The Cost of Hiring a Real Estate Agent May Soon Change
The cost of hiring a real estate agent to buy or sell a home may soon change, along with decades-old rules that have helped determine broker commissions.
What’s driving the change?
As part of a settlement announced Friday, the National Association of Realtors agreed to make some policy changes in order to resolve multiple class-action lawsuits brought on behalf of home sellers across the U.S. The trade group agreed to change its rules so that brokers who list a home for sale on any of the databases affiliated with the NAR are no longer allowed to include offers of compensation for a buyer’s agent.
What does this mean for homebuyers?
The key potential change centers on who foots the bill for real estate agents who represent homebuyers. Currently, an agent or broker representing a home seller typically splits a commission – often around 5% to 6% of the home’s sale price – with the agent working on behalf of the homebuyer. Under the proposed NAR settlement, a broker who represents a seller would no longer be allowed to include a blanket offer of cooperative compensation to a prospective buyer’s agent when they advertise the property on NAR-affiliated Multiple Listings Services.
How might this affect home sellers?
The biggest change for homeowners looking to sell is they could push back against paying for buyer-agent commissions, which could translate into considerable savings. Consider a seller who agrees to pay a 3% commission for their listing agent – instead of potentially twice that to cover the buyer’s agent, too – and sells their home for February’s national median sale price of $379,100. That homeowner would save roughly $11,373 paying only their agent’s commission.
How might this change the real estate industry?
One concern is that by making it easier for sellers to opt out of making a cooperative compensation offer to buyer agents, some buyers will opt against hiring an agent or only do so toward the end of the process after they’ve gone through most of the home hunt themselves. That could end up weeding out some "lower-performing brokers." Another scenario is that alternative types of real estate business models will become more popular. This includes using discount brokers that will list a home for a flat fee of $500.
Conclusion
The proposed changes to the National Association of Realtors’ rules could have significant implications for the real estate industry. While it’s unclear how much the cost of hiring an agent will change, it’s likely that homebuyers will face pressure to pay for their agent’s commission out of pocket. Home sellers, on the other hand, may be able to negotiate lower commissions or opt out of paying for buyer-agent commissions altogether.
Frequently Asked Questions
Q: What is the National Association of Realtors’ proposed rule change?
A: The NAR has agreed to change its rules so that brokers who list a home for sale on any of the databases affiliated with the NAR are no longer allowed to include offers of compensation for a buyer’s agent.
Q: How will this affect homebuyers?
A: Homebuyers may face pressure to pay for their agent’s commission out of pocket, which could be a challenge for those already stretching financially to make a down payment and cover other upfront costs involved in buying a home.
Q: How will this affect home sellers?
A: Home sellers may be able to negotiate lower commissions or opt out of paying for buyer-agent commissions altogether, which could translate into considerable savings.
Q: How might this change the real estate industry?
A: The proposed changes could lead to a shift toward alternative types of real estate business models, such as discount brokers that list homes for a flat fee.
