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Maryland real estate agents, homebuyers navigate changes under new rules – Maryland Matters

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For more than a century, when someone wanted to buy a home all they had to do was walk into a real estate office and ask the agent to start showing them properties. That agent was typically paid by the seller if a deal ever went through.

All that changed Saturday.

As part of the settlement of an antitrust lawsuit brought by home sellers, the National Association of Realtors (NAR) agreed that sellers’ agents can no longer include an upfront offer of compensation to the buyer’s agent in order to list a property on the Multiple Listing Service.

As a result, buyers may find themselves having to strike a deal with their agents to pay them for work that used to be covered automatically by the seller, negotiating a price with their agent before even looking at a property.

It’s a change that agents said they have spent months preparing for. But that doesn’t mean they’re crazy about it.

“The buyer and the tenant are the ones at … risk of losing the most, due to the fact that they may not be able to obtain or afford proper representation,” said Gregory Gray, a real estate agent based in Howard County. “It tilts the scale in favor of the seller.”

But the change was defended by NAR President Kevin Sears, who said in a written statement last week that the changes “help to further empower consumers with clarity and choice when buying and selling a home.”

“As the August 17 practice change implementation date approaches, I am confident in our members’ abilities to prepare for and embrace this evolution of our industry,” his statement said.

The lawsuit against NAR claimed that its previous rules were anticompetitive. Under those rules, sellers had to include an offer of compensation for buyers’ agents if they wanted their home to show up in the MLS, the association’s listing of properties for sale.

Under the settlement announced in March, NAR now prohibits such offers in an MLS listing. While buyers and sellers could later negotiate some payment, it’s not set in advance, leaving buyers to pay their agents’ fee.

The shift could be less painful in Maryland, which has required written buyer agreements since 2016, said Maryland Association of Realtors CEO Chuck Kasky. But the new written agreements must disclose the amount or rate of compensation of a buyer agent, Kasky said in a resource video explaining the change.

“Real estate licensees will be required to enter into written agreements with buyers before touring a home. This applies to houses listed on a multiple listing service,” Kasky explained. 

Judith Egbarin, the owner of Blue Ribbon Realty, said that under the new arrangement will hit buyers the hardest. 

“They want the buyers to pay commission to their own agents, so who’s going to lose out the most?” Egbarin asked. She answered her own question by noting that “the buyer now has to come out of pocket even more.”

She said this will add to the fees that the buyer traditionally has to pay, like down payments and closing costs. 

Jennifer Young, from Jennifer Young Realty, agreed with Egbarin. Young said the new settlement would most negatively affect first-time home buyers. 

“I don’t think it’s a good thing. So I think it’s going to hurt buyers who are no-money-down, low-money-down buyers, first-time buyers, grant program buyers,” Young said. “So there’s potentially more cost to have proper representation.” 

But none of the agents felt defeated by the settlement and, in fact, all were looking ahead. Young said her firm had been preparing its agents for months before Saturday’s shift and Gray said that the settlement will leave a competitive landscape for buyers’ agents. 

“It’s going to be very competitive, and they’re going to have to show their value if they want to obtain the commission,” Gray said. “They’re not getting it from the seller or the landlord, they’re going to have to get it from their client, and they’re going to have to be able to negotiate.”

Egbarin said that real estate will just have to adapt and adjust.

“It’s just, we need to get used to it. And we will adjust,” she said. “I’m not frustrated yet, I am very optimistic, I want to see what happens.”

– This story was updated on Monday, Aug. 19, to correct Chuck Kasky’s title in the 10th paragraph and to clarify the effect of the NAR settlement throughout.



This article was originally published by a marylandmatters.org . Read the Original article here. .

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How real estate agents get paid changes Saturday

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“If you’re a buyer, you’re likely not seeing that form,” McFall said.

Realtors aren’t the only ones paying close attention to those new forms.

