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New real estate rules are in effect: Here’s what you need 2 know

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A class action suit has resulted in new buying and selling rules aimed at making the real estate process more transparent.

BUFFALO, N.Y. — Those in the market for buying or selling a home, are facing some changes in the process due to a national settlement that called for more transparency in the real estate process.

The newest rules laid out by the National Association of Realtors are as follows:

Offers of compensation will be prohibited on Multiple Listing Services (MLSs). Offers of compensation will continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals.Agents working with a buyer must enter into a written buyer agreement before the buyer can tour a home. The practice changes do not require an agency agreement or dictate any type of relationship.

Gregory Straus of 716 Realty Group says that although the written agreement is a new requirement, it’s not a foreign concept.

“Before it was optional, now it is required that when a buyer goes out and tours a home that they have buyer broker agreement which clarifies that they’re working with a realtor and that conversations had upfront and the fee that an agent can earn is also clearly identified in that contract,” said Straus. 

Real estate professionals in Western New York say that this allows for transactional transparency.

“This is improving the industry so that we have those conversations up front, what does it mean to be helping you, how much are we going to be paid, are we all transparent about that and that’s the goal of the settlement,” said Straus. 

That goal of transparency was also echoed by Vienna Laurendi, President of the Buffalo Niagara Association of Realtors.

“Honestly, this has always been in place, it’s just never been talked about out loud. So that’s where we come in with some transparency in the transaction,” said Laurendi. 

Really, it makes agents commission more negotiable for the buyer and the seller. Although the rules may sound different, it’s more of a matter of paperwork, making realtors adjust for the consumer – not the other way around. 

“The transactions are going to be a lot easier thanks to the dialogue that we are now armed and faced with,” says, Laurendi. 



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Rules for buying and selling a home are changing. Here’s what to know.

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When it comes to buying and selling homes, new rules are about to be put in play, five months after the National Association of Realtors agreed to a blockbuster settlement over how its 1.5 million agents across the U.S. are paid commissions.

The settlement — which resolved litigation stemming from a grand jury finding that the real estate group artificially inflated brokerage commissions — brings sweeping changes to the industry, starting tomorrow.

The adjustments come as prospects brighten for the beleaguered housing market. Mortgage rates earlier this month tumbled to their lowest level since April 2023, offering hope to house hunters priced out of the market given high borrowing costs and home prices that reached a record in June. 

Still, the current rate on the 30-year fixed loan stands at about 6.5%, or more than double the sub-3% rates available in 2020 and 2021. The Federal Reserve in September is widely expected to reduce its benchmark interest rate, a step that should reduce mortgage rates currently high enough to bring turnover in the housing market near 40-year lows. 

In the meantime, real estate agents across the nation will have to adopt to new changes that could potentially reduce the commission that home sellers are asked to pay. 

Many experts are now looking for home prices to fall as the sticker price will no longer include the steep commissions that have for decades been in play.

Here’s a rundown of what this means for those looking to buy and sell homes going forward.

Buyers beware

Real estate agents are now required to have buyers sign a form before showing them a home. The agreements are intended to detail exactly how much a buyer will be expected to pay an agent. 

However, “at that stage, the buyer hasn’t had an adequate opportunity to evaluate that agent,” Steve Brobeck, a senior fellow at the Consumer Federation of America, told CBS MoneyWatch. “When you’re touring houses with an agent, the agent is auditioning to be your agent, that’s when you get to know the agent.”

Most buyers would not be comfortable signing a contract with a financial obligation that early in the process, added Brobeck, who noted that the new requirement came at the industry’s behest and was not part of the NAR’s settlement.

Buyers should not sign a contract with a financial obligation until they are ready to make an offer, advises Brobeck. “There are other options for seeing a house,” he noted, including calling the listing agent or attending an open house. 

Another option that is increasingly in use are touring agreements that cover limited amounts of time and come without financial ties, he said, noting that Zillow had developed one. Many model contracts developed by the industry are difficult to read, understand and are otherwise problematic for consumers, Brobeck warns. 

That said, one buyer-broker agreement developed by real estate brokerage eXp Realty is “simple, consumer-centric and meets most of our criteria,” he said. “They’ve made it available for the industry to use.”

Homebuyers should also think about offering a flat fee or paying their agent an hourly rate, the advocacy group advised.

“The dollar value of today’s percentage commissions is often underestimated by buyers. Moreover, buyer agents should not have a financial incentive to be paid more the higher the sale price,” Brobeck said in a report.

