March 26, 2024
Buying
You’ve probably heard the news that there are changes coming in terms of how real estate commissions are paid.
This might sound exciting and like a potential game-changer for you as a home seller or buyer, with headlines proclaiming things like:
But you’re also probably not sure exactly what it all means, how it will work, or how you’ll benefit from the changes.
Unfortunately, even if you ask the most informed agents on the planet, you probably aren’t going to get many answers. It isn’t because agents don’t want to answer your questions; it’s because they don’t even know exactly how the changes are going to work.
The settlement happened seemingly overnight. There was no advance warning or discussion with agents. They found out by reading a bunch of headlines you probably saw at the same time they did.
On top of that, most of the headlines are misleading, because nobody knows exactly how things are going to play out. Any claims that the media makes that commissions will be cut in half, or any specific number of dollars will be saved by consumers, remains to be seen. The changes might reduce commissions. On the other hand, they could increase them. As with many things the government or court system touches, there’s always the possibility that it could create more issues than it solves.
But, for the time being, as much as you might want or expect your local agent to be able to give you specifics, please understand that they can’t. For starters, it’s a proposed settlement, not yet accepted by the courts, and if it’s approved, the changes won’t start until July.
Here’s What Matters to Buyers and Sellers in a Nutshell
Unless you’re in the business, you probably have no desire to read through all of the court documents or proposed settlement. You just want to know what changes will possibly impact you. So here’s an excerpt from a National Association of REALTORS® press release, highlighting the changes that will most likely affect you. Note: MLS stands for Mulitple Listing Service.
“In addition to the financial payment, NAR has agreed to put in place a new MLS rule prohibiting offers of broker compensation on the MLS. This would mean that offers of broker compensation could not be communicated via the MLS, but they could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. Offers of compensation help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers. They are also consistent with the real estate laws in the many states that expressly authorize them.
Further, NAR has agreed to enact a new rule that would require MLS participants working with buyers to enter into written agreements with their buyers. NAR continues, as it has done for years, to encourage its members to use buyer brokerage agreements that help consumers understand exactly what services and value will be provided, and for how much. These changes will go into effect in mid-July 2024.”
Again, unless you’re in the business, that may not even be all that clear of an explanation. So to put it in simpler terms:
Basically, it allows sellers to choose to not offer or agree to pay a commission to buyers’ agents when they list their house for sale, and allows buyers to choose to not work with a buyers’ agent when they buy, in hopes of saving money. But before you do that, there are some things you should keep in mind.
Here Are Some Things to Keep in Mind if You’re Selling a House…
Here Are Some Things to Keep in Mind if You’re Buying a House…
While it’s impossible to predict exactly how everything will play out, those are a few things to keep in mind whether you’re buying or selling.
The best thing to do if you’re curious or concerned about the coming changes is to reach out to your local agent and ask them for their perspective, insights, advice, and to keep you in the loop as the changes get finalized.
The Takeaway:
While the headlines about changing real estate commission structures might sound exciting and like a potential game-changer for you as a home seller or buyer, they are misleading, because nobody knows exactly how things are going to play out. While it’s true that commissions may shift, the details remain uncertain. The expected court agreement is scheduled for mid-July and it is important to note nothing changes until approved by the court.
If the proposed settlement is accepted by the courts, sellers won’t be able to advertise agent commissions, however they will still be allowed to offer them, just not within their listing. In many cases this will still benefit the seller to do so in order to get the most exposure for their house, and sell it for the most money possible.
Buyers will be given the option to not work with a buyers agent, however that could come with some unexpected downsides and difficulties, and may not produce the savings they anticipate. Fortunately, you will still be able to hire your own representation, and have an agent looking out for your interests and helping you through the process.
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