Rosalind Evans
The landscape of buying and selling homes has changed dramatically with a recent settlement in an antitrust lawsuit involving the National Association of Realtors (NAR). The $418 million settlement, which took effect on August 17, aims to dismantle the previous system that allowed the NAR and large real estate brokerages to conspire in inflating agent commissions. This new framework presents both challenges and opportunities for buyers and sellers alike.
A New Competitive Landscape
Under the previous model, the NAR’s multiple listing service (MLS) dictated the commission rates for both buyer and seller agents. Home sellers would negotiate commission with their listing agent, which would then be publicly displayed on the MLS. Often, sellers were unaware of their ability to negotiate, leading to standard commission fees being charged.
Glenn Kelman, CEO of Redfin, described the shift as follows: “Now, the buyer chooses how much the buyer’s agent makes; the sellers choose how much the seller’s agent makes. It’s a new competitive ballgame.” This change empowers buyers and sellers to have more control over commission rates, fostering competition among agents.
Temporary Confusion Ahead
As agents and consumers adapt to these new rules, inconsistencies are expected in the market. Claudia Cobreiro, a real estate attorney, noted that potential homebuyers might receive different information from agents. “Before August 17, if you called five buyer agents for the same inquiry related to buying a home, four out of five times, you would get the same answer. Now, maybe two out of five times, you’re going to get the same answer,” she said.
This variation arises from different brokerage firms providing various instructions on implementing the changes, leading to potential confusion among buyers and sellers.
The Importance of Offering Commission
Despite the new regulations, educating home sellers about the benefits of offering commissions to buyer agents remains crucial. Cobreiro emphasizes that even if not mandated, offering a commission can stimulate competition among agents eager to show the property, potentially driving up the sale price. She explained, “Explaining those benefits of still offering commission even though the commission is not mandatory is part of the job that now I’m seeing listing agents do.”
Understanding Buyer-Broker Agreements
In the wake of these changes, buyers need to familiarize themselves with buyer-broker agreements. These contracts define the relationship between a real estate agent and a homebuyer, detailing the terms under which the agent is entitled to a commission upon purchasing a property. Cobreiro noted, “The purpose of this form is telling the buyers they are responsible for their commission on the buyer’s side.”
In scenarios where the seller does not offer a commission, buyers must adhere to the terms outlined in their buyer-broker agreements, making it crucial to understand the documents thoroughly. Melcher advised, “The forms are designed to be read by buyers and for buyers to understand them,” underscoring the importance of asking questions about any unfamiliar language.
Embrace the Change
As the real estate market adapts to these new commission rules, buyers and sellers must carefully navigate the landscape. Understanding the implications of the settlement, including the potential for greater negotiation power and the importance of buyer-broker agreements, will be essential for success. Consumers can take full advantage of this new competitive environment by educating themselves and seeking clarity.