Prentiss Cox, a law professor at the University of Minnesota, said it remains to be seen whether it’ll now cost less to buy and sell a home. The current commission structure, he said, has been difficult to upend in part because of what he calls persistent “collusive practices” that force buyers and sellers in the U.S. to pay 5% to 6% to sell a home, not including other fees, while the rest of the world pays roughly half that.

As of mid-July, the typical U.S. seller paid a buyer’s agent alone a 2.55% commission, according to a new Redfin analysis of MLS data. That’s down from an average of 2.62% in January. The study didn’t track commissions paid to the listing agent.

The average commission paid to a buyer’s agent in the U.S. is $15,377, up slightly from $15,124 in January. The dollar amount has increased marginally, even though the percentage has declined because of the rise in home prices.

Redfin said while it’s possible news of the NAR settlement has contributed to the recent decline by making consumers more aware they can offer any commission to a buyer’s agent or none at all, commissions were already on a gradual decline prior to the settlement. Through the past decade, the average buyer’s agent commission fell from 2.89% in 2013 to 2.66% in 2023.



This article was originally published by a www.startribune.com . Read the Original article here. .

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The NARS settlement agreement will not only affect real estate agents but also home buyers

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GAINESVILLE, Fla. (WCJB) – On August 17th policy changes are coming to people looking to buy and sell a home, as well as agents commissions.

The real estate industry is changing some of its practices and many people, including homebuyers and sellers, may not be aware of what’s in store.

“The news entails a buyer is now required to have some sort of agreement with their realtor before they start looking at homes. That’s one portion of the settlement and the other portion of it is that home sellers can no longer offer compensation to a buyer realtor in the MLS” President-Elect Gacar, Lisa Baltozer added.

This affects the buyers, to know how the market is changing. They will be responsible for paying for their agents. Sellers can negotiate the fees to both parties.

Still, agents can’t advertise for buyers’ agent’s commissions on the MLS

Some real estate agents favor the new changes, like Debra Martin-Back who is the broker of Exit Realty Producers.

“I think it’s a great thing for the industry and now it’s going to put us at a new level. Nobody works for free, nobody goes out there without telling you what they are charging. Now we are just doing it upfront and we are not relying on the seller and agents to pay us which has happened in the past. Whatever was in the MLS is what we got paid” Martin-Back added.

Others are hopeful agents will follow the rules and explain all the information to their clients upfront.

Florida realtor Zome De Las Estrellas said,

“I am a little annoyed by it because it’s a little more complicated but I’m not worried about it. I think my biggest concern would be just hoping that other agents are doing their part to explain the rules”.

Realtors say this changes the game when buying or selling a home. It’s a learning curve that everyone is learning together.

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Copyright 2024 WCJB. All rights reserved.



This article was originally published by a www.wcjb.com . Read the Original article here. .

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Buying or selling a home set to change on August 17

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KSHB 41 reporter Grant Stephens covers issues connected to access to housing and rent costs. Share your story idea with Grant.

—

There are big changes coming to the way you buy or sell a home.

These changes stem from a series of lawsuits intended to make the home buying process more transparent.

The changes take effect August 17th.

An agent working with a buyer will have to work out an agreement before the prospective buyer and real estate agent look at a property together.

KSHB 41 News staff

Home in Kansas City area

“When a real estate agent says, ‘Hey, starting August 17th, you have to sign this agreement,’ they’re telling you the truth,” said Holden Lewis with NerdWallet.

You may be familiar with the standard five to six percent commission rate you’d have to pay in the past.

It’s split between buyer’s and seller’s agents and is often baked into the total cost of the home.

The changes mean there’s now an extra layer of negotiation that could change that standardized fee.

“It’s gonna specify how much you’re gonna pay that agent,” Lewis said.

Realtors like Kathleen Spiking with the Rob Ellerman Team say it might change how contracts are written and how they’re paid.

KSHB 41 News staff

Kathleen Spiking

“They’re training us on what’s going on, what’s does this look like, how does it appear in a contract,” Spiking said.

But since she’s always been upfront with costs, it won’t change the day-to-day.

