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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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Real Estate Commission Changes Are Here For Buyers, Sellers | Bankrate

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The National Association of Realtors (NAR) agreed to new rules around real estate commissions as part of a lawsuit settlement in March. As of August 17, they’re actually rolling out — and consumers face a deluge of confusion and conflicting predictions.

One narrative predicts a coming utopia for homebuyers: A price war will erupt, and commissions will plunge amid a new wave of competition among buyers’ agents. A competing narrative goes in the opposite direction: Under the new commission structure, buyers will realize they’re on the hook for thousands and decide not to use agents at all. NAR, meanwhile, has portrayed the changes as minor tweaks rather than a major shift.

The opposing narratives underscore just how complex Realtor compensation has always been — and how much more complex it just got. Here’s a look at the new commission structure and what it could mean for both homebuyers and sellers.

How real estate commissions used to work

Traditionally, when a home seller hired a real estate agent to represent their listing, the seller agreed to pay a commission. The national average has been about 5 percent of the home’s sale price, typically split down the middle with 2.5 percent going to the listing agent and the other 2.5 percent to the buyer’s agent. (On a $400,000 home, 5 percent comes to $20,000, or $10,000 for each agent.)

Who pays?

Even this has been a bit murky. Agent fees came out of the seller’s proceeds at closing, but it’s reasonable to assume that the seller adjusted their price accordingly — the fees were baked into the home’s sale price. And so the buyer ultimately paid, just not directly to the agents: That extra 5 percent was rolled into the home’s sale price.

What’s changing?

The biggest change is that listing agents (the agents who represent home sellers) may no longer make offers of compensation to buy-side agents on any NAR-affiliated multiple listing service (MLS). In addition, a buyer’s agent must now have a written contract with a home shopper, clearly specifying their fee, before they may show that client a house. Until now, NAR encouraged but didn’t require written agreements between buy-side agents and buyers.

A federal judge gave preliminary approval to the settlement in April 2024, and the final holdout among the brokerages named in the suit — HomeServices of America, part of Warren Buffett’s Berkshire Hathaway — also settled in April. While final court approval is not expected until November, the rules took effect August 17.

Compared to the old model, the new version offers a greater level of transparency for consumers — homebuyers now will be fully aware of how much they’re paying for an agent’s services. “It’s always good when people understand what they are and are not paying for,” says David Druey, Florida regional president at Centennial Bank.

An important aspect of the new model for agents: While the new rules prevent listing agents from posting buy-side commissions on the MLS, as they used to, sellers and listing agents still can agree on the amount off the MLS. That means it’s OK to offer compensation amounts verbally, in emails or texts, and even on their brokerage’s own website, as long as it’s not done on the MLS.

“Although sellers can elect not to pay any buyer agent compensation, that doesn’t mean they will avoid the economics,” says Budge Huskey, president and chief executive of Premier Sotheby’s International Realty in Naples, Florida. “Buyers may easily write into any offer a contingency requiring that the seller cover the cost, or may request other concessions, such as closing cost assistance in the dollar amount they are paying their representative.”

Does this mean real estate commissions are now negotiable?

Technically, real estate commissions always have been negotiable — a theme NAR long has stressed. Practically, though, the picture gets complicated. In many cases, Realtors are more skilled at negotiating than their clients, so the consumer comes into the negotiation at a disadvantage. What’s more, the buyer’s agent commission was previously determined by the seller, not by the buyer. The new rules shift that responsibility to buyers, who now will discuss compensation directly with the agents representing them.

Is this good or bad for consumers?

Until we see how things shake out over time, the answer really depends on who you ask. Some foresee a near-nirvana for consumers: Vishal Garg, CEO of mortgage company Better, predicts the settlement will unleash a “buy-side price war” — buyer agents will begin competing fiercely for clients.

Others fear a darker turn. Ken H. Johnson, a real estate economist at Florida Atlantic University and a former real estate broker, says the new rules just add another layer of complexity to an already-confusing process.

“No longer advertising buyer agent commissions will only create a more confused and drawn-out transaction process as buyers, sellers and agents will have to negotiate the fee, who will pay for it and how much will be paid by each party,” Johnson says. “Due to this added level of complexity, buyers will almost certainly have to negotiate with more sellers before they find the deal they are satisfied with. Thus, the house-hunting period will extend for the average buyer.”

Concerns for first-time buyers

Many in the real estate industry worry that first-time homebuyers — those who need expert guidance the most, and who are already severely hampered by high prices and high mortgage rates — will be priced out of professional representation. If commissions no longer come out of the seller’s proceeds, the thinking goes, buyers won’t have an additional $7,500 or $10,000 to pay an agent.

“Most of those buyers are scraping the barrel to the bottom to come up with a down payment,” says Dave Liniger, chairman and co-founder of RE/MAX. (The firm was one of the large brokerages named as defendants in the suit along with NAR; RE/MAX settled last year for $55 million.)

