Realtors’ agreement will change homebuying Many aspects will be figured out in the coming months
The $418 million National Association of Realtors settlement over home sales commissions is causing confusion and consternation.
Many home sellers think the deal could save them money because they won’t have to pay commissions on behalf of buyers.
Some home buyers, particularly first-timers, are concerned they will have to come up with money to hire a real estate agent. But many are already stretched to afford a house.
Newer Realtors are concerned it will cost them commissions and their jobs.
Veteran agents are far less concerned because they have clients who will pay for their expertise.
Market disruptors selling homes for low, flat fees think the settlement will help their businesses.
“The new rules are scheduled to go into effect in mid-July, which gives the industry just months to prepare for some big changes,” said mortgage expert Holden Lewis with Nerd Wallet. “If you sell or buy a home this spring or summer, expect your agent to be uncertain about the answers to some of your questions. When you do get answers, they might change as more information comes in.”
Dane Briggs, executive vice president of Clear Title Agency of Arizona, said “the sky isn’t falling” for real estate agents.
“I am seeing on social media there’s a lot of fear and concern from agents. We all get very protective when our livelihoods are challenged,” Briggs said. “There are going to be changes, and by the end of the year, we will have a new normal. We are going to figure it out.”
Negotiating commissions is already a big part of the home sales process. Moving forward, a buyer’s commissions can be paid in several ways, including with sellers chipping in. And the number of Arizona real estate agents is already down due to the slower housing market.
What Arizona Realtors has to say about the national settlement
One of the state’s biggest real estate industry groups, the Arizona Realtors, answered questions from The Arizona Republic about the settlement related to home sales commissions. Here are the group’s answers, condensed and edited for clarity.
What is the settlement about?
Plaintiffs allege home sellers are damaged when their listing broker offers to compensate the buyers’ representative. The lawsuits further allege that various National Association of Realtors rules and its members’ adherence to them have led to artificially fixed and inflated commissions. The National Association of Realtors maintains the practice emerged in the free market decades ago.
What does the settlement do?
The settlement releases the National Association of Realtors and its members from liability for claims in cases filed on behalf of home sellers over real estate agent commissions. There was no admission of guilt or liability.
How will it change real estate transactions?
A new rule will prohibit offers of compensation on the multiple listing service. Offers of compensation can continue to be an option consumers can pursue off the multiple listing service through negotiation. Another new rule will require multiple listing service real estate agents working with buyers to have written representation agreements.
What should homebuyers and sellers know?
There is no such thing as a standard
commission. Compensation has always been negotiable between agents and their clients and takes many forms, such as a percentage, fixed rate, hourly rate or any other mutually agreed arrangement.
A new reality for home sales?
Negotiating to buy a home isn’t going away, and that’s a big part of what real estate agents get paid to do.
About 89% of buyers last year purchased their homes through a real estate agent or broker, according to the National Association of Realtors.
And about 31% of U.S. homebuyers or sellers have attempted to negotiate real estate agent commission fees when buying or selling, according to a LendingTree 2023 survey. About 64% of those who asked successfully reduced the commission they had to pay.
Also, 48% of home buyers and sellers don’t understand or know what commissions were paid on their sales, according to the survey.
For homebuyers, there are many ways to pay commissions. In a slower market, like in the Valley now, sellers might still pay full or partial commission to a buyer’s agent to close a deal.
“It might be tempting to forgo using a real estate agent when you’re buying or selling a home, but before you try to do everything on your own, be sure you really understand what you’re getting yourself into,” said Jacob Channel, Lending Tree’s senior economist. “Though paying a commission fee might not be the most fun thing in the world, it can be well worth it.”
The number of licensed real estate agents who are members of the Arizona Regional Multiple Listing Service is down almost 8% from 2022 to approximately 38,600.
Some market disruptors suggest commissions can be rolled into a buyer’s home loan. But many federally backed mortgages prohibit that.
Veteran Arizona real estate attorney and broker Christopher Combs said the National Association of Realtors settlement is private and not binding on mortgage lenders. He said he doesn’t know of any prohibitions that would prevent them from rolling broker commissions into a conventional loan.
Mortgage lending and other aspects of home sales that will change with the National Association of Realtors settlement will be figured out in the coming months. said, “implying there’s not enough supply.”
Some positive signs have emerged for homebuyers. Yun said the housing supply is slowly picking up in 2024. Going forward, even more relief could come in 2025 when “mortgage rates could be closer to 6%.”
All that said, if you’ve found a nice, affordable home, the lack of movement on mortgage rates shouldn’t stop you from buying it, some experts say.