Changes to Real Estate Commissions from August Could Mean Low Realtor Fees and Savings

🗞️ Weekend Edition:

• In-depth dive on real estate commission changes from August 17

  • Key changes from settlement

  • Implications for buyers & sellers

  • Expert predictions

  • Tips for buyers & sellers

• Colorado push-back on buyer agreements

• Value of female leadership in real estate.

• VA Loans in hot markets

• Dream waterfront listing in New Jersey

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📝 Weekend Dive

Changes to Real Estate Commissions from August Could Mean Low Realtor Fees and Savings

The real estate landscape is poised for significant transformation following the National Association of Realtors' (NAR) $418 million settlement of antitrust lawsuits. This settlement mandates substantial shifts in how real estate commissions are negotiated and paid, promising potential savings and changes for both buyers and sellers. Let's delve into what this means for the real estate market and how you can navigate these changes effectively.

Key Changes from the Settlement

1. Direct Negotiation of Agent Fees: Buyers will now negotiate their agents’ fees directly, contracting with them before the home search begins. This removes the traditional expectation that the seller covers the buyer’s agent's commission, which was typically included in the home's sales price.

2. Prohibition of Commission Advertising on MLS: Brokers are now prohibited from advertising compensation on the Multiple Listing Service (MLS). Any commission agreements between buyers, sellers, and agents must be negotiated separately, ensuring greater transparency and potentially lower costs.

These changes are expected to take effect Aug 17 2024, with preliminary court approval, and will release over a million NAR members from liability.

Implications for Buyers

• Increased Cost Responsibility: Buyers may need to budget for their agent’s fees, which were previously covered by sellers. This shift could make the home buying process more expensive, particularly for first-time buyers and those on fixed budgets.

• Transparent Fee Structures: Buyers will need to sign written agreements with their agents, outlining the fees involved. This could foster more competition among agents and lead to innovative fee structures, such as flat fees or à la carte services.

• Potential Savings on Home Prices: If commission costs are no longer baked into the sales price, overall home prices may decrease, potentially offsetting the direct payment of agent fees by buyers.

Implications for Sellers

• Reduced Commission Burden: Sellers might save thousands of dollars by only paying their agent's commission or negotiating lower fees for the buyer’s agent. This could lead to significant cost savings on high-value properties.

• Strategic Fee Payment: Sellers who choose to pay the buyer’s agent fees might attract more potential buyers and agents, increasing the likelihood of competitive offers and higher sales prices.

Expert Predictions

Real estate experts predict a period of adjustment as the industry adapts to these new rules. Marty Green, a principal at Polunsky Beitel Green, anticipates innovative buyer’s agent arrangements but expects uncertainty in the short term as MLS rules, agreements, and business practices evolve.

Madison Sutton, a New York-based agent, suggests that while buyers might bear a larger portion of transaction costs, the increased transparency could promote competition among agents, potentially leading to reduced fees.

Tips for Navigating the New Commission Landscape

For Buyers:

1. Shop Around: Take your time to find a reputable agent who is transparent about fees and services. Experienced agents will need time to adapt to the new rules, making it crucial to work with someone who communicates clearly.

2. Educate Yourself: Leverage resources from the Department of Housing and Urban Development (HUD) and other entities offering home buying training and events.

3. Budget for Fees: Plan for varying closing costs, as some sellers might cover the buyer’s agent fee while others might not. This could significantly affect your overall costs.

For Sellers:

1. Explore Your Options: Consult with professionals to understand different commission structures and how they impact your net proceeds.

2. Ensure Legal Compliance: Work with a knowledgeable agent to comply with legal disclosure requirements and avoid potential lawsuits.

3. Negotiate Fees: Remember that commission fees are negotiable. Discuss potential savings with your agent and consider negotiating the buyer’s agent commission as part of the purchase agreement.

Conclusion

The NAR settlement is set to reshape the real estate commission landscape, with potential benefits and challenges for buyers and sellers. By staying informed and strategically navigating these changes, you can make the most of the evolving market dynamics. Whether you're buying or selling, understanding these new rules will be crucial for making informed, cost-effective decisions in the real estate market.

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