For now, buyers can’t roll commission costs into their mortgages under the new rules. But industry players widely expect the Federal Housing Finance Agency, overseer of mortgage giants Fannie Mae and Freddie Mac, to change those rules.

“I think there’s going to be pressure on them to allow that,” Liniger says. “The industry needs first-time buyers.”

Indeed, NAR already has been attempting to nudge the mortgage industry in that direction: “We are talking with Freddie and Fannie to see what can be done,” says Lawrence Yun, NAR’s chief economist.



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

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The Future Of Real Estate Commissions | Bankrate

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Real estate commissions have survived the rise of the Internet and decades of attacks from disruption-minded discounters. Now, finally, they might be coming down.

A federal lawsuit has forced changes to the way consumers negotiate and pay real estate agents. In October 2023, a federal jury in Missouri found that the National Association of Realtors (NAR), along with several large brokerages, conspired to inflate Realtors’ commissions. The brokerages all settled out-of-court, and in March 2024, NAR settled as well, agreeing to pay $418 million in damages and change some of their longstanding rules. (Final court approval is expected in November.) Here’s what it means for homebuyers and sellers.

How real estate commissions are changing: A ‘price war’?

As of August 17, home sellers are no longer automatically responsible for paying both their own agent and the buyer’s agent. Instead, homebuyers who want representation may have to pay their own agents separately: Under the new system that NAR agreed to in settling the suit, when a home hits the market, listing agents will no longer specify how much the buyer’s agent will be paid. Instead, that fee will be negotiated separately between the buyer and the buyer’s agent.

Next up, perhaps: Full-throated price competition among buyers’ agents. “You’re going to see a buy-side price war by next year,” says Vishal Garg, CEO of mortgage company Better.

Technically, real estate commissions have always been negotiable. Practically, though, agents are more skilled at negotiating than their clients, and commissions have clustered in the range of 5 percent. The new rules set the stage for buyer agents to aggressively market their fees. Stephen Brobeck, senior fellow at the Consumer Federation of America, expects commissions will ultimately fall below 4 percent, maybe even to 3 percent. “Over time, more agents will feel free to offer different types of compensation, and more consumers will comparison shop and negotiate commissions in a more transparent marketplace,” he said.

A new era of competition among buyer agents is coming soon, says Garg. “In the best-case scenario, consumers are going to shop around for buy-side agents in the same way they shop around for mortgage lenders,” he says.

A financing wrinkle

There are still many details to be worked out. If the buy-side agent is no longer paid from the listing commission, then that means the buyer is responsible for paying their agent directly — a sum that would average about $10,000, based on a 2.5 percent commission and a $400,000 sale price. For now, buyers aren’t allowed to roll that amount into their mortgage to be paid over time. However, it’s possible that the Federal Housing Finance Agency will change its rules to allow Fannie Mae and Freddie Mac mortgages to include commissions. Industry experts expect federal regulators to tackle that topic in the near future.

How much do commissions cost?

Under the longtime standard, if a homeowner sold a property for $400,000, about average for existing homes in the United States, the seller paid a commission of around 5 percent, amounting to $20,000. That amount was then split between the seller’s own agent and their buyer’s agent (which hardly mattered to the seller, who still had to pay the full amount regardless).

Long ago, 6 percent was the going rate for real estate commissions; 3 percent to each agent. But after decades of competition and regulatory scrutiny, the typical commission now is slightly less than 5 percent, according to data from Anywhere Real Estate, the parent of Coldwell Banker, Century 21 and other large real estate brands. In its filings with securities regulators, publicly traded Anywhere reports that its average commission “side” — half the commission — is currently about 2.4 percent.

While commissions briefly rose during the Great Recession and again in 2023, rates in general have been falling steadily for decades. For Realtors, this decline in commission rates has been offset by rising home prices: They’re getting a smaller piece of the pie in terms of their percentage-based fee, but the pie is getting bigger.

About the NAR lawsuit

In the case that went to trial in 2023, Missouri home sellers alleged antitrust violations by NAR and four major brokerages: Keller Williams, Anywhere, RE/MAX and HomeServices of America. Anywhere and RE/MAX settled before trial — paying $83.5 million and $55 million in damages, respectively — while the other defendants opted to take their chances in the courtroom.

The jury ruled against the industry, and a judge ordered NAR and the two remaining brokerage firms to pay $1.8 billion in damages to home sellers. Keller Williams eventually settled for $70 million, and HomeServices of America, part of Warren Buffett’s Berkshire Hathaway, settled for $250 million. NAR also agreed to pay up and change its practices.

Other dramas

NAR has recently faced other headwinds in addition to the antitrust lawsuit and related cases. A sexual harassment scandal led to the resignation of the organization’s then-president in 2023, and the organization’s next president and longtime CEO then stepped down as well.

All the drama has created unease and unrest in the ranks. Redfin cut ties with the trade group, requiring many of its brokers and agents to cancel their memberships, and other brokerages have followed suit. In addition, two influential real estate agents have launched a competing trade group, known as the American Real Estate Association (AREA).

