The real estate industry will implement new rules on payments to buyers’ and sellers’ agents starting Aug. 17. Supporters say the move could lower fees overall, but it will also put pressure on consumers to choose experienced real estate agents and read the fine print.
The rule changes decades of financial arrangements between the two parties. For example, sellers will no longer have to pay buyers’ agents, but buyers will still be required to sign contracts with their agents outlining compensation terms.
“The new rules present both opportunities and risks for consumers,” said Steven Brobeck, a senior research fellow at the Consumer Federation of America. “Savvy home buyers and sellers will be able to take advantage of the opportunities and avoid the risks.”
The National Association of Realtors agreed to the new rules in March to settle a class-action lawsuit that accused the trade group of conspiring to set fees artificially high. The trade group said it would pay $418 million over four years and change some of its practices but denied wrongdoing.
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The rule comes after New Jersey added its own requirements for real estate agents. As part of a state law that went into effect Aug. 1, buyers must sign a representation agreement with a real estate agent before starting the home-buying process, outlining how they will be compensated for their work.
Ultimately, the changes may result in buyers paying more and sellers paying less, but real estate agents are still unsure how the process will play out.
“Nobody likes change, but I think most people who have been in the industry a long time feel like the industry has been through big changes before. You just adapt,” said Diane Traverso, an agent with NextHome Nexus Realty Group in Toms River and president of the industry group Monmouth Ocean Regional Realtors.
The lawsuit, involving the National Association of Realtors, targets long-standing rules that require sellers to pay buyers to post contracts on the Multiple Listing Service, a locally run platform run by Monmouth-Ocean area real estate agents, where buyers can view properties for sale in the area.
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Consumer advocates argued that the practice was anticompetitive. They argued that it forced sellers to pay commissions of 5 to 6 percent of the sale price, effectively erasing the bargaining power that buyers bring to a deal. It also paved the way for buyers’ agents to steer their clients toward sales that offered higher commission.
As part of the National Association of Realtors settlement, sellers will no longer be required to pay a buyer’s real estate agent a commission, and buyers will be required to sign a contract with the agent that specifies the terms of the commission.
A seller’s agent may split commission with a buyer’s agent, but that arrangement cannot be disclosed on the MLS.
“I think the best way (to find out if commission is being split) is for the buyer’s agent to call the seller’s agent and ask,” Traverso said.
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Brobeck of the Consumer Federation of America advised:
Choose an honest, competent broker or agent who understands and can explain the new compensation system. Check reviews on sites like Zillow, Realtor.com and Homes.com. Read and evaluate the buyer-seller contract and take note of any blanks that are filled in. Consumers should be aware of whether they are obligated to pay an agent a commission before deciding to become a client. Discuss and negotiate commission in dollar terms.
“Buyers should seize the opportunity to negotiate and set a target amount of 2 percent or less of the home’s sales price,” the Consumer Federation of America said, “as should sellers, who often give up on negotiating when given the same opportunity.”
Michael L. Diamond is a business reporter for the Asbury Park Press and has written about New Jersey’s economy, housing market and health care industry since 1999. He can be reached at mdiamond@gannettnj.com.