“Personally, for me, it doesn’t affect the way that I run my business,” she said. “I still have communication up front with all of my clients, whether they’re buyers or sellers, and I think maybe for people it would be further and more thorough communication at the beginning and during the process of buying a home,” she said.

—





This article was originally published by a www.kshb.com . Read the Original article here. .

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Biggest shakeup in a century set to hit real estate agents this week: Here’s how they’re

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CNN
 — 

Realtors across the US are bracing for a seismic shift in the way they do business. Starting August 17, new rules will roll out that overhaul the way Realtors get paid to help people buy and sell their homes.

The changes, which are part of a $418 million settlement announced in March by the powerful trade group the National Association of Realtors, eliminate informal rules that propped up the industry’s traditional payment structure, where home sellers were typically on the hook to pay a 5% or 6% commission, usually split between their agent and the agent representing their home seller.

In the months since the settlement was announced, Realtors across the country have been preparing for the change, attending trainings and poring over the details of new contracts they must sign with prospective homebuyers. Some agents predict the rules will pave the way for new business models and potentially drive many full-service Realtors to leave the industry, while others are more sanguine about the impending changes.

“This is a grand social experiment in an industry at scale,” Leo Pareja, CEO of eXp Realty, one of the largest real estate brokerages in the US, said. “I’m bracing my agents for what I call the ‘messy middle.’ I fully expect a lot of confusion.”

In a statement, NAR’s president, Kevin Sears, said he was confident NAR members would adapt to the changes, which industry analysts have called the biggest change in America’s real estate market in a century.

“These changes help to further empower consumers with clarity and choice when buying and selling a home,” Sears said. As August 17 nears, “I am confident in our members’ abilities to prepare for and embrace this evolution of our industry and help to guide consumers in the new landscape.”

Historically, a seller’s agent charged homesellers a fee, often 5% or 6% of a home’s purchase price, that was intended to be shared with the buyer’s agent. That meant that homesellers could be on the hook for serious cash: A seller of a $1 million home might pay out $60,000 in commissions. Some experts have said that money was baked into homes’ listing prices, inflating the price of homes for sale.

A series of lawsuits alleged this standard practice violated antitrust laws, though the NAR has long argued that the commissions were always negotiable.

Along with a monetary payout, the NAR agreed to two key rule changes as part of an agreement to settle the lawsuits. Both take effect on August 17 and are designed — in theory­ — to shake loose the standard way of paying out commissions.

A judge granted preliminary approval of the NAR’s settlement in April, but the final approval hearing is scheduled for November 26.

The first change prohibits agents’ compensation from being included on multiple listing services, which are centralized databases used by Realtors to share details about homes for sale. Compensation details can still be advertised elsewhere or communicated in person or over the phone, though.

The second change requires buyers’ agents to discuss their compensation upfront. Come August 17, agents working with a prospective homebuyer must now enter into a written buyer agreement before touring a property together. This agreement is designed to inform buyers that they are responsible for paying their own Realtors if a seller chooses not to cover the cost.

However, prior to the changes, Realtors in 18 states were already required to sign buyer agency agreements. Mary Schumann, a Realtor in Minnesota, said that to her, NAR’s changes seem manageable.

“I always tend to wait and see how things shake out before I panic,” Schumann said. “We already do buyers agreements here, and this doesn’t seem to be incredibly different.”

By some estimates, real estate commissions could fall between 25% to 50%, according to a March analysis by TD Cowen Insights. This could pave the way for real estate companies with alternative business models, like flat-fee and discount brokerages, to thrive.

Shelly Cofini, the chief strategy officer at Redy, said she believed the NAR settlement would benefit her company. Redy, which operates nationwide, is a marketplace that allows real estate agents to bid on home listings, meaning agents could pay homesellers for the opportunity to represent them, cutting into their own commissions.

“This is part of this notion of shifting how real estate is always done,” Cofini said. “Because agents are in control of the proposal process, they decide on the cash incentive they’ll offer and they decide on the commission structure they’re willing to offer.”