One of the new group’s cofounders, Jason Haber — a broker/agent at Compass in New York City and an outspoken NAR critic — described AREA as an alternative, not a replacement. “We’re not trying to replace NAR. We’re not trying to replicate NAR,” he said. “They have a 108-year head start.”

Competition and the MLS

The residential real estate industry has long presented a dichotomy. On the one hand, it has essentially controlled the marketing of properties for sale through a nationwide network of multiple listing services (MLSs). That reality has led to grumblings about collusion and price-fixing, along with scrutiny from the U.S. Department of Justice.

On the other hand, real estate sales is a relatively easy business to get into, as evidenced by NAR’s membership rolls of more than 1.5 million agents. To earn a real estate license, an agent typically needs to take a couple of classes and pass a state exam. No college degree is required, and the costs of entry are modest. However, the settlement is expected to thin the ranks.

Lawrence Yun, NAR’s chief economist, pointed last year to these low barriers to entry as evidence that competition is alive and well: “Real estate is a perfectly competitive industry,” Yun said during the organization’s annual conference in November.

Brobeck, the consumer advocate, disagrees with that assessment. “It’s not a free market right now,” he said. “There’s intense competition for clients. But there’s no competition on rates. In a normal marketplace, you compete based on marketing, but also on the price you charge.”

Meanwhile, the industry mantra has long held that commissions are negotiable, suggesting that sellers and buyers call the shots when it comes to how much they pay agents. In practice, though, consumers buy or sell a home only once every 5 to 10 years, if that, and many aren’t knowledgeable enough about the process to successfully negotiate the rate down.

“Consumers are at a disadvantage,” Brobeck said. “They buy and sell homes infrequently, and they’re mostly concerned about sale price and timing.”

Historically, discounters have not succeeded

For decades, detractors have predicted the demise of real estate commissions. These fees were sure to go the way of stockbrokerage commissions and travel agency fees, the naysayers said. Instead, real estate commissions have proven stubbornly resilient.

It’s not for a lack of trying. Many disruptors have seen commissions as a problem to be solved, but most have fallen short of reshaping the industry.

In the early 2000s, for instance, a splashy discounter known as YourHomeDirect (and later Foxtons) offered 2 percent commissions in New York and New Jersey. But after advertising heavily and gaining market share, it ultimately collapsed.

A decade later, London-based Purplebricks pushed into the U.S., wooing sellers with a flat fee of $3,200. It, too, overestimated demand and pulled out of the U.S. market in 2019.

One high-profile discounter, Seattle-based Redfin, has achieved greater staying power. It launched as a cheaper alternative to traditional brokers and touted listing fees of just 1 percent, although it has since shifted to focusing on 1.5 percent listing fees.

How sellers can save on real estate commissions

If you’re not keen on paying agent commissions, here are some alternative options:

Go it alone: Sell your home without an agent in a “for sale by owner” transaction. Between July 2022 and June 2023, 7 percent of home sales were sold by owners without the help of an agent, according to NAR data. But selling without professional help is a lot of work to do on your own, and it technically only saves you one agent’s commission — you may still have to pay your buyer’s agent.

Negotiate: If you don’t want to go it alone, ask agents about their commission rates upfront and compare the terms of each person you talk to. If you think the fee is too high, see if they’re willing to lower it. If both agents in the transaction are from the same brokerage, you might have more leverage to negotiate.

Hire a discount agent: A low-commission real estate agent will likely charge much less than a traditional agent would — usually 1 to 1.5 percent of your home’s sale price. (However, you might not receive the personalized attention you would with a traditional Realtor.) There are also brokerages and agents who work on a flat-fee basis, earning a preset amount on the sale rather than a percentage of the sale price.

Sell to a cash-homebuying company: These companies, which often advertise “we buy houses,” pay in cash, close quickly and typically charge no fees. However, if you sell this way you’re likely to get a lower price for your home than you would with a traditional sale.



This article was originally published by a www.bankrate.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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11 Upgrades That Actually Make Your House Harder To Sell, According to Real Estate Experts

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In a competitive housing market where first impressions are everything, coming in with all the right intel on buyer psychology is key to a speedy sale. “While you only need one buyer, it’s also important that you’re putting your absolute best foot forward,” Austin-based real estate agent Emily Ross says, adding that buyers are getting pickier these days and less willing to renovate after moving in. At the risk of staging a boring home, Ross says, “When in doubt, go classic.” Above all, buyers prize neutrals, matching appliances, and open spaces that can help them envision how they want to shape the home rather than living with other people’s existing design decisions.

She, along with Opendoor head of real estate Kerry Melcher, advise looking at other listed homes in your neighborhood for context clues on what’s working and what’s not. “I often try to find a recent sale in the neighborhood that sold for an above-average price and/or quickly as an example of what to emulate,” Ross says. In other cases, having the only home on the market in your neighborhood without a renovated kitchen lets you know that you might not be getting the most competitive offers compared with the Joneses next door.