Sellers rejoice?

For folks selling their homes, the changing landscape should bring some quick respite, as their agents no longer have to make an offer of commission to buyers’ agents. 

Nearly 9 in 10 home sales are handled by real estate agents affiliated with the NAR, the nation’s biggest trade association. It required that home sellers figure in a commission rate, usually 6%, before listing homes on its property database, known as the Multiple Listing Service, or MLS.

The commission borne by home sellers was then divided between agents for the seller and buyer. While on paper subject to negotiation, the fee was the focal point of the lawsuit lost by the NAR and brought by a group of home sellers, who claimed the trade group and others colluded in driving up the commissions.

In June, the median sale price of a home was $442,451, according to Redfin. Under the previous practices sellers would be paying $26,547 in commissions. That customary rate is no longer the default.

Sellers can now expect to be asked for just one side of the commission pot, or what would now average 2.5% to 3%. 

“For the first time now, buyers will have the opportunity to negotiate the buyer commission,” said the CFA’s Brobeck. “We suggest setting a target of 2% or less,” the advocate said. Matched with the buyer agent’s commission that would mean paying overall commission closer to 4% rather than the current standard of 5% to 6%, he added.

In a separate but related development, almost any American who sold a home in the last fives years is covered by the class-action settlement with NAR and other brokerages. How much anyone is entitled to depends in part on how many sellers submit claims, and other factors including where one lives and when your home was listed. 

To see if you’re eligible, check here. 

More from CBS News

Kate Gibson

Kate Gibson is a reporter for CBS MoneyWatch in New York, where she covers business and consumer finance.



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The NAR settlement comes into effect today: Here’s what changing and why | CNN Business

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CNN
 — 

On Saturday, a new set of rules governing how most real estate professionals do business in the US officially take effect — and the changes could potentially upend how Americans buy and sell homes.

The rules were agreed to by the National Association of Realtors, the powerful trade association that counts 1.5 million members, as part of a $418 million settlement into antitrust claims. The rules are designed to transform the way Realtors get paid and who pays them. It’s the largest change to the organization’s rules in at least a generation.

In a statement, Kevin Sears, NAR’s president, said that the changes “help to further empower consumers with clarity and choice when buying and selling a home.”

“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,” he said.

Here’s what you need to know:

Historically, buyers were not expected to pay their real estate broker directly. That’s because Realtor commission fees — to both the buyers’ agent and the sellers’ agent — were paid by a home seller.

Commissions usually total 5% or 6% of a home’s selling price, so for a $450K home, roughly the average price of a home in the US, a seller would be responsible for $27,000 in fees. Many experts have said these commissions have been baked into a home’s listing price, inflating home prices.

But beginning this week, seller’s agents will no longer be allowed to advertise commission fees to buyers’ agents on multiple listing services that Realtors use to list and find homes for sale and to facilitate transactions.

That means that a buyer’s agent can no longer use the database to search for houses based on how much they’ll get paid, a practice called “steering,” which led some agents to skip over showing homes that fit their client’s criteria solely because a seller was offering below-market commission rates, critics allege.

“By not having commission on the MLS anymore, it makes it harder to steer, because you can’t just do a search for 3% commissions,” said Tanya Monestier, a professor of law at the University at Buffalo School of Law. “You can still call everyone up and figure out what the lay of the land is, but this just makes it 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 begin touring homes together.

These agreements are designed to inform home buyers how their agent gets paid,­ and if sellers do not agree to pay the agent’s commission, the buyer may be on the hook for that payment. They’re also designed to inform buyers that this commission is fully negotiable.

“The idea is if buyers are aware that they can negotiate commissions and that if they, in fact, do pay them, not the seller, it might create a more completive 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 to these agreements is that a buyer’s agent cannot receive more compensation than what the buyer initially signed onto, even if a seller is willing to offer more.

On its website, NAR said that these two changes have “eliminated any theoretical steering, because a broker will not make more compensation by steering a buyer to a particular listing because it has a ‘higher’ offer of compensation.”

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

Some brokerages have realized that buyers may get nervous about signing anything that commits them to a legally binding relationship with an agent before they begin touring homes. So, they created shorter-term contracts that cover a week­ or maybe even an hour for buyers to get comfortable with an agent before committing.

But, Monestier cautioned that buyers should be careful about signing any kind of legally binding contract without giving it a thorough read.

