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A “Sale Pending” sign hangs in front of a property in San Francisco in 2023. Last Saturday, the National Association of Realtors introduced policies that changed the payment process for real estate agents representing home buyers. 

Jeff Chiu/Associated Press

There’s been a major shake-up in how you buy and sell your home in America — and those in the Bay Area’s ultra-pricey and ultracompetitive housing market are watching closely to see how these changes might affect them.

This past Saturday, the National Association of Realtors implemented new policies that affect how real estate agents get paid when they represent a home buyer.

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Previously, in the vast majority of real estate transactions, the seller covered the commission fees for both the seller’s agent and the buyer’s agent. That commission percentage was baked into the price of the house. When homes were listed on the real estate database called the Multiple Listing Service, agents could see what percentage commission they would get if someone they represented bought the home.

For the buyer, their real estate agent’s services were “free,” in that they did not pay the agent out of pocket during the transaction.

A lawsuit upended this longtime practice. A group of home sellers in Missouri argued in a class action lawsuit that the practice violated antitrust laws. So the National Association of Realtors, a trade association that represents real estate agents and brokers, agreed to a settlement that changed the rules.

Those changes represent “the biggest shake-up to real estate in the United States in the past 200 years,” said Nikki Edwards, a real estate agent in the Bay Area. 

But in Northern California’s tight markets, she said she doesn’t see the changes “being a factor that’s going to move the needle in terms of dropping prices dramatically to even affordable levels.”

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If you’re planning to buy or sell a home in the near future, the process is going to be different. Here’s what to expect.

Changes for buyers

How it worked before: A real estate agent could show a potential buyer a house without establishing any sort of contract between the parties. Buyers had no say in what commission the agent would receive if they bought a house. 

Though the buyer’s agent was not working “for free,” said Vanessa Gamp, the president of the San Francisco Association of Realtors, “the buyer was not paying up front for the services. The agent was being paid through the shared listing agents’ commission” via the seller from the proceeds from the home sale.

How it works now: A buyer will need to enter into a written agreement stating how their real estate agent will get paid before the agent can show them a house. 

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Vince Malta, the former president of the National Association of Realtors and a real estate agent in San Francisco, outlined what the agreement must contain.

“The relationship and how compensation is going to be paid, how the agent will be compensated, what the rate will be — is it a fee, a percentage, something else — and it will include a statement that the agent will not receive compensation from any source other than what they’ve agreed to in this written agreement,” Malta said. The agent and buyer will also agree on the duration of the contract. It could be for a few months or longer, or it could just cover one house showing.

So buyers now have the opportunity to decide what they think their agent’s time is worth. Buyers can negotiate the traditional percentage commission on the purchase price or negotiate a flat fee, an hourly rate or some other arrangement. The realtor can agree to that or not.

This change doesn’t necessarily mean buyers will have to pay their agent’s fees out of pocket and up front — or at all. Sellers are still allowed to fold the buyer’s agent’s commission into the purchase price. They just aren’t agreeing to do that up front like they used to.

It’s too early to tell whether nontraditional payment arrangements will become popular: The rules only went into effect this past Saturday. So far, Gamp said, she hasn’t been approached by any buyers seeking an alternative style of payment. And none of the real estate agents interviewed for this story said they’ve heard from sellers who say they won’t agree to the traditional method of baking the commission into the sale price.

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So-called discount agents already exist — websites and platforms that will draw up an offer letter for a flat fee — and they might become more popular, Gamp said. But a competitive real estate agent who can pick and choose clients probably won’t take one trying to get a bargain.

“San Francisco’s a really sophisticated, complicated market. And most agents that are out here selling real estate for a living are putting in a ton of time and effort,” she said. “In order to be successful, you’re typically working with an agent that does this full time, and those agents want to be paid appropriately for the work that they’re doing.”

Changes for sellers

How it worked before: In most cases, the seller agreed to pay their agent and the buyer’s agent before the house was listed on MLS. That agreement often involved a cooperating commission amount based on the purchase price of the house — typically 5%-6%, though that percentage was always negotiable — and split between the two agents. That commission was listed on MLS, so other real estate agents could anticipate what they’d make on a sale.

How it works now: The seller is not required to agree up front to cover the buyer’s agent costs. Any commission that might be offered to a buyer’s agent will not be listed on MLS.

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Buyers will have the option to make an offer that includes a percentage they intend for the seller to pay as commission to their agent. A seller can agree to that — and has good incentive to, Gamp said. Limiting your potential buyer pool to people who can pay their agent out of pocket in addition to their down payment means you might get fewer offers or fewer competitive ones, especially in a market like San Francisco that’s already so pricey.