To hear more on what modern finishes and design choices are of-the-moment but not so friendly to buyers, we asked real estate agents what to avoid, along with what they recommend swapping in instead.

Related StoriesA Colorful Kitchen

Colorful hues can be a draw for individual buyers, but they won’t appeal to everyone. Take yellow, a hue that’s become a popular choice for brightening up the kitchen. “Yellow is said to symbolize energy and optimism, and I’ve often seen it used in kitchens and laundry rooms,” Melcher says. Still, she notes, the sunny hue can potentially alienate people and make dimly lit rooms appear more dingy.

Buyer-friendly alternative: Melcher suggests sticking to traditional neutrals that offer shoppers a blank slate so they can easily envision their style.

Related StoryNaked Floor-to-Ceiling Windows

Tall, open floor-to-ceiling windows without any muntins (vertical dividers) or grilles crisscrossing them are a fixture of the modern glass-house trope. They draw in lots of sunlight and offer unobscured views of the outdoors, which you might think could only be a good thing. Ross warns that this trend isn’t likely to win over buyers who prioritize privacy, energy efficiency, and security.

Buyer-friendly alternative: Ross suggests buying long, sheer curtains or remote-controlled roller blinds to soften the windows and shield the home from prying eyes.

Related StoryBlack Kitchen Cabinets

Some homeowners today are venturing off the beaten path and into moodier palettes for kitchen cabinets, opting or colors like black and dark green to play off matte appliances and finishes. The trend can be polarizing.

Buyer-friendly alternative: Ross suggests playing it safe with a clean white palette for cabinets and adding personality with new knobs and pulls. If you’re still itching to have some fun with moody or bright colors and patterns, she adds, a powder room or utility room is a great place to do that.

Related StoryA Jewel Box Ceiling

Cloaking an entire room in one hue—a paint technique also called color drenching—can heighten its coziness and make intimidatingly high ceilings feel lower and more human scale, though the jewel-box look is not a design choice for the faint of heart.

Buyer-friendly alternative: Add a slightly darker accent wall to your primary bedroom or bathroom to can break up the sea of neutrals, Ross advises.

Related StoryBold Appliances

Sometimes your appliances can be a deterrent to buyers who gravitate toward a sleek and simple aesthetic. Los Angeles–based real estate broker Casey Winchell Napolitano, founder of NDA Real Estate, says “2024 is all about bold color choices in the kitchen,” and points to black or pink statement appliances as an example. All that flair may be a fleeting trend, though.

Buyer-friendly alternative: Napolitano recommends swapping out colorful appliances for classic ones in stainless steel or panel-ready appliances that offer broader appeal when it comes time to sell. “Bonus points if you can get all the appliances to match,” Ross adds, whether that’s a suite of matching stainless steel or paneled devices.

Glass Door Refrigerators

Another appliance no-no, according to Napolitano, is glass door refrigerators, which are popular for their modern aesthetic but not so practical. “While they can certainly add a sleek, modern touch to a kitchen, they require constant upkeep to maintain their appeal,” she says. “Smudges, fingerprints, and food splatter can quickly diminish their allure.” Besides upkeep, some buyers might also be turned off by the lack of door storage that’s common among these types of fridges.

Buyer-friendly alternative: Opt for a standard door fridge. French door and bottom-freezer styles are especially popular.

Related StoryMaximalist Wallpaper and Custom Murals

In real estate, where first impressions are everything, buyers might not want to open the door to wild patterns on every wall. “If they see bold or outdated wallpaper, they immediately calculate the cost and effort of removing it, and it’s expensive,” Napolitano says. Melcher adds that the same goes for custom murals, which can potentially deter buyers by coming across as too personalized.

Buyer-friendly alternative: Neutral paint. Both Napolitano and Melcher say it presents as a clean slate that allows potential buyers to imagine their own touches, making it easier to emotionally connect with the home. According to Opendoor’s 2024 Home Decor Report, homeowners prefer beige/tan, gray, and variations of white paint for the exterior, interior, and front door of a home.

Related StoryLED Chandeliers

Beyond the much-maligned boob lighting of rental homes, more directional choices like LED chandeliers in unusual configurations are en vogue but not always well received by shoppers. Ross says that when installed over a dining table or as pendants over a kitchen island, they can feel too cold and detract from the surrounding beauty of the space.

Buyer-friendly alternative: A staircase, entryway, or other walkthrough area is a better location for making the most of these sculptural lights (and making a good first impression with buyers), Ross says.

Related StoryThe Color Pink

Barbie pink had a moment last year at the box office, in home design, and in businesses—basically everywhere except in the housing market. Opendoor data identifies pink as the least appealing color for exteriors, interiors, and front doors, Melcher says. “Pink exteriors can be overwhelming for some,” she adds.