“You’re going to see all sorts of different versions of these agreements that are going to vary, state-by-state, brokerage-to-brokerage. There may end up being thousands of them out there,” she said. “It concerns me that buyers and sellers may sign something blindly and then be surprised when things are not as they think.”

Leo Pareja, the CEO of eXp Realty, one of America’s largest brokerages, told CNN that he drafted his company’s buyers’ agreements with simplicity in mind to head off potential confusion.

“It is designed to be something that a consumer could read in the driveway of a house without feeling put in an uncomfortable situation,” Pareja said. “You don’t need a law degree to read it.”

Pareja decided to make his contracts widely available so that they could be used by other firms, as well.

“We just want consumers and agents to have the least amount of friction going forward, because that’s the last thing we need right now,” he said.

Some real estate professionals have warned that the new rules could have a chilling effect on the home-buying market since more buyers may now be expected to come up with cash to pay their own agents.

But Monestier said that she believed in the long-term, the changes would help consumers.

“I would say the better thing for home buyers and sellers is if commission rates were to go down over time,” she said.

It remains unclear whether the cost of buying and selling homes in the US will immediately become cheaper for most people, though.

“I suspect somebody out there will eventually say, ‘let’s compete on price.’ If it’s a big firm, that could cause a revolution,” the University of San Diego’s Miller said. “But when would that happen? I don’t know.”

In the short-term, Miller believes mortgage rates will have a larger impact on home affordability than any particular rule change.

The rate for an average 30-year fixed mortgage recently hit 6.49%, still elevated compared to recent history but near the lowest levels in more than a year.

“That has a whole lot more effect on affordability than anything we’re talking about here,” said Miller. “If mortgage rates come down further, rule changes will just be noise in the equation, compared to that.”



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The home buying and selling process is changing. Here’s what you need to know in Illinois.

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Save up money. Find a real estate agent. Attend open houses. Put in an offer … or two or three or four. 

Once the deal is closed, real estate agents for both the buyer and seller get paid commissions, typically by the seller.

This is a condensed version of how the home buying and selling process has functioned for years. And this process is about to change. The way real estate agents get paid will shift on Aug. 17, following massive settlement agreements that resulted from numerous class-action, antitrust lawsuits brought by home sellers over the commissions they paid to real estate brokers. The suits were filed against the Chicago-based National Association of Realtors and real estate brokerages nationwide.

In March, NAR agreed to pay $418 million as part of a settlement to resolve litigation against the organization and its members. It also agreed to amend its model rules. The settlement will be paid out over approximately four years, and around 50 million people will be eligible to receive money from NAR’s settlement. Some real estate brokerages opted to settle their own suits before and after NAR’s agreement, and some are still ongoing.

The full NAR settlement is not expected to receive final court approval until November, with the U.S. Department of Justice indicating that the terms of the settlement may not go far enough.

NAR’s settlement came after a Missouri federal jury issued a landmark $1.8 billion verdict in October of last year, finding NAR and several large real estate brokerages conspired to artificially inflate commissions on home sales. A similar case was expected to go to trial this year in Illinois federal court. The settlement resolved NAR’s role in both of those suits plus two other class actions. NAR continues to deny any wrongdoing, according to the association.

The litigation came to a head amid internal turmoil at NAR, which has undergone a series of leadership changes. Over the past year, NAR has seen two presidents and a CEO resign following allegations of sexual harassment against its former President Kenny Parcell.

Here’s what you need to know about the landmark settlements and how the changes being implemented will affect buyers, sellers and real estate agents in Illinois. 

What were home sellers arguing in their lawsuits against NAR and real estate companies?

The lawsuits claimed the compensation practice for brokers was anti-competitive because it incentivized buyers’ agents to steer their clients toward sellers who were offering higher commission rates in their listings on the Multiple Listing Service. The MLS is the main tool used by real estate agents across the country to market home listings.

Historically, the seller set the commission rate when listing the home for sale and then paid the fee to their agent, who split it 50-50 with the buyer’s agent.

How is the National Association of Realtors changing its rules?

NAR is changing its rules in two main ways. It is requiring potential homebuyers to enter into written agreements — often referred to as buyer agency agreements — with their agent that state how the buyer’s agent will be paid. NAR is also removing offers of compensation to agents in the MLS.

If a broker is not a member of NAR or does not use an MLS platform that adheres to NAR’s rules, they will not be subject to these rules changes.

Can cooperating commissions be listed outside the MLS?

Some real estate brokerages are still permitting their agents to list cooperating commissions on their real estate listings outside the MLS, while others are not. A cooperating commission is the amount paid to a buyer’s agent once a transaction is closed.