“A buyer is going to have a finite budget no matter what,” Gamp said. “So if they are also required to pay commission, that means they will have less of a budget for the purchase.”

What about open houses?

The new policy change doesn’t extend to open houses. You can still casually drop in to one without having to sign a contract under the new NAR rules. A listing agent might ask you to sign something before you see an open house. But they are not required to under the NAR settlement rules.

“That is the one carve-out the NAR made very clear,” Gamp said. There was some confusion about this at first, she said, but “public open houses is the one scenario where a buyer would not need to have a signed agreement in order to see the property.”

Will this change bring down home prices?

When the settlement was announced, some industry watchers predicted it would bring down prices by putting buyers in the driver’s seat when it comes to how their agents were compensated. Buyers could negotiate a flat fee or lower percentage payout. Or the changes could reduce competition for homes by removing casual shoppers from the market who are wary of signing a binding agreement up front.

But buyers have very little leverage to begin with in California’s super tight market, and they have lots of competition. Malta said he doesn’t see these changes moving the needle.

“I think it’s really speculative to say this is going to affect home prices,” he said. “There are greater market conditions such as inventory and mortgage interest rates that are much bigger factors.”

If anything, it could make things harder for buyers, Edwards said.

“If you’re placing an offer, and if now we’re competing with other people and we don’t know what they’re offering in terms of commission now, we don’t really know how that seller’s going to look at the offers,” she said. 

Ultimately, buyers will have more transparency into pricing with their agent. But the changes add a layer of paperwork and complexity to a process that was already notorious for both of those things.

Reach Jessica Roy: jessica.roy@sfchronicle.com



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



building Lab, inc.Save Photo
Photos by Adam Rouse Photography

ADU at a Glance
Who lives here: A couple and their three children
Location: Silicon Valley, California
Size: 1,592 square feet (148 square meters); two bedrooms, 1½ bathrooms
Architect-builder: Principal Stephen Shoup and project designer-manager Hideaki Kawato of building Lab

After long delays during the pandemic and its resulting supply chain issues, the ADU was finally completed. Shoup and his team delivered a serene, modern home built for a sense of well-being, with traditional Japanese elements that include smooth lines, airiness and a connection to nature. The design includes an undulating roof with skylights that bring in light and a sense of the outdoors.

“The series of skylights in the main space that denote the main flow offer an abundance of light and a proportionally unexpected architectural and spatial experience,” Shoup says. “On clear nights, one feels as though they can reach up and grab the stars.”

The couple and their children ended up moving in themselves. They especially enjoy the quality of light and the kitchen and bath spaces in the new ADU. The main house is now used as study rooms and play spaces for the children and for relatives when they visit. There’s a large asphalt play area directly outside the ADU. The homeowners park in the relatively long driveway, part of which is covered.

Find an architect on Houzz



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


Traditionally, when a homeowner hired a real estate agent to handle the sale of their property, they agreed to pay that agent, as well as their eventual buyer’s agent, a commission. This fee typically amounted to between 5 and 6 percent of the home’s selling price, split more or less evenly between each agent.

Due to a recent lawsuit settlement, sellers may no longer be on the hook for buyer’s agent fees. But if you use a real estate agent, he or she will have to be paid somehow. How does that look for California home sellers? Let’s take a look at Realtor fees in the Golden State.

How much are real estate commissions in California?

In California, the current total real estate commission averages 5.11 percent, according to the latest data from Clever Real Estate. This clocks in lower than the national average of 5.49 percent.

That might be because the California housing market is so expensive: The median price of an existing single-family home in the state was about $908,000, in May 2024, per the California Association of Realtors (CAR). For a home sale of this amount, 5.11 percent equates to $46,400 total, or $23,200 per agent.

Chalk it up to the high cost of living in the Golden State. Here’s what the Realtor fees would be in a few major cities across the state, assuming a home’s median sale price per May CAR data and an even split of a 5.11 percent commission:

City
Median price
Total agent commission
Individual agent commission

SOURCES: California Association of Realtors May 2024; *San Jose median price from Redfin May 2024 

Los Angeles
$811,610
$41,473
$20,736

San Francisco
$1,690,000
$86,359
$43,179

San Jose*
$1,500,000
$76,650
$38,325

Fresno
$425,000
$21,717
$10,858

Sacramento
$555,000
$28,360
$14,180

What’s included in a real estate agent’s commission?

Whether they’re representing the buyer or the seller, most agents do a lot to earn their fee.