Buyer-friendly alternative: Incorporate pink in less permanent or softer ways. “I’d advise homeowners to incorporate the color in smaller doses and in more muted tones, like dusty rose,” Melcher says.

Related StoryCollections and Displays

Anti-minimalist cluttercore enthusiasts have turned an artful obsession with nostalgia into a whole lifestyle. According to Ross, all that clutter doesn’t photograph well for a listing. “The less on the countertop, the longer and bigger it looks on camera,” she says.

Napolitano is a little sterner: “Buyers want to envision themselves in the home and if you have too much going on, it can literally make or break an opportunity for an offer,” she emphasizes.

Buyer-friendly alternative: Keep surfaces clear of personal items—and keep most of your belongings in closed storage.

Related StoryBig, Maximalist Furnishings

That same less-is-more philosophy holds true for your furniture too. Napolitano says a good edit is always necessary to open up a space, and Ross explains that the things to keep in a purge are furnishings that fit the room rather than making it appear smaller. That means losing the oversized couches, conversation pits, or otherwise maximalist-leaning designs that—while popular on Instagram—can overwhelm a tight space IRL. “Also, make sure you don’t have anything in your home that may be meaningful to you but controversial or offensive to buyers,” Napolitano adds.

Buyer-friendly alternative: Choose minimalist furniture with a sleek profile that makes your space look larger and more open.

Related Story

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

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Guide to Real Estate in Mexico — Continually Updated

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Comprehensive guide to real estate in Mexico for buyers, owners, sellers and renters—continually revised and updated.

Extensive and detailed guide to real estate in Mexico

Our comprehensive guides to real estate in Mexico introduce you to essential information about property in Mexico whether you are:

Renting property in Mexico;
Buying a home in Mexico;
An owner who needs to insure and maintain the property;
An owner who plans to rent a property in Mexico;
Selling your home in Mexico; and
Working with Real Estate Agents in Mexico.

Property rental in Mexico

We publish detailed guides about all aspects of property in Mexico, including renting residential property here.

Property purchase in Mexico

Connect to detailed and exhaustive guides about buying and owning property in Mexico.

Owning and maintaining a property in Mexico

Browse detailed information that helps existing property owners manage, maintain, and insure their property in Mexico.

Insurance for your home in Mexico

Helpful guides and insights to help you consider how to get the right level of coverage for your home and property in Mexico, including coverage against third party liability damages.

Selling your home in Mexico

When you come to sell your residential property in Mexico, our guides and articles give you practical insights to help you prepare, market and sell your property.

Working with realty agents in Mexico

Insights and tips for finding and working with a local realty agent in Mexico, whether you are renting, buying or selling a property.

Learn more about real estate in Mexico

We continually update our guides and articles about matters related to property and real estate in Mexico.  Connect to further resources for insights and connections:

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Our free newsletter about Mexico brings you a monthly round-up of recently published stories and opportunities, as well as gems from our archives.



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New real estate commission rules to roll out Aug.17: Here’s how selling and buying a home

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New rules to how homes are bought and sold could mean an average savings of more than $50,000 to Peninsula home sellers. Photo courtesy Getty Images.

Big changes are coming to how homes are bought and sold beginning Aug. 17 when new rules roll out that will revamp how Realtors get paid commission. 

The changes, which are part of a $418 million court settlement that the trade group the National Association of Realtors announced in March, put an end to the decades-old practice requiring home sellers to pay 5% to 6% of a home’s purchase price to cover the commission for both the listing agent and the buyer’s agent.

For sellers on the Midpeninsula, where the median price for a single-family home is above $2 million – this means an average savings of more than $50,000 in commission fees.

The sudden death of the 6% commission

The Sitzer/Burnett buyer-broker commission lawsuit – a class-action lawsuit filed in Kansas City, Mo., last October on behalf of 260,000 home sellers in the Midwest over the National Association of Realtors’ commission rules – paved the way for the new regulations that will affect sellers, buyers and agents nationwide. 

A federal jury found the National Association of Realtors and some residential brokerages liable for nearly $1.8 billion in damages after determining they conspired to inflate commissions by forcing sellers to make non-negotiable offers of compensation to the buyer’s agent for listings on the Multiple Listing Service. 

What buyers should know

If you are a buyer and your agent is using an Multiple Listing Service, you will need to sign a written agreement with your agent before touring a home so you understand exactly what services will be provided and for how much. Written agreements are required for both in-person and live virtual home tours and must include: 

The amount of compensation the real estate agent will receive and how this amount will be determined. Is it a flat fee, a percent of the home cost or an hourly rate?  Compensation cannot be open-ended or determined by “whatever commission amount” the seller is offering to give to the buyer’s agent. 

A statement indicating that the agent is prohibited from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer

A statement indicating that broker fees and commissions are fully negotiable and not set by law. 

Information from the National Association of Realtors.

To resolve the litigation claims against the trade association and more than one million Realtor members, the National Association of Realtors agreed to make changes to its commission process as part of the $418 million settlement agreement.

