NAR Resource

Changes in real estate commission payments have been making headlines lately. While the news might spark excitement for home sellers and buyers, with promises of slashed commissions and reduced costs, the reality is a bit murkier.

Despite the bold headlines, understanding the implications of these changes can be elusive. Even the most knowledgeable agents are in the dark, as the details remain uncertain. The suddenness of the settlement caught many off guard, leaving agents and consumers alike scrambling for information.

Misleading headlines abound, offering promises of halved commissions or guaranteed savings, but the truth is still unknown. The changes could go either way, potentially reducing or increasing commissions. Like many governmental interventions, there's a chance these changes might create more problems than they solve.

For now, agents can't provide specifics. The settlement is still pending court approval, and if accepted, the changes won't take effect until July. So, while everyone waits for clarity, it's important to understand that answers are in short supply.

Here’s What Matters to Buyers and Sellers in simple terms:

If you're not in real estate, you probably don't want to dig through legal stuff. You just want to know how it affects you. Here's the scoop from the National Association of REALTORS®:

  • Sellers and agents can't advertise commissions for buyers' agents in listings.
  • But sellers can still pay buyers' agents, just not through listings.
  • Buyers need to sign a deal with an agent, likely agreeing to pay. But it doesn't have to come from their pockets; it can be part of the purchase price.
  • Basically, sellers can choose not to pay agents, and buyers can skip having an agent, hoping to save money. But think twice before deciding.

Things to Keep in Mind if You’re Selling a House:

Offering a commission to buyers' agents is still possible, despite the restriction on publishing the amount in listings. For sellers, it remains beneficial to provide and be open to offering commissions to buyers' agents to maximize exposure and attract better offers for their home.

Typically, buyer agent commissions will still be covered from the proceeds of the sale, as has been the norm for years.

If selling to a buyer without representation, they may anticipate a reduction in the price since no agent commission is involved. For instance, if a home's value is perceived at $300,000 and buyers assume a 3% agent commission (even if it's often different in practice), they might expect a $9,000 price reduction.

There's a risk of increased lawsuits and complications, particularly concerning dual agency, where an agent represents both buyer and seller. This shift in business practices could lead to situations where consumers feel their interests aren't fully represented, potentially resulting in legal issues involving the property owner.

Things to Keep in Mind if You’re Buying a House:

The structure of compensation for buyers' agents emerged from a need to protect buyers' interests, particularly when they lacked dedicated representation. Decades ago, buyers often found themselves without agents advocating for their needs, unaware that the seller's agent didn't fully represent them. To rectify this, regulations were implemented, compelling listing agents to offer a portion of the commission to buyers' agents representing clients interested in their properties. This arrangement afforded buyers more agency in choosing representation and ensured they could compensate their agent without direct out-of-pocket expenses. Thus, for many buyers, the recent changes might not seem significant, unless they prefer the autonomy of representing themselves and managing all aspects of the transaction independently.

Now, buyers must actively select a buyer's agent and formalize their working relationship through a signed agreement. While this option has always been available, it was not always required. However, given recent developments, it's increasingly emphasized. Although some may anticipate agents willing to accept lower commissions, it's vital to acknowledge the substantial efforts and expertise agents contribute. Opting for the lowest-cost option may not necessarily yield the best outcomes, as it often does in various industries.

Regarding sellers, it's reasonable to expect some to uphold their pricing expectations, considering recent sales data inclusive of buyer agent commissions. Despite the absence of such commissions, sellers might not necessarily lower their prices, potentially leading to negotiation challenges for buyers.

Choosing to navigate the buying process independently requires comprehensive understanding and effort. It encompasses more than merely browsing listings and making offers; it involves understanding market dynamics, negotiating deals, and managing all transactional aspects from contract to closing. Without the presence of a buyer's agent, buyers must undertake the responsibilities typically managed by an agent, which can be demanding and complex.

Consider these key points whether you're buying or selling. If you're unsure about the upcoming changes, consult your local agent for guidance and stay informed as developments unfold.

The Takeaway:

While the headlines about changing real estate commissions may seem promising for home sellers or buyers, they're misleading because the exact outcomes are uncertain. If the proposed settlement is approved, sellers won’t be able to advertise agent commissions but can still offer them outside their listing. This could still benefit sellers by maximizing exposure and potential earnings.

Buyers may opt not to work with a buyer's agent, but this choice could lead to unexpected challenges and may not result in anticipated savings. However, buyers can still hire their own representation to navigate the process and protect their interests.

Post a Comment