Companies are seeking to capitalize on the impending changes in other ways, too. Flyhomes operates as a traditional real estate brokerage, but earlier this summer, the company launched an AI chatbot designed to answer questions that a homebuyer might traditionally ask their Realtor.

“Consumers don’t know this is coming,” Flyhomes’ chief strategy officer, Adam Hopson, said of the NAR changes. “When they decide they want to buy a home and they find they have to sign a contract, they may say, ‘whoa, what is this?’ We think this will drive them to find information from other sources. We will be one of those sources.”

Under the old standard, buyers often got representation for free, since their agent’s commissions came from the homeseller’s pocket.

Many Realtors who spoke to CNN said they believe the new set of rules will reward more experienced Realtors and shut out younger agents, since homebuyers may be wary of signing a legally binding agreement that ties them to a more inexperienced Realtor.

At 19, Madison Mathias, a Realtor in Chapin, South Carolina, said she has had to work overtime to dispel preconceived notions about her age to prospective clients, often re-reading contracts at night to ensure she has the details memorized.

Mathias said she thinks some Realtors will leave the industry, but she doesn’t believe age will be a factor.

“I think more agents will fall off because some people don’t like change,” she said. “Being a new agent, I have had some people question me, but I’ve never had somebody not want to work with me because of my time in the business. It’s all about confidence and educating yourself.”

“I’m not really worried about it too much,” she added.



This article was originally published by a www.cnn.com . Read the Original article here. .

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Owning Manhattan review – please stop putting real-estate agents on TV!

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At first, I thought I had run out of hatred. An unsettling sensation. Fortunately, order was soon restored. It turns out that the opening episode of Owning Manhattan – the latest product in Netflix’s attempt to saturate the market for real-estate shows – is an uncharacteristically gentle lead-in to what becomes a characteristic maelstrom of backbiting, warring egos, frightening fashion choices, daily Oscar-ceremony levels of grooming and gobsmacking commissions up for grabs.

After the most recent iteration – the essentially dismal Buying London, set in essentially dismal London and unable to field the level of monstrosity required in property and human terms that the Americans manage so effortlessly – this is at least a return to suitably excessive form. Fans of Selling Sunset who are not yet sated should find something to help them here.

Owning Manhattan is fronted by Ryan Serhant, a real-estate broker who appeared in nine seasons of Bravo’s Million Dollar Listing New York (and had his wedding covered in the four-part miniseries Million Dollar Listing New York: Ryan’s Wedding and starred in the spin-off show Sell It Like Serhant) before starting his own company in 2021. It’s called SERHANT. You probably guessed. It does $1bn a year in sales. Ryan oozes charm, which is precisely as horrible as it sounds. I would say he oozes confidence, too, but that would suggest there is some part of him not made of the stuff, which is not true.

Nor is it true of any of the agents we meet. One doesn’t blink, one is mostly lips and one has breasts that are so forced into her clothes that blue veins are visible on her cleavage; it makes me long to pop her in a sweatshirt and show her that a new life is possible. One has a dog in a bag – possibly as a USP, possibly as a snack – and one has eyebrows that make me want to hide under the covers until they go away.

I can’t pretend to have a grip on them all yet. I know there is Chloe, who came to New York from Los Angeles to try to become a Broadway star, but pivoted to real estate when it turned out “I actually wanted the whole damn skyline”. There is a blond southern belle called Savannah (confusingly, from North Carolina) who is a newbie, learning the ropes on rentals and struggling to pay her own rent on the meagre commissions. There is Jess M, who hands Savannah a lifeline, but may yet exact a fee in blood.

Above all, there is Tricia, a longstanding SERHANT employee who used to run her own nail salon in Brooklyn and parlayed the 23,000 contacts she gathered on that database into a career in real estate. You might hear Shoreditch called the Brooklyn of London, she says, because “you’re always going to be emulating our shit. That’s just how it is.”

She works with her husband. “I wouldn’t recommend it, but I do it and I do it well.” It was he who proposed the arrangement. She recalls the moment fondly. “Well, I’d like to join me, too! Shit.” Ryan calls her “the unofficial mayor of Brooklyn”, but she may be the US president by the time you read this.