The association, however, has stressed that commissions have always been negotiable and continues to deny any wrongdoing by its members in regard to commissions. 

“NAR does not dictate commissions. This was true before the settlement agreement and remains true once the practice changes go into effect,” according to a statement by the association.  

What the changes mean to buyers and sellers

Under the new system, the most significant change is how buyers’ agents are paid. While the seller can choose to pay a buyer’s agent, the rules make it crystal clear that sellers are no longer required to offer any compensation to a buyer’s agent. 

Buyers now will be required to negotiate directly with their own agents and must enter into signed agreements that outline how they will compensate their agent (flat fee, hourly rate or other arrangements), the amount they will pay and what services they want their agent to provide. Written agreements will be required before a buyer and their agent can do any in-person or live virtual home tours. Buyers do not need a written agreement if they are just speaking to an agent at an open house or asking them about their services.

There are also changes to how and where real estate professionals may communicate with each other about offers of compensation. These offers are no longer allowed on Multiple Listing Service platforms, which are private databases created, maintained and paid for by real estate professionals and provide property listings to Zillow, Trulia, Realtor.com and others.  

Individual agents and real estate companies, however, will still be able to reference compensation on their own websites. 

“These changes will bring more transparency and more clarity for home sellers and buyers,” said Jennifer Branchini, regional vice president of the National Association of Realtors for California, Hawaii and Guam. Branchini, who served as last year’s president of the California Association of Realtors, manages the Compass real estate office in Pleasanton.

Talk of the industry

The lawsuit and the National Association of Realtors’ subsequent agreement are the talk of the industry — but little of it on the record. Numerous local Realtors, the Silicon Valley Association of Realtors, the Sunnyvale office of MLS, and the Real Estate Research Institute of Hartford, Conn., all either declined comment or did not return messages for this story.

Michael Repka, CEO and general counsel of DeLeon Realty of Palo Alto, had plenty to say, however. He said the 5% to 6% commission structure — including sellers paying 2.5% to agents representing buyers — has been the norm throughout the industry since he joined it in the 1990s.

He said a recent analysis of home sales in Palo Alto valued at between $2 million and $10 million, revealed that nearly 95% of them included the 2.5% fee paid by sellers to agents representing buyers.

Repka said he believes the rule changes will be good for the real estate market. With sellers now looking at paying a commission of only 2.5% to 3.5% on any given transaction, Repka said this could persuade more long-time Midpeninsula homeowners to sell their homes. That, in turn, could put more badly needed housing inventory onto what has been an historically tight market in recent years.

“This new situation results in something that is more fair to the seller,” he said.

The new rules still allow sellers to offer some compensation to the agents of buyers, but the amount paid, if any, is now up to the seller, Repka added. 

“Typically, sellers had no option to pay less than the total commission. Even if the buyer’s agent’s involvement was minimal, or if the buyer discovered the property on their own (without the assistance of an agent), the listing agent retained both sides of the commission,” Repka said. 

This practice, he explained, has been used to encourage agents to point buyers toward properties that offer them higher commission rates. Sellers who didn’t offer 2.5% commission to a buyer’s agent, allegedly risked having their listing “blacklisted” by some real estate agents, according to Repka. 

“In essence, buyers will now have access to information about all homes available for sale, irrespective of whether the seller offers minimal or even no compensation to the buyer’s agent,” Repka said. 

According to the settlement facts outlined on the National Association of Realtors’ website, the association already had MLS policies in place regarding the non-filtering (or removal) of listings based on compensation. The new rules amend that policy “for clarification purposes and to ensure consistency with the proposed settlement agreement.”

Whether the 6% commission has been a longstanding and common practice, depends on whom one speaks to in the industry. 

One veteran Midpeninsula agent, who preferred not to be named, said 6% commissions have never been demanded across the board by agents locally, adding commissions are typically negotiated between home sellers and Realtors — and discounted commission rates are fairly common “to keep transactions alive.”

She said it’s not unusual for agents to “absorb costs” at times for sellers and buyers.

While the new rules provide more transparency and give sellers more options, some say the homebuying process may become more challenging for first-time buyers. 

“At a time when home prices and mortgage interest rates are higher, these new rules place an additional financial burden on homebuyers, particularly first-time homebuyers who are already struggling to come up with a down payment to purchase a home.” Eileen Giorgi, president of the Silicon Valley Association of Realtors, said in a news release from the association. 

New California requirements in the works

On the buyers’ side, Branchini, regional vice president of the National Association of Realtors, said the issue also has attracted the attention of lawmakers in Sacramento. The California Legislature currently is considering a bill that would require written agreements between agents and homebuyers. It would enshrine the requirement in state law, complementing the new industry directives.

Mantill Williams, Washington, D.C.-based vice president of communications for the National Association of Realtors, said 18 states currently have such laws, with several more, including California, now proposing similar legal requirements.

