Real Estate Commission Changes on Deck

In March, the National Association of Realtors(NAR) reached a landmark settlement after losing an antitrust lawsuit filed by a group of home sellers.

As a result, effective August 17, 2024, NAR will implement the following new policies related to how real estate brokers are compensated to handle transactions.

1. Commission offers for buyer agents can no longer be required or appear in the MLS, though they are still permitted. Listing agents can advertise specific commission offers on brokerage websites and over the phone, by text message, or email. Home sellers and their agents will negotiate directly with buyers and their agents regarding compensation.

2. Before being shown a home listed for sale, buyers will have to discuss and set compensation directly with their own agents, just like sellers do. They will be asked to sign written representation agreements that outline the agents' services and how much they charge. This is to help make sure that buyers are fully aware of the costs they may be responsible to pay.

These changes are intended to allow more room for negotiation which could, hopefully, help lower the cost of selling a home. Commissions have always been included in transaction prices in one way or another, so in transactions where the seller doesn't have to pay as much in commissions, home prices may be reduced as well.

Some economists believe commissions could drop as much as 30% if buyer agents face pressure from potential clients to discount their fees, but no savings are guaranteed. The impact on real estate commissions will ultimately depend on market conditions, which can vary by location, and how sellers, buyers, and agents respond to the new practices.

Buyer agents sometimes show properties to clients over a period of days to months and may write numerous offers for homes that are never bought. Buyer agents may have no intent at all to work for less, even if they must now justify their value more regularly.

Buyers will determine the commission for their own agents, but the money may or may not come out of their own pockets. For example, it's possible that an offer could be made contingent on the seller paying the buyer's share of the commission or include a request for a general credit toward closing costs in the amount needed to pay the buyer's agent.

In some cases, sellers might agree to cover buyer commissions, which has happened in numerous real estate transactions and could still be in the sellers best interest.

First time buyers, in particular, may need help from sellers to pay their agent's fees. But the additional negotiating required to reach a an agreement that each side is happy with could make it more difficult to get a transaction to the finish line.

Online sites have made it easier to shop for a home without the help of an agent,

Buying a home is a huge investment and comes with a lot of opportunities for serious problems. The type of problems that real estate agents have historically been very good at solving.