What else is there to say? With the exception of the occasional brownstone, the properties continue to confirm the maxim that money cannot buy you taste. They also deepen the mystery surrounding American hygiene. Just about every property has more bathrooms than bedrooms. The poorest clients get by with, say, a 3.5:3 ratio, but the $250m penthouse overlooking Central Park – which will become the focal point of much vicious infighting – shows us that the ideal is 11:7. One each and four spare. What is going on?

I would like to say that, with Owning Manhattan, the realtor-reality-show genre is surely exhausted. But it’s not, of course. The appetite for high drama with low stakes (which is what these Monopoly-money commission figures are for viewers) never wanes. But if we could have a bit of a rest from it, that would be lovely. Those who want to could wriggle into a sweatshirt and restore the circulation to their mammaries. It’s genuinely worrying me. Please.

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Owning Manhattan is on Netflix now



This article was originally published by a www.theguardian.com . Read the Original article here. .

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Settlement of a Federal Lawsuit Will Change How Real Estate Agents Are Paid

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click to enlarge James Buck Vicky Phillips is selling her Westford home without a Realtor.

Before she put her Westford home on the market, Vicky Phillips did some math. With the four-bedroom home priced at $808,000, Phillips estimated it would cost her about $48,000 in commissions for a real estate agent to handle the sale.

Phillips decided to keep that money and sell the home herself. In May, she posted it on Picket Fence Preview, a website featuring homes that are for sale by the owner. She also paid a real estate agent $499 to offer the house on the multiple listing service, a system that shows all the properties for sale through brokers.

“It isn’t complicated,” said Phillips, who owns a business and noted that she has signed much more detailed contracts than the one she’ll use in selling her home.

She’s shown her home five times, a process that usually takes her about two hours, including tidying up. If she contracted with a real estate agent to handle the sale, that person would expect the standard 2 or 3 percent commission, as much as $24,000. If a buyer’s agent were involved, as is often the case, that person would take another 2 or 3 percent of the sale price.

“Real estate agents are great, but what are you paying for?” Phillips asked.

Questions like Phillips’ have roiled the real estate profession for years, and recently a rebellion of home sellers succeeded. In March, the National Association of Realtors agreed to pay $418 million in damages to settle a 2019 federal lawsuit that accused the organization of violating antitrust laws by adopting rules that created an industry-wide standard commission.

The settlement specifies that the NAR must drop rules that require the agent for the home seller to offer payment to the agent for the buyer. Those rules have resulted in the standard 5 to 6 percent commission being incorporated into the price of most homes for sale. Under the settlement, it will be easier for buyers and sellers to negotiate commissions with their real estate agents.

The settlement made national headlines, with some analysts predicting that the price of buying a home would drop significantly as a result of the decline in commissions.

Smaller commissions would be good news for Vermont home sellers, but local experts say the soaring cost of buying a house is mainly the result of the spike in home values. The median price of a house sold in Chittenden County climbed by more than $100,000 between 2020 and last year, to $460,500. With the typical commission of 5 or 6 percent, someone selling that home would pay the agents involved as much as $27,000.

Many real estate agents insist the national settlement won’t change anything in Vermont. Local agents have always been up front with homebuyers and sellers about how much commissions would cost — and have always been open to negotiation, said Kathy Sweeten, CEO of the Vermont Association of Realtors.

“It’s not going to have a huge effect, because we already do this,” Sweeten said in an interview. That’s the position many of Vermont’s real estate agencies are taking, too.

“We’ve been doing business this way for many years now with our agency disclosures,” Four Seasons Sotheby’s International Realty CEO Laurie Mecier-Brochu said.

But home industry analysts say the settlement will likely free up consumers to bargain with agents for their services. The Consumer Federation of America, an advocate for nonprofit consumer groups, said that while negotiating has always been an option in theory, contracts are usually written by lawyers for local real estate associations. Under the existing system, many homebuyers are unaware they’re paying a commission of 2 or 3 percent to their agent, because it’s incorporated into the home seller’s fees and therefore into the price of the home.

