USA (Transatlantic Today) – The National Association of Realtors (NAR) has struck a historic agreement that will transform the American real estate market. This new settlement seeks to eradicate practices that have boosted housing prices while fostering greater openness and fairness in transactions. Significant changes are anticipated in agent commissions and negotiation processes between buyers and sellers.
Legal dispute ended, changes planned for July
The NAR has announced a settlement that ends its legal dispute with some home sellers. The agreement, which is set to take effect in July following court approval, has the potential to profoundly alter the way Americans purchase and sell houses. The $418 million settlement seeks to abolish restrictions blamed for soaring property prices, as well as to create a fairer market at a time when access to real estate is becoming more difficult.
Changes to the Commission’s rules
According to Revistaeconomia, one of the most significant changes includes the prohibition of the inclusion of brokerage fees in MLS (Multiple Listing Services) listings. In the past, this practice incentivised agents to refer their clients to properties with higher commissions, regardless of suitability for the buyer. The agreement now requires brokers to register with MLSs, many of which are owned by NAR member organisations.
Additionally, buying agents must now sign written agreements with their buyers. These agreements will specify the services provided and the payment structure. Financial services research firm TD Cowan predicts these new rules could reduce fees by 25% to 50%. They may also encourage the emergence of diverse real estate services, ranging from low-cost, reduced-service options to high-cost, full-service offerings.
Impact on Home Buyers
Traditionally, home buyers did not pay their agents out of pocket, as commissions were covered by sellers. Under the new rules, buyers might have to pay their own agents, though it is not mandatory. Sellers can still choose to pay both their own agents and the buyers’ agents, but this information will no longer appear in MLS listings. Buyers will need to negotiate terms directly with their agents and include them in a buyer representation agreement, detailing the agent’s duties and payment.
Impact on Home Sellers
For sellers, commissions will remain negotiable, but they may no longer have to pay the buyer’s agent commission in some MLS systems. Since the U.S. Supreme Court ended NAR rate-setting in 1950, commissions have been negotiable and could become even more flexible under the new rules. Sellers can stick with traditional commission structures or negotiate different options directly with agents
The agreement also prohibits the disclosure of commissions in the MLS to prevent agents from prioritizing properties with higher commissions over better options for clients. NAR has argued that sellers paying the buyer’s agent helps buyers afford an agent without high upfront costs.
Future of the Real Estate Market
The agreement’s changes could significantly transform the real estate business. Glenn Kelman, CEO of brokerage Redfin, suggested that the deal might weaken agent cooperation on fees and reduce commissions, as consumers will be more cautious about paying agents directly. A Federal Reserve Bank of Richmond study found that a cost-based commission model, where buyers’ agents are paid per home shown rather than as a sale percentage, could save consumers over $30 billion annually. The study also suggested a commission cap could lower prices for buyers and sellers, though a commission floor might be needed for low-value home sales.
Perspectives and Challenge
Despite potential reductions in real estate agent commissions, some industry professionals see the new rules as an opportunity to demonstrate their value and offer differentiated services. Michael Downer, an associate broker with Coldwell Banker Realty in Naples, predicted a bifurcation of the market into low-cost, low-service and high-cost, high-service segments. “There will be people who contribute almost no value, who put it in the MLS and that’s it. And people who offer limousine services,” Downer said, anticipating a clear divide between the extremes.