Realtor rules just changed dramatically

Here’s what buyers, sellers can expect

So long, 6% commission. For decades, real estate commissions have been somewhat standardized, with most home sellers paying 5% to 6% commission to cover both the listing agent and the buyer’s agent.

On Friday, everything changed.

A landmark agreement from the National Association of Realtors paved the way for a new set of rules that will likely shake up the entire industry, affecting sellers, buyers and the agents tasked with pushing deals across the finish line.

The most pivotal rule change pertains to how buyers’ agents are paid. Traditionally, home sellers have paid for the commission of both their agent and the buyer’s agent, which critics argue stifled competition and drove up home prices.

The new rule prohibits most listings from saying how much buyers’ agents are paid, removing the assumption that sellers are on the hook for paying both agents.

The other new rule requires buyers’ agents to enter into written agreements with their clients, known as buyer brokerage agreements. These agreements outline exactly what services will be provided — and for how much.

The changes will take effect this July, pending court approval, and will have major implications on how real estate deals are done. Here’s how buyers, sellers and brokers will likely be affected.

Lower fees for sellers

The most obvious takeaway is that if buyers end up paying for their real estate agents instead of sellers, sellers are set to save a lot of money.

In February, the average Southern California home sold for $842,997. Under the old system, where sellers pay both agents 3% commission, they’d shell out $50,580. But if they only have to pay one agent 3%, they’d save $25,290.

Buyers, then, would be the ones footing the bill for their agent. The added expense might seem pricy, but Michael Copeland, a real estate agent in Palm Springs, said the final numbers might ultimately shake out the same under the new rules.

“Buyers were often told by their agents that they didn’t have to pay anything and that services were free,” Copeland said. “But that’s not necessarily true.”

Flexibility for buyers

One of the biggest complaints about the previous system was that it left buyers out of the negotiation process. Sellers paid each agent’s brokerage 3% or so, and that was that.

But under the new system, more buyers will be negotiating directly with their own agents — not just how much they’ll pay them, but what services they want the agent to provide. And those expectations will be specifically outlined in the buyer brokerage agreements, which are now required.

“Some buyers may just hire an attorney and pay a fee to handle the transaction,” Copeland said. “Or they’ll want to hire an agent as a consultant. Someone they can ask questions.”