Are you confused by the latest real estate commission changes affecting agents, sellers, and buyers? The National Association of Realtors (NAR) has agreed to modify broker commissions in response to a lawsuit. This article will help clarify what these changes mean for everyone involved in the real estate market. Keep reading to understand how this could impact your next home sale or purchase.
Key Takeaways
✅ Commission Negotiability: Starting in July, the real estate commission rules are changing to allow commissions to be more negotiable. Sellers and agents must discuss fees openly, as MLS will no longer require offers of compensation from listing brokers.
✅ Financial Impact on Sellers: Home sellers could save money by negotiating lower agent commission rates. Instead of paying the standard 2.5 - 3 percent per side, they have a chance to bargain for better deals and reduce selling costs.
✅ Buyer Benefits: Buyers may face lower transaction costs due to reduced agent commissions ranging between 1-2%. Increased transparency means buyers will have a clearer understanding of agent fees and make better-informed decisions.
✅ Changes for Real Estate Agents: From August 2024, real estate agents need written agreements with buyers before showing homes. They will only earn commissions from their clients (sellers or buyers), requiring them to market their fees directly and potentially lowering overall income due to increased competition.
✅ Enhanced Negotiation Skills Needed: With these new rules, both sellers and buyers need good negotiation skills. Brokerages should train newer agents in effective negotiation techniques to ensure successful transactions under the changing commission structures.
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Overview of Real Estate Commission Changes
Real estate commission rates are changing, and these changes could shift how agents, buyers, and sellers interact. Commissions will now be negotiable, allowing for more flexibility in transactions.
Key Points of the NAR Settlement
Financial Settlement: NAR agreed to pay $418 million over four years to resolve claims against them, involving over one million NAR members and various REALTOR® associations and MLSs
What's changing?
New rules will change how buyer brokers get paid. Starting in July, the MLS (Multiple Listing Service) will no longer require offers of compensation to buyer brokers from listing brokers.
This means agents and sellers must negotiate commissions more openly.
Buyer brokers might receive fixed fees or seller concessions instead. The Florida Association of Realtors® is providing more details on this settlement. This shift impacts over one million members, including state and local Realtor® groups and brokerages with transactions under $2 billion in 2022.
Say goodbye to old commission structures—things have changed as of July 2024!
Under the settlement, sellers can no longer advertise an offer to compensate the buyer's agent on real estate databases.
Why are commissions now negotiable?
Real estate commissions have always been negotiable, but new changes make it more apparent and enforced. The National Association of Realtors (NAR) settled a lawsuit agreeing to pay $418 million in damages. This settlement highlights the need for transparency and negotiation in commission costs.
Starting August 2024, home sellers won't have to pay both their agent's commission and the buyer’s agent's commission anymore. Agents must now get written agreements from buyers before showing homes.
This rule ensures that buyers understand agent fees upfront, making negotiation easier for all parties involved.
Impact on Sellers
Sellers could save money with the new commission changes. Sellers now need to be ready to negotiate these fees confidently.
Potential cost savings
Home sellers have a chance to save money by negotiating lower commission rates with their real estate agents. Instead of paying the average 2.5 - 3 percent per side, they can bargain for better deals.
This helps reduce the overall cost of selling a home.
Understanding these changes in commissions could make buying and selling properties more affordable. Sellers who are comfortable negotiating might also decide to sell without an agent, cutting out fees entirely and maximizing their profit.
Need for negotiation skills
Negotiation skills are crucial for buyers and sellers in the changing real estate marketplace. Agents will need to discuss their fees up-front as commissions become negotiable. Sellers can save money by negotiating lower fees with their agents, while buyers benefit from transparent agent costs.
.Brokerages should enhance training programs for newer agents to ensure they can negotiate effectively. Experienced negotiation leads to better deals and satisfied clients. The ability to secure concessions is vital in this new regime, making strong negotiation skills a must-have for everyone involved in real estate transactions.
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Impact on Buyers
Real estate commission changes mean buyers might pay less overall. Buyers can see exactly what they are paying for agent services now.
Possible lower transaction costs
Lower transaction costs can make buying a home more affordable. Buyers might save thousands of dollars on an average sale price by reducing agent commissions to 1-2%, as seen in commercial real estate transactions.
