Starting this week, significant changes are coming to the homebuying and selling process due to a recent settlement involving the National Association of Realtors (NAR). If you’re planning to buy or sell a home, here’s a breakdown of what’s happening.
Background: In May, NAR settled class-action lawsuits claiming that its compensation rules stifled competition and inflated commission prices. The settlement, costing over $400 million, takes effect on August 17th and introduces new requirements for real estate agents.
What’s Changing? Two key changes impact consumers:
- Buyer’s Agency Agreement: Agents must now secure a signed Buyer’s Agency Agreement before showing any property. This requirement, already in place in Pennsylvania, now extends to other states. The agreement defines the relationship between the buyer and agent, including the commission owed to the buyer’s agent upon settlement.
- Agent Commissions: Previously, sellers typically paid a 6% commission, split between their agent and the buyer’s agent. From August 17th, MLS listings can no longer advertise commission offers. This change could shift the responsibility of paying the buyer’s agent’s commission to the buyer, potentially increasing homebuying costs.
Advice for Buyers:
- Interview Agents: Ensure you receive excellent service by interviewing multiple agents, especially if you cover their fees.
- Negotiate Fees: Discuss compensation with your agent before viewing properties. You can set a budget-friendly compensation limit.
- Narrow Your Search: Focus on homes where the seller may still cover the agent’s commission.
- Consider For Sale by Owner: You can avoid agent fees by dealing directly with sellers or using platforms like Zillow.
- Consult a Real Estate Attorney: If you decide to go without an agent, a real estate attorney can guide you through the process for a lower cost than agent commissions.
Advice for Sellers:
- Lower Your Costs: This change could reduce the overall cost of selling your home, as you may no longer need to cover the buyer’s agent’s fees.
- Be Prepared to Negotiate: While you can choose whether to pay the buyer’s agent, not offering compensation may lead to lower offers or a smaller pool of interested buyers.
- Try For Sale by Owner: Consider selling your home independently using online platforms, which might attract more traffic due to these changes.
These adjustments in the homebuying industry mark a significant shift in how transactions will be conducted moving forward. Buyers and sellers alike should prepare by understanding the new landscape and considering alternative strategies.
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