Savings on the Horizon: New Real Estate Commission Rules Aim to Reduce the Cost of Selling a Home
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Homebuyers Face Changing Housing Market as Realtor Fees Shift
Homebuyers face a changing housing market this weekend as major shifts to how real estate agents are paid take effect.
New Rules for Realtor Fees
The National Association of Realtors (NAR) groundbreaking new commission-sharing agreement will end the common practice of home sellers automatically covering the fees for real estate agents on both sides of the transaction. The new rules start on Saturday.
Background on Realtor Fee Lawsuits
The agreement is the result of the settlement of a series of lawsuits brought over the past few years challenging the long-held practice of splitting the sales commission between the seller and buyer agent. Plaintiffs in the legal battles, primarily home sellers who paid both agents, claimed commission sharing, also known as cooperative compensation, artificially inflated the cost of a home sale.
New Rules for Realtor Fees
Although the NAR was the main defendant in several cases, other major brokerages, including Keller Williams and RE/MAX, were also named co-defendants. With the NAR settlement, however, most of these lawsuits will have been settled, clearing the way for a change in how realtor fees are negotiated.
How Realtor Fees Will Change
Now, real estate agents are prohibited from advertising shared commissions on local databases, called multiple listings services (MLS), and buyers will instead have to negotiate their agent’s fees before they start viewing homes.
Impact of Realtor Fee Changes
Even though these fees have always been negotiable, most homeowners entering into a listing agreement with a realtor have typically paid between 5% and 6% commission on the sales price, which was split between the agents representing the seller and buyer. The ultimate goal of the lawsuits was to reduce this percentage, thereby saving sellers money.
Marty Green’s Take on Realtor Fee Changes
Marty Green, principal at the Texas-based law firm Polunsky, Beitel, Green, believes that once the agreement goes into effect, commission changes will remain modest — at least for now.
Who Benefits Most from the Change in Realtor Fees?
Although the settlement is meant to benefit all sellers and buyers, that may not be the case, according to Daniel Smith, founder of Keepingly, a home management platform. If the traditional model of commission sharing is fundamentally altered, it could simply lead to more upfront costs for buyers.
Outlook for Realtor Fee Changes
It will take time to measure exactly how much change the agreements will bring about to agent commissions. For now, it’s more important than ever that sellers and buyers understand the potential impacts of the settlement. For sellers, Green says, this means deciding whether to pay the buyer’s agent and for buyers, how to structure their offer in a way that makes financial sense.