Redfin will allow sellers who want to advertise an offer of compensation to do so, but will not require it, according to a statement from a company spokesperson.

Compass agents will follow a similar practice, with a company spokesperson saying it will be an “agent-by-agent decision with their clients.”

A RE/MAX spokesperson said in a statement that while the firm will not display offers of compensation on the company website, each RE/MAX office is independently owned and operated, and “it is up to offices to determine what works best for their office.”

Laura Ellis, chief strategy officer and president of residential sales at Baird & Warner, said her company will not allow its agents to list buyer or seller agent compensation on any platform.

“We will not do that because it’s going to put us right back to how we got into the situation we are in now,” Ellis said.

Mike Golden, co-CEO of @properties Christie’s International Real Estate, said that as of now, similar to Baird & Warner, the company does not have plans to list cooperating commissions outside the MLS.

“We feel like that is in direct conflict with what the Department of Justice’s goals are with the settlement,” Golden said.

On a call with reporters on Aug. 7, NAR said it would not tolerate “people making attempts to circumvent those policy changes,” but declined to comment on particular brokerages’ practices when asked after the call.

Realtors group to pay $418 million to settle litigation over broker commission fees

What does this mean for potential homebuyers?

Homebuyers will now be required to enter into written contracts with their agents before the first tour of a home if working with an agent who is a member of NAR or an agent who is using an MLS that follows NAR’s model rules. The contracts will dictate how much the buyer will pay — in either a dollar amount or percentage — their real estate agent in the event that the seller does not cover any or all of the buyer’s agent commission.

These contracts do not have to be signed if a buyer chooses not to work with an agent, if a buyer visits a for-sale home on their own or if a buyer is working with an agent who does not use a NAR-affiliated MLS. Some states already required these written buyer agreements. Illinois was not one of them, but many brokerages began encouraging their agents to use the agreements after the Missouri verdict came down.

In Illinois, there are five primary MLS platforms, and they are all implementing the changes, according to a spokesperson from Illinois Realtors, a local NAR chapter. MLS platforms also have the option to disaffiliate from NAR if they do not agree with certain model rules, according to NAR.

Even when the litigation was still winding its way through court, local real estate firms said it was no longer assumed sellers would foot the bill for both the listing agent and the buyer’s agent.

Ellis of Baird & Warner said it is still “highly likely” that buyers will ask sellers during contract negotiations to offer a concession or closing cost credit so they can pay their agent. Commission costs have typically been baked into the price of the home, something the DOJ wanted to clarify for buyers with these rules changes, Ellis said.

A landmark jury verdict threatens to upend home buying and selling. In Illinois, changes are already underway.

Do these rules apply to VA-backed mortgages?

Veterans with VA-backed mortgages are allowed to pay buyer broker fees as of Aug. 10. Prior to the settlement agreements, per the policy for VA-backed mortgages, veterans buying homes were not allowed to pay a buyer’s agent commission. The VA amended its policy in light of NAR’s rules changes because veterans could have been at a disadvantage in the homebuying market if they could not offer to pay an agent’s commission, according to the VA.

What does this mean for potential home sellers?

Sellers will maintain their ability to offer a buyer’s agent compensation or to choose not to. A seller’s agent will, however, no longer be able to list cooperating commission percentages on the MLS. If a seller does choose to cover a buyer’s agent commission, the compensation must not exceed the amount the buyer agreed to pay their broker in their buyer agency agreement.

Conversations surrounding agent commissions can still occur during the contract negotiation process for buyers and sellers.

Golden of @properties said his company has seen that sellers are still largely paying buyer’s broker compensation.

Erika Villegas, president of the Chicago Association of Realtors, said she has not seen large numbers of sellers stop paying commissions to buyers’ brokers.

“What I am seeing is that we are having a more transparent conversation with our sellers about all the choices that they have,” Villegas said. “Sellers have always had choices, but I think that we are making it even clearer now.”

Will the costs of hiring a real estate agent go down?

Data already show that commission percentages have been decreasing for years. And attorneys say they expect the rules changes will lead to lower commission fees because agents will be forced to compete on service.

Since the NAR settlement, average buyer’s agent commission percentages have declined locally and nationally, according to recent data from Redfin. In Chicago, the average commission was 2.35% for the four weeks ending July 14, 2024, compared to 2.44% for the four weeks ending Jan. 28, 2024. Nationally, buyer’s agent commissions have declined from 2.62% to 2.55%. Redfin said these trends follow yearslong gradual declines, but buyer’s agent commissions in dollar amounts are up this year due to rising home prices. 

