Welcome Changes Coming to Real Estate Industry
Exciting changes are on the horizon for the real estate industry, with new rules set to take effect nationally this weekend. These changes are expected to have a significant impact on home shoppers, particularly first-time buyers.
One of the most notable shifts is the end of the traditional practice where sellers covered the cost of a buyer’s agent commission. Going forward, this blanket offer will no longer be a given, and homebuyers may find themselves responsible for their agent’s fees if the seller declines to pay.
The policy changes are the result of a $418 million settlement earlier this year by the National Association of Realtors, in response to federal class-action lawsuits alleging inflated real estate agent commissions. Major real estate brokerage brands such as Keller Williams, HomeServices of America, Re/Max, and Redfin have also agreed to policy changes and payments in light of the settlement.
These changes, effective for brokers and agents working with clients on MLS-listed properties, include the removal of blanket compensation offers for buyer’s agents in listings and the requirement for detailed representation agreements when hiring an agent.
While the impact of these changes on agent commissions remains to be seen, home shoppers, especially first-time buyers, may face additional costs associated with hiring an agent. Factors such as mortgage rates, a limited housing market, and high home prices will all play into the equation for prospective buyers.
Homebuyer Representation Agreements
For those looking to work with an agent, signing a representation agreement upfront will be mandatory. This agreement will outline the agent’s services, payment details, and commission splits. It’s a new requirement that aims to bring transparency to the process and ensure clarity from the outset.
Similar agreements are already in place in some states, but the new rules mandate that agreements be completed before an agent begins working with a client. This decision must be made before viewing a property, either physically or virtually, emphasizing the need for early commitment from buyers.
Removing Buyer-Agent Compensation Offers from Home Listings
Historically, sellers covered the buyer’s agent commission, but this practice will no longer be a default inclusion in MLS listings. Sellers may still choose to pay this cost, but without the pressure of a public offer. Negotiations around compensation will likely become more common between parties.
The impact of these changes on buyers and sellers will vary based on local housing market conditions. In slower markets, buyers may still be able to negotiate for the seller to cover agent fees, but in competitive markets, sellers will have more leverage in offers.
Will Commissions Come Down?
While it’s uncertain whether these policy changes will lead to lower broker commissions, there’s potential for negotiation. Buyer-agent commissions have seen a slight decrease this year, and experts anticipate more sellers will seek to negotiate lower rates with their agents.
Overall, these changes aim to bring more transparency and accountability to the real estate industry, providing both buyers and sellers with clearer expectations and financial considerations.
