Real Estate Industry Shake-Up: New Sales Commission Rule’s Impact on Agents and Buyers

The real estate industry is undergoing a seismic shift following a landmark legal settlement that will impact how buyers' agents get paid.

The National Association of Realtors (NAR), the organization that set the guidelines for home sales for decades, recently agreed to a $418M million settlement. The series of lawsuits against the NAR mandated them to drop the rule that required all real estate listings to specify how a buyer's agent would be paid. Lawyers expect to file the deal within weeks, pending approval from a federal court. If approved, the agreement would resolve numerous legal claims from home sellers who claimed that the rules compelled them to pay excessive fees.

This change could have significant implications for the market, especially in terms of commission structures.

Previously, the standard practice was for sellers to pay their own agent's commission as well as the commission for the buyer's agent, typically totaling 6% split evenly between the two. However, without a universal listing for offers of "cooperative compensation," buyers could end up having to pay for their own agents. This could lead to buyers being billed for services on an à-la-carte basis or as a percentage of the sale, potentially coming out of the buyer's pocket.

The impact of this change is still uncertain, but it could lead to a shift in how agents operate. Some agents may choose to lower their commission rates to remain competitive, while others may offer a variety of services at different price points. This could create more competition among agents and make it easier for new agents to enter the market.

For buyers, especially first-time homebuyers, this change could create additional barriers to homeownership. Buyers who were previously able to rely on sellers to cover their agent's commission may now find themselves having to pay for these services out of pocket.

On the other hand, sellers may benefit from this change, as they could potentially walk away with more money upon selling their home. Sellers may also be more inclined to put their homes on the market if they no longer have to cover the cost of a buyer's agent.

Overall, while the definitive impact of this change remains to be seen, it has the potential to reshape the real estate industry and how agents and buyers interact. As the market adjusts to these changes, it will be interesting to see how different players adapt and innovate in response.