In commercial real estate, it is common to see similar commission structures, which often result in lower overall transaction costs compared to residential real estate. This model provides a useful comparison for how residential real estate could benefit from reduced agent commissions. Buyers in the commercial sector typically negotiate more flexible commission rates, leading to significant cost savings.
These savings can ease the financial burden and make entering the housing market less challenging.
This change means more transparency in real estate transactions. Buyers will see clearer breakdowns of agent fees, leading to better-informed decisions. This benefits first-time buyers and seasoned investors alike, creating a fairer playing field for all involved.
Increased transparency in agent fees
Both buyers and sellers will now see clearer details on agent fees due to new rules. With buyer agency agreements mandatory in 18 states, agents must explain their payment options in detail.
This change leads to better transparency and helps homebuyers understand the costs involved.
For realtors, these changes mean they can no longer hide broker compensation offers on MLS listings. By mid-July 2024, buyers will benefit from knowing exactly how much an agent earns through commissions.
This promotes trust and informed decision-making for everyone involved in real estate transactions.
Impact on Real Estate Agents
Real estate agents may see their income structure shift with these new commission rules. Increased competition could also require them to offer more value to clients.
Shifts in income structure
Shifts in income structure will change how real estate agents earn. Agents used to earn from both seller and buyer commissions. Starting August 2024, that changes. Now, sellers only pay their own agent—not the buyer’s agent.
Buyer agents must market their fees directly to buyers. This means more competition and lower commission rates. Expected averages may drop below 4 percent, impacting earnings significantly.
Real estate agents need to adapt by offering better value and clearer fee structures to stay competitive.
New competition dynamics
As agents adapt to shifts in income structure, new competition dynamics are emerging. Real estate agents now face challenges and opportunities from these changes. The need for a written agreement before home tours has added another layer of complexity.
Agents must stay sharp as factors influencing their performance get reevaluated. Competition among buyer’s agents may lead to price wars or a more transparent fee system. Adapting strategies becomes crucial for staying ahead in the real estate game.
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Conclusion
These changes in real estate commissions can bring benefits and challenges. Sellers might save money but need to polish their negotiation skills. Buyers could see lower costs and clearer fees.
Real estate agents will adapt to the new income structure and face tougher competition. The industry will continue evolving, driven by consumer needs and market forces. Bennett Capital Partners remains committed to guiding clients through these shifts with expert advice in Florida’s housing market.
FAQs
What are real estate commission changes?
Real estate commission changes affect how agents, sellers, and buyers pay and negotiate fees for services in the industry.
How do these changes impact homebuyers and sellers?
Homebuyers might need to sign contracts with their agents, while sellers can negotiate commissions more freely with listing agents.
Will these changes affect agent commissions?
Yes, agents may see shifts in how much they earn from sales due to new rules on transparency and competition among buyer’s agents.
Can sellers still offer a flat fee to their agent?
Sellers can still offer a flat rate or percent commission when hiring a real estate agent to sell a home.
Who is involved in making these commission changes?
Organizations like the Consumer Federation of America, Federal Housing Finance Agency, and companies like HomeServices of America play roles in changing policies related to commissions.
Why is understanding these changes important for consumers?
Knowing about real estate commission changes helps consumers make informed decisions when buying or selling homes—ensuring fair financial transactions and better negotiation power.
Philip Bennett
Philip is the owner and principal mortgage broker at Bennett Capital Partners, Business NMLS# 2046828. He earned his degree in Accounting and Finance from Binghamton University and holds a Master's Degree in Finance from NOVA Southeastern University. With over 20 years of experience in the mortgage industry, Philip has been a leader in his field and has personally originated over $2 billion in residential and commercial mortgages.
Learn more about Philip Bennett's background and experience on our Founder's page. Whether you're a first-time homebuyer or a seasoned real estate investor, our team is here to help you achieve your real estate goals. Don't wait any longer; contact us today and let us help you find the right mortgage for your needs.
References
What high-profile commission changes mean for buyers and sellers | Bankrate
How will the National Association of Realtors settlement affect the cost of selling or buying a home? | Brookings
