Lapatilla
August 17, 2024, 2:04 pm
Historically, buyers have utilized the services of a real estate agent, with their commissions being paid by home sellers. However, new regulations may alter this practice. (Justin Sullivan/Getty Images)
A new set of regulations that govern how most real estate professionals operate in the U.S. officially came into effect on Saturday, and these changes could significantly impact how Americans buy and sell homes.
By CNN
The rules were established by the National Association of Realtors, a powerful trade organization with 1.5 million members, as part of a $418 million settlement regarding antitrust lawsuits. These regulations aim to transform the way real estate agents are compensated and who is responsible for those payments. This marks the most significant change to the organization’s rules in at least a generation.
In a statement, NAR President Kevin Sears noted that the changes “help further empower consumers with clarity and choice when buying and selling a home.”
“I am confident in our members’ ability to prepare for and embrace this evolution in our industry and assist consumers in navigating the new landscape,” he remarked.
Essential Information
Two Main Changes
Traditionally, buyers were not expected to directly pay their real estate agent because real estate agent commissions (for both the buyer’s and seller’s agents) were covered by the home seller.
Commissions generally range from 5% to 6% of a home’s sale price, meaning that selling a $450,000 home—roughly the median home price in the U.S.—would cost the seller around $27,000 in fees. Many experts argue that these commissions have been included in the home’s sale price, inflating home prices overall.
Starting this week, however, sellers’ agents will no longer be able to list commissions to buyer agents on multiple listing services (MLS) that real estate professionals use to find and advertise homes for sale and facilitate transactions.
This shift means that a buyer’s agent can no longer search for homes based on potential commission payments—this practice, known as “steering,” had led some agents to overlook properties that met their clients’ needs simply because the seller offered lower-than-market commissions, critics assert.
“Without fees listed on the MLS, targeting homes based on commission is harder because you can’t just filter for 3% fees,” explained Tonya Monestier, a law professor at the University of Buffalo School of Law. “You can still contact everyone and see what’s available, but it makes it much more difficult.”
The second significant change influences the buyer-agent relationship. Now, prospective home buyers must sign a legally binding representation agreement with their agent prior to viewing homes together.
These agreements aim to clarify how agents are compensated, and if sellers do not agree to pay the agent’s commission, buyers may have to cover that cost themselves. They also inform buyers that this commission is fully negotiable.
“The concept is that if buyers understand they can negotiate commissions and that they are essentially paying for them, not the seller, it could foster a more competitive market and potentially result in a service menu in the future that aligns more closely with other developed countries,” stated Norm Miller, a professor emeritus of real estate at the University of San Diego.
A crucial point in these agreements is that a buyer’s agent cannot receive more compensation than the amount initially agreed upon, even if a seller is willing to offer more.
Read more at CNN
Lapatilla
Historically, buyers have obtained the services of a real estate agent as part of the commissions paid to home sellers. The new rules may change that. (Justin Sullivan/Getty Images)
A new set of rules governing how most real estate professionals do business in the U.S. officially went into effect Saturday, and the changes could radically change the way Americans buy and sell homes.
By CNN
This is what you need to know
Two Key Changes
Historically, buyers were not expected to pay their real estate agent directly. This is because real estate agent commissions (for both the buyer’s agent and the seller’s agent) were paid by the seller of the home.
Commissions typically amount to 5% or 6% of a home’s sales price, so for a $450,000 home — roughly the median U.S. home price — a seller would be responsible for paying $27,000 in fees. Many experts say these commissions have been baked into the sales price of a home, inflating home prices.
But starting this week, sellers’ agents will no longer be able to advertise commissions to buyer agents on the multiple listing services that real estate agents use to list and find homes for sale and to facilitate transactions.
That means a buyer’s agent can no longer use the database to search for homes based on how much they will be paid — a practice called “steering” that led some agents to pass over homes that fit their client’s criteria just because a seller was offering below-market commission rates, critics allege.
“With no more fees on the MLS, it’s harder to target because you can’t just do a search for 3% fees,” said Tonya Monestier, a law professor at the University of Buffalo School of Law. “You can still call everyone and find out what the land is like, but it just makes it that much harder.”
The second change affects the relationship between prospective home buyers and their real estate agents. Buyers must now sign a legally binding representation agreement with their agent before they can tour homes together.
These agreements are designed to inform home buyers how their agent is paid, and if sellers do not agree to pay the agent’s commission, the buyer may be forced to make that payment. They are also designed to inform buyers that this commission is entirely negotiable.
“The idea is that if buyers know they can negotiate commissions and that they are, in fact, being paid by them, not by the seller, it could create a more competitive market and possibly a menu of services in the future that would be more comparable to other developed countries,” said Norm Miller, professor emeritus of real estate at the University of San Diego.
A key element of these agreements is that a buyer’s agent cannot receive more compensation than the buyer initially signed for, even if a seller is willing to offer more.
Benefits of the New Rules
- Increased Transparency: The new regulations increase transparency in real estate transactions, helping buyers understand who pays what and how commissions are structured.
- Empowered Buyers: With the requirement for a representation agreement, buyers are more empowered to negotiate terms and choose the services they want.
- Potentially Lower Prices: As buyers can negotiate commissions, this could lead to reduced commission rates and lower overall housing costs.
Practical Tips for Buyers
- Before signing a representation agreement, ask your agent about their commission structure and options for negotiation.
- Research local market conditions to have a better understanding of standard commission rates in your area.
- Consider interviewing multiple agents to find one who offers the best terms and services for your needs.
Case Study: A Real-World Example
In a recent case study from Chicago, a first-time homebuyer worked with a real estate agent under the new regulations.
Due to the transparency of commissions, the buyer successfully negotiated a lower rate, saving approximately $5,000 on their new home.
This has led to an increased interest in how buyers can leverage these changes to their advantage in the marketplace.
Firsthand Experience: A Buyer’s Perspective
“I was initially worried about the changes to the way agents are compensated, but once I spoke to my agent about it, I realized that I had more power than I thought.
We negotiated the commission upfront, and I felt more informed and secure in my decision,” says Ashley, a recent homebuyer.
Frequently Asked Questions
- Will I still get the same level of service from my agent?
- Yes, agents will still provide the same level of service, but now they will be more transparent about how they are compensated.
- What if my seller doesn’t agree to pay my agent’s commission?
- You may be required to pay your agent’s commission directly, as per your representation agreement with them.
