-called multiple listing services (MLS).
Only paying members of the NAR can call themselves “Realtors,” and only they can access the MLS database of properties available for sale.
Previously, these databases required the seller’s agent to indicate the amount of commission their client paid.
This, in theory, allows the buyer’s agent to “steer” buyers toward homes where the commission is higher and where they can make a higher profit in the event of a sale.
Now, however, compensation details can still be shared, but they must be done in person or over the phone.
The second amendment to the rules requires buyer’s agents to be transparent about their compensation.
After August 17, the agent and prospective homebuyer must sign a written agreement together before even visiting a property for sale.
The agreement will outline that buyers may be responsible for paying their own real estate agent’s fees if the seller decides not to cover that cost.
Some analysts argue the changes will give prospective buyers more power to negotiate with real estate agents during the process.
“Buyers will decide, through negotiation, how much to pay their agents,” explained housing and mortgage expert Holden Lewis.
‘But that doesn’t mean buyers have to pay their agents out of their own pockets. They can ask sellers to contribute some or all of the buyer’s agent’s commission.
“Some sellers may balk, especially when inventory is low and bidding wars break out, but most sellers will be willing to negotiate compensation with the agent,” Lewis said.
The move has been met with mixed emotions by real estate agents since it was announced in March.
Agent commissions could fall by 25 to 50 percent, according to analysis by TD Cowen Insights.
However, this could offer opportunities for real estate agents with different business models, such as flat fees instead of percentage-based commissions, to stand out.
“These changes help further empower consumers with clarity and choice when buying and selling a home,” NAR President Kevin Sears said ahead of the changes.
“I am confident in our members’ ability to prepare for and embrace this evolution of our industry and help guide consumers through the new landscape.”
While the changes will benefit vendors, they could also cause significant disruption to the living conditions of NAR’s 1.6 million members.
“I feel like real estate agents are getting an unfair reputation because of this,” agent Desirae Wykoff told DailyMail.com after the Missouri ruling. “I could see a lot of these people hanging up their license.”
Estate agent Desirae Wyckoff previously told DailyMail.com last year: ‘I feel like estate agents are getting an unfair reputation because of this.
Real estate agents will see big changes in the way their fees are charged and paid
“When you look at this profession from the outside, it looks like easy money. It gives the impression that you do a little bit of work for a lot of money, but that’s not the case at all,” he told DailyMail.com.
Meanwhile, $418 million has been set aside to pay compensation to Americans who were overcharged by middlemen.
Homeowners who sold property in the last seven years may now qualify for a payment, although they must File a claim by May 9, 2025.
Eligible sellers must have listed the home on a multiple listing service (MLS) and paid a commission to a real estate agency.