Assembly Bill 2992, authored by Assembly member Stephanie Nguyen, D-Elk Grove, would mandate buyer/broker written agreements — already required for sellers and brokers. The bill is still working its way through legislative committees.

Despite the National Association of Realtors’  widespread coverage, the association’s agreement does not yet cover all brokers in the industry. Officials of HomeServices of America Inc. of Edina, Minn., are still litigating the lawsuit, known as the Sitzer-Burnett vs. National Association of Realtors case. HomeServices of America is the parent company of Intero Real Estate Services, which has local offices in Palo Alto, Menlo Park, Los Altos and Redwood City.

David Goll is a freelance writer who regularly contributes to the Real Estate section.

– Linda Taaffe contributed to this article.



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

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Florida’s real estate market has a split personality: What to know if you’re buying or

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Florida’s real estate market has a split personality: What to know if you’re buying or selling in the Sunshine State

Florida’s housing market is a tale of two states. On the coast, condo prices are falling with residents being driven out by high insurance costs and assessment fees, while inland, the cost of single-family homes is holding steady. Local experts say this divergence is driven by soaring insurance premiums and rising assessment fees under new state regulations, which have significantly affected condo owners. [Source: Realtor.com]

Florida house named HGTV’s 2024 Dream Home is now for sale

Every year, television network HGTV hosts a “Dream Home” giveaway, and this time a waterfront Florida home was up for grabs. Marie Fratta, a teacher from New York’s Westchester County, won the pad (and a new Mercedes-Benz and $100K) three months ago, and now it appears she’s looking to get rid of it. [Source: Orlando Weekly]

This Florida city was hit hard when the 2008 housing bubble burst—now prices are falling again

While national aggregate home price indices are hovering around all-time highs, some regional housing markets in states like Florida, Texas, and Louisiana are experiencing home price corrections. This includes the Punta Gorda metro area in Southwest Florida. [Source: Fast Company]

Condo HOA fees jumped 60% in South Florida in past 5 years. Why higher costs are ahead

South Florida condo owners, burdened by spiraling insurance, repair bills and a new state law, saw their association fees shoot up nearly 60% over the past five years — driving some to consider difficult financial decisions to make their next HOA payment. [Source: Miami Herald]

Orlando home-purchase cancellations highest in country

Across the U.S., buyers are increasingly backing out of home purchases as prices rise and mortgage rates remain elevated. Orlando is seeing this trend play out in a more pronounced way than any other major market, with about 900 home-purchase agreements canceled in June, according to a report from Redfin. [Source: Orlando Business Journal]

STAT OF THE WEEK
13.4%
Farm real estate values in Florida jumped by 13.4% from 2023 to 2024. [Source: CVille Right Now]

ALSO TRENDING:

› South Florida real estate firm significantly grows Orlando presence [Orlando Business Journal]
KW Property Management & Consulting has added three new properties to its management portfolio in Central Florida totaling more than 1,600 units. The Miami-based firm has been contracted to oversee two condominium towers in downtown Orlando.

› It’s Ritz-Carlton vs. National as South Beach heavyweights battle over condo for billionaires [Miami Herald]
On Collins Avenue in South Beach, along a strip of jazzy historic mid-century high-rise hotels that have defined the city skyline for decades, two giants are going at it. And the outcome of their long-running battle could forever alter the look and feel of a landmark Miami Beach district that harks back to the city’s Golden Age. Whether that’s for the good for the future of highly popular but perennially troubled South Beach, or a harbinger of its continued erosion, is the gist of the dispute.

› Osceola joins movement to reject tax incentives for affordable housing [Orlando Sentinel]
Joining a growing list of municipalities across the state, Osceola County has decided to opt out of a program that uses tax incentives to boost affordable housing. The board of county commissioners voted swiftly and unanimously last week that Osceola will no longer provide property tax exemptions under Florida’s Live Local Act.

› Tampa reopens Rental and Move-in Assistance Program applications [WTSP]
The city of Tampa’s Rental and Move-in Assistance Program, or RMAP, is accepting new applications beginning Thursday, Aug. 8. The decision to re-open applications comes after significant rent increases in the Tampa housing market over the past few years.

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

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How new rules could change the real estate industry

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The National Association of Realtors (NAR) requires the implementation of two policy changes no later than Saturday, August 17.

San Luis Obispo County real estate agent Christa Lowry explained the two changes taking place.

“The first change is that buyers will not be able to enter a home without a written and signed buyer’s representation agreement with their buyer’s agent,” Lowry said.

That agreement negotiates a percentage of the sale the buyer will pay their agent. Prior to this rule, buyers could opt out of paying the buyer a commission.

“They had the option to not, but it was standard that they did,” Lowry said.

She added that while this new change requires the buyer to pay the buyer’s agent a commission, that commission fee is agreed upon by both parties.

“It’s a negotiable amount. That’s the most important thing to know,” Lowry said.