“For the seller’s agent, the commission generally includes services like listing and marketing the property, hosting open houses, negotiating with buyers and assisting the seller through the closing process,” says Scott Beloian, broker/owner of Westcoe Realtors in Riverside, California. Listing agents also often prepare a comparative market analysis to determine a competitive price and help the seller review and compare offers.

“For the buyer’s agent,” Beloian says, “the commission covers tasks such as finding suitable properties, setting up property viewings, advising on the [bidding] strategy and guiding the buyer through negotiations and closing.”

Who pays agent commissions in California?

Across the country, including in California, it used to be that commissions for both agents in the transaction were paid by the seller. “This arrangement [meant] that, while buyers [did] not directly pay the commission, the cost [was] typically factored into the home’s final sale price, affecting both parties indirectly,” says Beloian.

Again, however, changes to the way Realtor fees are paid are coming this summer. Under the new rules, sellers may — or may not, depending on the details of their deal — be responsible for paying their own agent directly.

Are California real estate agents worth it?

Although no one is required to use a real estate agent to either buy or sell a home, there can be considerable advantages to doing so. Agents are licensed professionals who are experts in their local markets. Their job is literally to help you meet your real estate goal, whether that’s earning top dollar on your sale or finding you the right new home at the right price.

Selling a home without a listing agent — known as a for sale by owner transaction, or FSBO for short — means you take on all the responsibilities typically managed by an agent yourself. With California’s high home prices, a mistake in negotiations or missed detail on the contract can really cost you.

That said, $23,200 apiece in commissions is a lot to tack onto an already pricey transaction. And there can be disadvantages to using an agent, aside from that cost, as well. For example, if the two of you don’t mesh well in your schedule or communication styles, working together can be a rough road. And most agents juggle multiple clients at once, which means you might not always be their top priority.  But generally speaking, the pros of having an agent on your side should outweigh the cons.

Saving on commission fees

There are ways to save money on fees if the commission is a hurdle you just can’t get past:

Negotiate the rate: Real estate commissions are often negotiable, and many agents might be willing to lower their rate if you ask. On a high-priced home, even a small rate reduction can make a big difference.

Choose a discount agent: Think about hiring a low-commission real estate agent — companies like Redfin and Clever often charge closer to 1 or 1.5 percent of your home’s sale price, rather than the traditional 2.5 or 3 percent. You might also explore agents who operate on a flat-fee basis, earning a predetermined amount rather than a percentage of the sale price.

Sell by owner: When you sell without a listing agent, you don’t have to pay a listing agent’s commission. But you do have to do all the work yourself, and you still might have to pay your buyer’s agent.

Sell to a cash homebuyer: There are many companies in California that buy houses for cash, closing quickly with no hassle and no Realtors or fees. However, this method will yield a lower sale price compared to a traditional market sale.

Find a trusted California real estate agent

If you’re ready to sell and eager to maximize your profits in the pricey California market, your next step is to find a local real estate agent to team up with. Do your homework first: Start by asking for referrals from family and friends. Look for agents with a thorough knowledge of your specific area and expertise in selling properties similar to yours.

Interview multiple agents and ask targeted questions to help you make an informed choice. The better you click with someone, the smoother your journey is likely to be.



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


Previously, the buyer’s and seller’s agents would split the commission, but now, the buyer and seller will both be responsible for paying their respective agents.

“What the settlement does is [it] enables both the buyer and the seller to negotiate with the broker upfront of what level of service they want and what their fees are going to be,” said Ted Tozer, a fellow at the Urban Institute, who specializes in housing finance. “I think, in the long run, this is very positive.”

How will the world of real estate change? 

Likely, quite a bit.

Because commission rates can’t be set up front, realtors will have to compete for business and may offer lower rates to their clients. But it could also mean bad news for part-time realtors, who have otherwise relied on that 5%–6% commission as an occasional income.

“If you’re a realtor and you only sell a couple houses a month, you’re going to have a tough time making it,” Tozer said. “You will probably have less realtors in numbers, but the ones that are doing business are probably going to be more effective at what they’re doing because they’ll have to make it a full-time job.”

What does all this mean for me, a home buyer or seller? 

Firstly, because this is a class-action lawsuit, some home sellers might be entitled to compensation. But it doesn’t include California. It only pertains to metro areas in Arizona, Colorado, Florida, Nevada, North Carolina, Ohio, Texas, Utah, Minnesota, Pennsylvania, Virginia and Washington, D.C.

That said, the proposed settlement will likely empower home buyers and sellers to negotiate the commission rate with their agents.

“What the lawsuit was all about was that the sellers felt like they should have more control,” Tozer said. “I should have the ability to have a say in what I’m paying.”





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

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