Starting next month, buyers who hire an agent to show them homes will be asked to sign a contract spelling out what they will pay the agent if there is a sale, so the cost will not be hidden in the sale price of the home. The advocacy group said the settlement will create more freedom and transparency for agents and consumers.

Change won’t happen overnight.

“The residential real estate marketplace will take some time, perhaps several years, to fully process the implications of this settlement,” the Consumer Federation said in a statement after the NAR settlement was announced.

Not all agents are paid by commission. Some charge a flat fee — $3,500 is common — instead of a commission, using that transparency as a selling point. And there have always been homeowners such as Phillips who avoid commissions altogether by tackling home sales on their own.

Changes in technology are making that easier. Nowadays, websites such as Zillow and Redfin display the homes that are listed on the MLS, making them available online to anyone who knows how to look for them. When she was shopping for a house two decades ago, Phillips noted, the real estate agent would print off MLS listings and mail them to her, a cumbersome process that gave the agent control over which properties Phillips could consider.

Online listing services also help would-be home sellers see what similar properties are going for — and provide valuable information to buyers, such as how much the home sold for in the past.

“Before, you couldn’t really go on Zillow and find comparables and past histories and what the taxes were” for houses on the MLS, Phillips added.

Demand for homes is high in Vermont, making it a good time for sellers to try their hand at going it alone.

Before she put her Montpelier modular home on the market in May, Tammy Parish asked for advice on Front Porch Forum about selling without an agent. She got a flurry of responses from sellers who had done that — as well as several pleas from people who wanted to tour her home.

“My phone blew up. It was people giving me advice saying, ‘Yes, you can do it’ or ‘No, it’s more detailed than you think,'” said Parish, who added that she sold her home for $240,000 the following weekend to one of the people who had responded to her query.

Parish hired a lawyer to help with a contract, paying around $2,000, she said. A 5 percent commission would have set her back around $12,000.

“That’s a lot of money to give to someone else for putting pictures out there and marketing it,” she said.

Phillips said more than 25 agents have gotten in touch since she posted an ad for her Westford home on Front Porch Forum in May.

“They all want to represent me,” said Phillips, who thinks a lack of inventory and high interest rates may have created a very slow market for agents. She added that there are times when using an agent is essential. She’s looking for property in Asheville, N.C., where she’ll build her next home, and she said the agent alerted her that land prices were lower in a neighboring town because of a local paper mill.

“She said, ‘On the right day you don’t smell it, but on a bad day, not only do you smell it everywhere, the fumes are toxic,'” Phillips said. “Good advice.”

If more negotiations lead to lower commissions, as expected, some agents might leave the profession. The number of real estate agents licensed in Vermont jumped during the pandemic, reaching 3,072 last year — the most since the Secretary of State’s Office started keeping records in 2008. Right now, 2,843 people are licensed to sell real estate, according to the office.

click to enlarge James Buck Mikail Stein of RE/MAX North Professionals showing a house

It’s a tough way to make a living, according to Mikail Stein of RE/MAX North Professionals, who sells about 40 homes a year. Stein said his overhead is high and his hours are long. Income is unpredictable.

“Only in the last two years of my career have I had a winter where I wasn’t freaking out about where things were financially,” Stein said. “And hourly-wise, most people do way better than me.”

Stein thinks career professionals such as him will stay in the business, and if commissions drop, part-time, new or unskilled agents will be most likely to leave.

“I hope what it ends up doing is providing the public with better service,” he said of the NAR settlement. “For those of us who do bring high service, the compensation will be just. And for those who don’t, the market will say, ‘You’re not providing enough.'”

A Game-Changing Federal Case

The lawsuit
A group of Missourians who had used real estate agents to sell their homes filed a 2019 class-action lawsuit against the 1.5 million member National Association of Realtors and several multistate real estate brokerages. The suit alleged that the defendants had conspired to inflate real estate commissions paid by the homeowners.

