CNN recently reported on a significant change in the real estate industry that could potentially revolutionize how Americans buy and sell homes. The National Association of Realtors (NAR), a powerful trade association with 1.5 million members, agreed to new rules as part of a $418 million settlement into antitrust claims. These rules aim to transform how Realtors get paid and who pays them, marking the largest change to the organization’s rules in at least a generation.
Historically, buyers were not expected to pay their real estate broker directly, as commission fees were typically paid by the home seller. These commissions, totaling 5% to 6% of a home’s selling price, were often baked into the listing price, inflating home prices. However, with the new rules, seller’s agents are no longer allowed to advertise commission fees to buyers’ agents on multiple listing services. This change aims to eliminate the practice of “steering,” where agents would skip over showing homes based on commission rates offered by sellers.
Another significant change is the requirement for buyers to sign a legally binding representation agreement with their agent before touring homes together. These agreements inform buyers about how their agent gets paid and clarify that the commission is negotiable. Buyers may now be responsible for paying their agent if sellers do not agree to cover the commission.
While some real estate professionals have expressed concerns about the new rules potentially affecting the home-buying market, others believe that in the long run, the changes will benefit consumers. The hope is that over time, commission rates will decrease, making buying and selling homes more affordable for most people. However, it remains to be seen how quickly these changes will impact the overall cost of real estate transactions in the US.
In the short term, mortgage rates are expected to have a more significant impact on home affordability than the rule changes. With the average 30-year fixed mortgage rate recently hitting 6.49%, affordability may still be a concern for many prospective home buyers. Ultimately, the real estate industry is evolving, and these new rules are just one piece of the puzzle in creating a more transparent and consumer-friendly market.