In the past, real estate agents were typically compensated 5% to 6% of the purchase price of a house by the seller, an amount that usually got split in half between the buyer’s agent and the seller’s agent. Local real estate agents maintain the commission percentage has always been negotiable. NAR vehemently denies that there were ever “standard” commissions and also says its members’ clients have always been able to negotiate commissions.

Golden of @properties said he has not seen commission percentages go down.

As workers return to the office, residents are moving back to Chicago and other cities, driving up home prices

What do these changes mean for the real estate industry as a whole?

It is still too early to know exactly how the policy changes will affect potential homebuyers and sellers.

“I just think it’s going to be a bumpy ride for a while,” Ellis of Baird & Warner said.

But some signs of a changing market are underway. Ellis’ firm is seeing agents leaving their roles and expects to see more do the same, she said.

At the end of June 2023, Baird & Warner had 2,226 agents; for the same time this year, the firm had 2,161 agents, an approximately 3% loss of the company’s agent headcount, with no notable decrease after the settlement announcement in March, Ellis said.

Ellis said it’s hard to tell if agents are leaving because of the Aug. 17 changes. She thinks it is more likely due to the challenging market conditions. Either way, she believes it is a “good thing,” Ellis said.

“The Realtors who are going to survive this and thrive are your really high-integrity, highly professional, really smart agents, and I think that is better for everybody,” Ellis said. “The bar of entry was just too low in our industry.”

In its second quarter earnings, RE/MAX reported a 3,581 decline in its year-over-year U.S. agent headcount, a 6.3% decrease, as of June 30.  

Villegas of the Chicago Association of Realtors said the trade group has not seen a dropoff in membership since the settlement announcement but a “re-engagement of members” to make sure they are prepared for the changes.

Redfin has seen its agent headcount tick up by 61 nationally, a roughly 3.7% increase, between the first and second quarters of this year. Compass saw an even bigger increase in its headcount due to recent acquisitions, according to its second quarter earnings report.

Golden of @properties said his company has not seen any unusual attrition following the settlement agreements, and the company has already been navigating some of the market changes in Indiana, as buyer agency agreements became mandatory in that state July 1. So far, it has been a “pretty seamless process,” Golden said.

“Every brokerage company is faced with the same questions and faced with the same changes, and every company will adapt in their own way,” Golden said. 

ekane@chicagotribune.com

Originally Published: August 13, 2024 at 5:00 a.m.



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New real estate commission rules coming: Here’s what CA buyers, sellers need to know

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WALNUT CREEK, Calif. (KGO) — The experience of buying or selling a home is going to be different than transactions in the past. A recent National Association of Realtors class action settlement agreement has laid out new rules that will now bring the buyer and seller into negotiations over commissions on the sale of a house – negotiating who pays commission and how much is paid.

“Today is the day that on the MLS any indication of compensation commission is eliminated, you can’t even look at historical data,” Tricia Thomas, the CEO of the Bay East Association of Realtors said.

Realtors say that will make it more complicated for agents who now will have to involve potential buyers and sellers in signing new more complicated paperwork.

“So the buyer and seller are looped into the transaction more so we’re able to be more transparent with them about compensation,” Barbara Clemons, president of the Bay East Association of Realtors said, “There will be more forms for the buyer and seller to fill out.”

That will be apparent when visiting an open house – buyers will be asked to sign forms and if they don’t have an agent representing them; they might not be able to get additional information about a property without an agent.

MORE: San Jose becomes 1st in CA to allow property owners to sell ADUs

Buyers will have to negotiate how much they are willing to pay the agent representing them. But sellers could incentivize a sale by offering to pay all or a portion of the buyer’s agent’s commission.

David Stark with the Bay East Association of Realtors said, “It’s the biggest decision of your life and it’s probably going to be intimidating regardless of these changes but the fact that there’s going to be so much more information available, hopefully that’ll take care of some of the anxiety people will be having about real estate transactions.”

How these changes will affect commissions or the market is still a big unknown.

“There is no crystal ball. I don’t believe this is a factor on its own that’s going to significantly influence housing prices,” Thomas said.

But it will be a learning curve for everyone looking to buy or sell a home now.

Copyright © 2024 KGO-TV. All Rights Reserved.



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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.



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Buying and Selling a Home in California Is About to Change: Here’s How | KQED

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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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