The details
The lawsuit took aim at the NAR’s “cooperative compensation” rule, which requires the home seller’s agent to offer compensation to the agent for the buyer in order to add the home to a multiple listing service. The suit charged that the NAR, by controlling almost all the multiple listing services in the U.S., was wielding monopoly power to keep commissions artificially high.

The verdict
A federal jury in Missouri ruled for the homeowners in October 2023, awarding them $1.8 billion in damages. The NAR said it would appeal.

The settlement
Instead, in March, the NAR settled the case for $418 million in damages and an agreement to change some of its practices.

What will change?
Sellers’ agents won’t set the commission earned by the buyer’s agent. Instead, homebuyers will negotiate directly with those agents for their services. The changes are due to take effect in August.

What’s next?
In Vermont, analysts say it is too soon to predict what, if any, impact the settlement will have in the state. Prices are high, driven by a critical shortage of inventory and high demand.

“If I had to guess, I would say Realtors will become less powerful, and maybe there will be more fee-for-service” real estate transactions, said Jeff Lubell, a Norwich resident who works as a principal associate in housing policy for Abt Global, a consulting firm in Rockville, Md. “We’ll see different patterns in different places.”

An unintended consequence?
Some real estate companies and analysts say the settlement will hurt low-income homebuyers. Those buyers may not be able to afford to pay an out-of-pocket commission to their agent. Previously that commission was incorporated into the price of the home, and thus into the mortgage paid over time.



This article was originally published by a www.sevendaysvt.com . Read the Original article here. .

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How Do Real Estate Agents Get Paid? What to Know About Commissions After the NAR Settlement

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NAR settlement 2024: New real-estate commission rules

While both buyers and sellers typically use real-estate agents, traditionally, only sellers have paid directly. The commission is then split between the listing agent and the agent representing the buyer.

Critics have said for years that this structure limits competition, lacks transparency and artificially inflates both commissions and home prices. In October 2023, a jury ordered NAR and a number of well-known real estate brokerages to pay $1.8 billion in damages in a Missouri–based lawsuit arguing as much.

While NAR initially indicated it would appeal the verdict, in March the trade group opted to settle the case instead. The plaintiffs agreed to release NAR from the jury verdict in exchange for $418 million in damages and a host of new commission-related rules that are expected to go into effect in August (pending judge approval).

Those rule changes include:

Mentions of buyer-agent compensation will now be prohibited in listings on Multiple Listing Services, the regional databases agents use to list and market properties.  All commission splits will need to be negotiated separately, giving sellers more power over what—if any—compensation they’ll offer to buyer agents.Buyers and agents will need to sign a contract, detailing the fees and compensation they’ll owe, before even touring a property. This may open the door to more negotiation for buyers and new pricing models—like sliding-scale commissions or an a la carte approach, where buyers pay per service.

It’s not yet clear how these rules will play out on the ground, but they could lead to a major shift in how real-estate agents get paid and who uses an agent. Experts also predict that average commissions could eventually fall by as much as 30%.

How much are current real-estate commissions?

Real-estate agents are paid a commission based on the sale price, and for now, buyers and sellers pay an average of 5.45% the transaction amount, according to research by real-estate brokerage Clever. However, the typical commission varies by location, ranging from 4.90% in Washington, D.C. to 6.07% in Missouri.

Here’s a look at average real estate commission by state:

“Commissions can and do vary widely,” says Adie Kriegstein, an agent with Compass Real Estate in New York. “Location is a huge factor, as markets often vary city to city and state to state. On top of location are just the market conditions: Is it a buyer’s market, seller’s market or simply one that is transitional? The type of property also changes commission rates.”

In the luxury market, for example, commission percentages can often be lower. This is because higher-end properties come with higher price tags, leaving agents more room to negotiate and still get a decent payday.

The exact commission percentage is typically negotiated upfront and will be detailed in the listing contract with a seller. So, for example, if the agreed-upon commission was 5% and they sold a home for $500,000, the agent’s real-estate brokerage would get a $25,000 commission check once the transaction was complete.

