A groundbreaking $418 million settlement announced Friday by the powerful National Association of Realtors is set to usher in the most sweeping reforms the American real estate market has seen in a century.\u00a0It could dramatically drive down homebuyers\u2019 costs \u2014 and push some real estate brokers out of business.<\/p>\n
Here\u2019s a look at how we got here and what to expect in the months ahead.<\/p>\n
For decades, the NAR has required home sale listing brokers to provide an offer of compensation to a buyer\u2019s agent up front. That usually comes out to about 6%, split between a seller\u2019s broker and a buyer\u2019s agent.<\/p>\n
But that model has come under intensifying scrutiny from critics who have likened it to a cartel. Late last year, a jury in a Kansas City federal court found the longstanding practice to be a form of collusion that artificially inflated real estate fees, awarding a massive $1.78 billion judgment against NAR.<\/p>\n
If the settlement announced Friday is approved by a federal court, the standard 6% commission goes away. Sellers would no longer have to make a compensation proposal to prospective buyers and their agents. Critics have said the encouraged brokers to push their clients toward more expensive properties.<\/p>\n
Another new rule would see homebuyers having to sign an explicit deal with a broker before they start working with one \u2014\u00a0something experts say would lead many homebuyers to forgo using brokers entirely.<\/p>\n
The new rules would kick in within months of approval, currently expected around mid-July. <\/p>\n
Everyone involved in the market should expect \u201ca certain amount of uncertainty for the coming months,\u201d said Marty Green, principal at mortgage law firm Polunsky Beitel Green.<\/p>\n
\u201cThe industry will be in transition as everyone digests the settlements and market forces begin working,\u201d he predicted. \u201cWe will begin to see some creative buyer\u2019s agent arrangements that may have been harder to get traction on before.\u201d<\/p>\n
Home buyers and their agents will need to decide on a commission and put it in writing. Sellers, likewise, will need to work carefully with their listing agents as the new rules come into effect.<\/p>\n
The changes could mean buyers will save on commissions, eventually bringing U.S. fees more in line with the much lower transaction costs seen in other residential property markets around the world.<\/p>\n
Some commissions could even be cut in half, Jaret Seiberg, housing policy analyst for TD Cowen Washington Research Group, told clients in a note Friday.<\/p>\n
The new rules \u201cshould lead to commissions falling 25% to 50%, which we view as benefiting online real estate brokers,\u201d Seiberg wrote, but he warned it\u2019s too early to declare \u201cthe end of local real estate agents given their local expertise and reputation in neighborhoods. It is why we do not see this following the travel agency model in which online eclipsed local offices.\u201d<\/p>\n
Holden Lewis, a home and mortgage expert at NerdWallet, warned of a \u201cpotential negative trade-off\u201d: \u201cBuyer-seller negotiations will become more complex, and buyers with plenty of cash might navigate the process more easily than buyers who don\u2019t have a lot of savings,\u201d he said. Seiberg flagged a similar concern in his note, saying it could particularly affect first-time buyers with limited means to pay for an agent.<\/p>\n
Brokers and agents have come out against the settlement, saying it will make the home-buying process more byzantine for consumers and discounts the important role agents play in helping them navigate it.<\/p>\n
\u201cI\u2019m a full-service real estate agent, so when I go to list my client\u2019s house, I align their goals with my goal, and that goal is selling for the highest amount possible,\u201d said Roy Remick, a realtor based in Northern Virginia, who said he often pays thousands of dollars of his own for services like staging homes to aid the sale process.<\/p>\n
\u201cThis is ultimately someone saying, \u2018You guys make too much money,\u2019 which I don\u2019t think is right for someone to dictate,\u201d he said. <\/p>\n
Buyers\u2019 agents will be left \u201cflying blind\u201d since they won\u2019t know how much they\u2019ll end up making from a given home, Remick warned. \u201cWe\u2019ll have to make a bunch of phone calls, because now we don\u2019t know what [the commission] is because we can\u2019t see it in the MLS. But we\u2019ve already got an agreement with buyer how much they\u2019ll be able to compensate us.\u201d<\/p>\n<\/p>\n
A groundbreaking $418 million settlement announced Friday by the powerful National Association of Realtors is set to usher in the most sweeping reforms the American real estate market has seen in a century.\u00a0It could dramatically drive down homebuyers\u2019 costs \u2014 and push some real estate brokers out of business. Here\u2019s a look at how we […]<\/p>\n","protected":false},"author":0,"featured_media":2218,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-2217","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/2217","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=2217"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/2217\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/2218"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=2217"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=2217"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=2217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}