A new set of rules for real estate professionals in the US is set to take effect, potentially changing how Americans buy and sell homes. These rules were agreed upon by the National Association of Realtors as part of a $418 million settlement into antitrust claims, marking the largest change to the organization’s rules in at least a generation. The changes are aimed at transforming how Realtors get paid and who pays them, with the goal of empowering consumers with more clarity and choice in the home buying and selling process.
Historically, home sellers were responsible for paying commission fees to real estate brokers, totaling around 5-6% of a home’s selling price. However, under the new rules, seller’s agents are no longer allowed to advertise commission fees to buyers’ agents on multiple listing services used by Realtors. This prevents the practice of “steering,” where agents would skip over showing homes based on commission rates offered by sellers, potentially inflating home prices. The changes aim to eliminate any theoretical steering and create a more competitive market for buyers and sellers.
Another key change involves the relationship between prospective home buyers and their real estate agents. Buyers must now sign a legally binding representation agreement with their agent before touring homes together. These agreements inform buyers about how their agent is paid and that commissions are negotiable. Buyers cannot pay their agent more than what was initially agreed upon, even if a seller offers additional compensation. These changes are designed to create a more transparent and competitive market for buyers and sellers.
Some brokerages are offering shorter-term contracts for buyers to get comfortable with an agent before committing to a binding agreement. However, buyers should carefully review any legally binding contracts before signing. The CEO of eXp Realty, one of America’s largest brokerages, drafted simplified agreements to prevent confusion and made them available for wider use. Real estate professionals have expressed concerns about the impact of the new rules on the home-buying market, but experts believe the changes will ultimately benefit consumers in the long term.
While the immediate impact on the cost of buying and selling homes remains uncertain, experts hope that commission rates will decrease over time, benefiting consumers. The changes may lead to increased competition and potential price reductions in the real estate market, although it is unclear when this may occur. In the short term, mortgage rates are expected to have a larger impact on home affordability than the rule changes. Mortgage rates have recently hit around 6.49%, near the lowest levels in over a year, affecting affordability more significantly than any specific rule change in the real estate industry.