It sounds like a lot of money, but that check is rarely a single agent’s to keep. They often have to split that payment with one, two or even three other parties(more on this later). The settlement is meant to end parts of this practice, but it is not yet clear how much agents will be able to charge for their services, though the change is likely to be more dramatic on the buyer end of the equation.

How is the commission divided between agents?

Making things even more complex, unless the same agent is representing both the buyer and the seller, the selling agent gives a portion of the commission to the buyer’s agent—generally in a 50-50 split. With a $25,000 commission, that would mean the listing agent would get $12,500 and the buyer’s agent $12,500.

Beyond that, there are further splits. Often, the agents will also have to share their commission with their broker—the leader of the brokerage firm they work for. These splits vary based on the company, but it often starts at 60-40 (with 60% for the agent and 40% for the broker) and goes up to 80-20 for more experienced agents.

If the agents in that same $25,000 commission scenario had 60-40 splits with their brokers, that’d mean the listing agent and selling agent would take home just $7,500 each.

“Buyers and sellers can be wary of the 5% commission rate, but their individual agent typically ends up only seeing 1.5% on each deal,” says Christa Kenin, an agent and attorney with real-estate firm Douglas Elliman in Connecticut.

To be clear: Not all real-estate brokerages operate this way (just most). National discount brokerage Redfin, for example, pays its agents a salary. Realty ONE Group, which has over 400 franchise offices, lets its agents keep their full commissions, though agents do pay fees to the company.

Can sellers negotiate real estate commissions?

With inflation and mortgage rates high, a 4% to 6% commission might seem pretty pricey—regardless of whose pocket it goes into. Fortunately, “all commissions are negotiable,” says Joe Rath, head of industry relations for real-estate brokerage Redfin.

If you’re a seller looking to negotiate a lower commission with an agent you’re considering, it is important to do so up front. Ask your agent to detail what their proposed commission entails—what services and value they’ll provide in exchange for their fee. You can then agree to remove or reduce certain services in exchange for a lower cut.

“Commissions can vary depending upon the level of service that an agent provides, such as marketing, social media, etc.,” says Bryson Taggart, an agent with Opendoor in Arizona. “If a client wants drone photography, videos and a 3-D printing of their home, that commission may come at a higher price than if they simply want it listed on the MLS.”

You may be able to ask for a lower commission depending on market conditions, too. If it’s a seller’s market and homes are selling at inflated prices and record speeds, you may have more room to negotiate than when buyers are harder to come by and selling a home takes more work.

“Consider the conditions of your current market,” Kriegstein says. “If it’s a hot market with little supply and a lot of demand, you can likely leverage your commission. However, if the market is a buyer’s market you may not want to do that, as other properties could be offering more enticing commissions.”

Can buyers negotiate?

Buyers may be able to negotiate fees with their agents, too, though for now, opportunities for this are rare since sellers typically pay the full commission. Once the new rules from NAR’s settlement go into effect, buyers should have much more negotiating power.

Until then, you might be more able to negotiate if your agent is also the listing agent on the home you’re buying or if you’re buying a For Sale By Owner, or FSBO, property. Some brokerages offer buyer’s commission rebates, typically in the form of closing credits, though the practice is banned in eight states.

Other options

Negotiating isn’t your only option. You can also look to alternative agents and brokerages for reduced fees, too. Discount brokerages such as Redfin and Clever charge just a 1.5% listing fee (versus the usual 2% to 3%), plus the buyer’s agent fee. Other brokerages, such as Homie and ListingSpark, operate on a flat-fee basis.

You also have the option to go agent-free altogether. According to the National Association of Realtors, about 10% of all home sales are FSBOs.

Just keep in mind: If you go this route, you’ll need to handle all aspects of the sale yourself. As Kuba Jewgieniew, CEO of Realty ONE Group, explains, “Realtors work incredibly hard, with the bulk of that work done behind the scenes—negotiating, researching, marketing, writing up contracts and more.”



This article was originally published by a www.wsj.com . Read the Original article here. .

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