Ralph McLaughlin, senior economist at Realtor.com, said homebuyers and sellers have “more time” to get a good deal than they think.
Changes from a landmark settlement affecting brokerage fees by the nation’s largest real estate trade association take effect this weekend and could create a more complicated and uncertain buying process for consumers, according to industry experts.
Phil Crescenzo Jr., vice president of the southeast region for Nation One Mortgage, told FOX Business that the changes, made as a result of a $418 million settlement with the National Association of Realtors (NAR) announced in March, “add even more uncertainty and unknowns to an industry that is already under stress and pressure.”
While the deal will certainly make the process more complicated, it will also make the transactions more transparent and make it easier to negotiate agent fees, said Noel Roberts, CEO of Pending, a tech-enabled real estate company that facilitates off-market transactions.
Under the settlement, the NAR agreed to implement new rules banning the offering of compensation on listing databases it controls, also known as multiple listing services (MLSs), in an effort to put an end to a series of lawsuits that allege broker commission policies lead to excessive commissions and violate antitrust laws.
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NAR has denied any wrongdoing and has repeatedly maintained that the trade group does not set the fees. NAR said those fees are and will remain fully negotiable between brokers and their clients.
House under construction (David Paul Morris/Bloomberg via Getty Images/Getty Images)
Roberts said the new rules would mean sellers would no longer have to pay a buyer’s agent a commission, upending the traditional 5% to 6% commission split, where the seller typically picks up both the asking price and the buyer’s agent’s commission.
Going forward, transactions will require the explicit agreement of a Buyer’s Agency Agreement (BAA), a legal contract that defines how much the buyer’s agent will earn, regardless of the seller’s offer. This agreement must be in place before the buyer can tour the home.
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The deal is sure to make the process more complicated, but Pending CEO Noel Roberts said it would pave the way for greater transparency around the transaction and negotiations with the agency board. (Getty)
Crescenzo Jr. said these fees were, and remain, negotiable between the two parties and therefore do not directly affect real estate agents’ income.
Crescenzo Jr. also noted that because the change goes into effect on Saturday, it remains to be seen how this will impact the market and the actual impact on how agents and companies will process transactions going forward.
“The new rules will change the value proposition of using a buyer’s agent; properties currently for sale do not reflect the actual properties available on the market,” Roberts said. “There are many potential sellers who don’t want to publicly list but are open to offers. With many homes easily found online, the true value of a buyer’s agent will become more apparent if they can help uncover hidden or hard-to-find properties.”
Impact on buyers and sellers
Buyer
The previous structure created the impression that buyers’ agents were working “pro bono,” Roberts said. The new rules, which come into effect Aug. 17, will mean more transparency for buyers, but they may also mean higher costs, he said.
Changes resulting from a landmark settlement affecting brokerage fees by America’s largest real estate trade association go into effect this weekend. (Jacob Kepler/Bloomberg via Getty Images/Getty Images)
For example, if a buyer agrees to pay a 2.5% commission to an agent, the buyer needs to ensure they can afford that fee unless an equivalent concession is negotiated with the seller.
As a result, buyers “may be more selective about the properties they look at and the agents they work with, depending on whether the seller is willing to cover some or all of the buyer’s agent fees,” Roberts said.
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Seller
Roberts said the new changes, which reclassify buyer’s agent fees as “concessions” rather than “commissions,” “may lead to more nuanced negotiations.”
“Especially in competitive markets, sellers may feel pressured to make these concessions to attract buyers,” Roberts said. But he noted that the lack of a standardized way to offer such concessions “adds complexity and can make it harder for buyers and their agents to quickly evaluate potential deals.”
