This weekend, big changes will take effect because of a key settlement about broker fees that was pushed by the National Association of Realtors (NAR). Professionals in the real estate market say that these changes will make the process of getting a home more complicated and uncertain.
The $418 million settlement, which was announced by NAR in March, settles long-standing complaints about broker fees. A vice president of Nation One Mortgage’s southeast division named Phil Crescenzo Jr. told FOX Business that the upcoming changes will add “more uncertainty and unknowns to an already stressful and pressured industry.”
Noel Roberts, CEO of Pending, a tech-driven real estate company that specializes in off-market deals, says that the changes to the current system could make things more complicated, but they could also make things more clear and open up more negotiation possibilities. Because of these changes, Roberts thinks that the structure of the commission will become clearer and talks will be easier.
As part of the settlement, NAR has to make a new rule that says people can’t offer money in listing databases that the group manages, which are usually called multiple listing services (MLS). Several cases said that NAR’s broker commission rules caused fees to go up and broke antitrust laws.
This change is meant to end those lawsuits. NAR has agreed to the payment, but they have not said they did anything wrong. It has always said that it doesn’t set commission rates, stressing that these fees have always been and will continue to be up for discussion between agents and their clients.
One of the most important changes brought about by the new rules is that buyers no longer have to pay a buyer’s agent. In the past, the seller usually paid both the selling agent’s fee and the buyer’s agent’s fee, which added up to a 5% to 6% commission split.
Another change is that deals will need clear agreements through a Buyer Agency Agreement (BAA) from now on. The amount of money a buyer’s agent will get will be written in this legal record, regardless of what the seller offers. This deal is very important because it has to be in place before a buyer can look at a house.
Even though there have been changes to the way commissions are handled, Crescendo Jr. stressed that this has no direct effect on realtors’ total earnings because commissions have always been negotiable. But now that the new rules are in place, it’s still too early to tell what they really mean for the market and how agents and firms will act in the future.
But Roberts said, “The new rules will change how valuable it is to use a buyer’s agent.” The number of items in active inventory doesn’t always match the number of items actually on the market. A lot of people who want to sell don’t want to go public with their ads, but they are still open to offers. Since it’s easy to find a lot of homes online, a buyer’s agent will really shine if they can help buyers find homes that are secret or hard to find.
Impact on the real estate market for Buyers and Sellers
For Buyers
When things were the old way, buyers often thought that their agent’s services were pretty much “free.” However, the new rules that go into effect on August 17 should make the prices of these services more clear. Roberts says that this could possibly cause prices to go up for buyers.
For example, if a buyer decides to pay their agent a 2.5% commission, they will need to make sure they have enough money to pay that amount, unless they can get the seller to agree to a similar discount. Because of this, buyers may be more picky about the homes they buy and the real estate agents they work with, basing their choices on whether the seller is willing to pay for the buyer’s agent’s fees.
For Sellers
The changes change the way a buyer’s agent is paid from a “commission” to a “concession.” Roberts thinks this could make talks more complicated. In order to draw buyers, sellers may feel compelled to make these concessions, especially in markets where there is a lot of competition.
Unfortunately, Roberts also said that the lack of a standard way to show these changes could make things even more complicated. This could make it harder for buyers and their brokers to quickly look at possible deals, which could make the process of making a deal more complicated.