The second change prevents a listing agent from disclosing an agent’s commission or concession on the Multiple Listing Service. Instead, buyers will need to contact the listing agent directly about commission or concession fees.

“Buyers used to be able to call an agent and say, ‘Hey, I’d like to see five properties.’ There [was] no written agreement. There [was] no talk about commission or concession,” Lowry said. “Now they have to sit down and have that conversation with a buyer’s agent.”

Jenny Heinzen works as a broker for Vineyard Professional Real Estate, a luxury real estate firm in Paso Robles.

She said most of these changes involve a restructuring of business.

“It’s just kind of a work-around with the paperwork,” Heinzen said.

However, she said first-time home buyers could be impacted by the changes.

“A lot of times first-time home buyers are stretching for payment and if those first-time home buyers are asked to pay their buyer’s agent commission, that affects their down payment capabilities,” she said.

Heinzen noted that those costs can be avoided by structuring agreements differently.

“Our goal on our listings and most of the agents within the county is to get compensated by the seller,” Heinzen said.

She said for those new to buying a home or looking for help navigating these changes, finding the right agent is key.

“It’s going to be really important to work with good, experienced agents who are selling the types of property that you want to buy or sell,” Heinzen said. “Find a good agent and a good agent will educate you.”





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

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Real estate industry braces for shake-up as new rules roll out – Washington Examiner

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Aug. 17 will mark major changes for the real estate industry and the rollout of new rules about how Realtors are paid for buying and selling homes.

The changes are coming about because the powerful real estate trade group, the National Association of Realtors, agreed in March to settle lawsuits in which sellers accused the group of running up fees. At the time, the group agreed to pay $418 million in damages, but it also agreed to change the way commission rules work — a change that will go into effect within the week.

In the past, when someone went to buy a home, he or she would typically go out and get representation from a Realtor, and that Realtor’s compensation for his or her services was paid by the seller, according to Stephen O’Connor, chairman of the Center for Real Estate and Urban Analysis at George Washington University.

“So typically, a commission on a home, if you had a home for one million dollars and you were selling it, the commission structure would typically be 5% or 6%, out of that 5% or 6%, typically half would go to the listing broker, the person who was actually selling the house for the seller, and the other half would go to the buyer’s agent,” he explained to the Washington Examiner.

The NAR was sued because some people thought that was an unfair payment structure. Still, the NAR has argued that their compensation structures were always negotiable and transparent, O’Connor added.

With the new changes, now when someone wants to buy a house, he or she has to sign an agreement with an agent.

“So no longer is the seller responsible for paying the commission structure or the fees associated with the buyer’s representation,” O’Connor said. “So right now, as of Aug. 17, if I want to go out and I want to buy a house, I’m going to have to negotiate with a real estate agent and sign an agreement for buyer’s representation and negotiate what I’m going to pay out of my own pocket … the fee that that person is going to charge me for their professional services.”

The NAR itself has been optimistic about the new changes. Vince Malta, a member of NAR’s leadership team who previously served as the group’s president, told the Washington Examiner that the written agreement will improve transparency.

“We believe this will help with transparency, a better understanding of the relationship, what are the expectations of the parties, and it has to specify what compensation is expected or will be paid,” Malta said.

Malta said the agreement also makes it so offers of compensation will no longer be allowed on multiple listing services — central databases used by Realtors to share details about homes for sale.

“Those offers of compensation would have to occur off of the MLS, so various ways — another document like in a disclosure package or a phone call, but not on the multiple listing service,” he said.

But it doesn’t preclude an offer of compensation.

“If a seller and listing agent believe that it is in the best interest to sell that home to offer compensation to an agent that is representing a buyer, then offers of compensation could still be made,” Malta said.

The $418 million settlement and rules change came after a federal jury last October found major real estate groups liable and ordered them to pay $1.8 billion in damages as part of the antitrust lawsuit that accused them of colluding to inflate the rates of commissions.

The jury, based in Kansas City, Missouri, found that not only NAR but also Keller Williams Realty and HomeServices of America conspired to inflate and maintain high commissions artificially.

O’Conner said he doesn’t think this will greatly affect home sales volume. The housing market has been closely watched the past few years given soaring mortgage rates and home prices.

As of Wednesday, the average rate on a 30-year, fixed-rate mortgage was at 6.52%, according to Mortgage News Daily, which tracks daily changes in rates. That is down from a peak last year of above 8%, although it is still higher than in the years prior to the pandemic.

“I don’t think it’s going to affect home sales at all,” O’Connor said. “I think people are going to sell their home when they’re ready to sell their home. People are going to buy a home when they’re ready to buy a home. This is just different in terms of who gets to represent who and, more specifically, who’s paying who.”

On the agent side, O’Connor said it is yet to be seen how it will shake out, for instance, whether the change will affect the total membership size of the NAR. But he said it will be harder for agents to make money because of the change.

CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER

Others think this will be a big change that may be challenging for realtors.

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



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

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