A powerful real estate trade group has agreed to do away with policies that for decades helped set agent commissions, moving to resolve lawsuits that claim the rules have forced people to pay artificially inflated costs to sell their homes.
Home sellers behind multiple lawsuits against the National Association of Realtors and several major brokerages argued that the trade group’s rules governing homes listed for sale on its affiliated Multiple Listing Services unfairly propped up agent commissions. The rules also incentivized agents representing buyers to avoid showing their clients listings where the seller’s broker was offering a lower commission to the buyer’s agent, they argued.
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As part of the settlement, the NAR agreed to no longer require a broker advertising a home for sale on MLS to offer any upfront compensation to a buyer’s agent. The rule change leaves it open for individual home sellers to negotiate such offers with a buyer’s agent outside of the MLS platforms, though the home seller’s broker has to disclose any such compensation arrangements.
The trade group also agreed to require agents or others working with a homebuyer to enter into a written agreement with them. That is meant to ensure homebuyers know going in what their agent will charge them for their services.
Currently, agents working with a buyer and seller typically split a commission of around 5% to 6% that's paid by the seller. This practice essentially became customary as home listings included built-in offers of “cooperative compensation” between agents on both sides of the transaction.
However, the rule changes the NAR agreed to as part of the settlement could give home sellers and buyers more impetus to negotiate lower agent commissions. Analysts with Keefe, Bruyette & Woods also anticipate that the NAR rule changes will lead to lower agent commissions and could persuade some homebuyers to skip using an agent altogether.
While setting the stage for homebuyers to negotiate a more competitive price for their agent's services, the rule changes mean home shoppers will have to factor in how to cover their agent's compensation.
Homebuyers could still ask a prospective home seller for a concession that includes money to help cover the buyer's agent compensation. However, a home seller with multiple offers, for example, could refuse such a request, or opt to go with a bid from a different buyer who isn't asking for such a concession.
Local real estate agents argued these changes may harm first-time homebuyers as some selling agents or homeowners may not want to offer any commission to an agent who brings a buyer. They also said first-time homebuyers may not be able to get the help they need during the process of buying a home as they may not be able to afford to pay an agent.
We have a question for future homebuyers, especially first-time buyers: How do you think the changes in agent commissions will impact you?
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