Realtors in the United States are preparing for a significant change in the way they operate following the implementation of new rules that will affect how they are paid for their services starting on August 17. These rules are part of a $418 million settlement by the National Association of Realtors, aiming to eliminate the traditional payment structure where home sellers were typically responsible for paying a 5% or 6% commission split between their agent and the agent representing the buyer. In the months leading up to the changes, Realtors have been participating in trainings and reviewing new contracts in anticipation of the shift.
Leo Pareja, CEO of eXp Realty, believes that the changes will lead to new business models in the real estate industry and may cause some full-service Realtors to leave. However, NAR’s president, Kevin Sears, expressed confidence in the ability of NAR members to adapt to the changes and guide consumers through the evolving landscape. The impending adjustments have been described as a “grand social experiment” by Pareja, who anticipates a period of confusion as the industry transitions.
Historically, sellers would pay a fee of 5% or 6% of a home’s purchase price to their agent, intended to be split with the buyer’s agent. This practice has been criticized for potentially inflating home listing prices as commissions were factored into the cost. The NAR faced lawsuits alleging antitrust violations regarding these commissions, leading to the settlement that includes the implementation of new rules. These changes will prevent agents’ compensation from being included in multiple listing services and require buyers’ agents to disclose compensation details upfront through written agreements.
Real estate commissions are projected to decrease by 25% to 50% following the rule changes, potentially opening opportunities for alternative business models such as flat-fee and discount brokerages to thrive in the industry. Companies like Redy, which allows agents to bid on home listings and adjust their commission structures, see the changes as a way to shift traditional real estate practices. Other companies, like Flyhomes, have introduced AI chatbots to provide information to consumers in anticipation of the evolving landscape post-rule changes.
There is concern among Realtors that the new rules may favor more experienced agents and pose challenges for younger agents in the industry. Madison Mathias, a 19-year-old Realtor in South Carolina, has experienced skepticism due to her age but remains confident in her abilities despite potential hurdles. She believes that some agents may leave the industry due to the changes, but she is focused on educating herself and building confidence in her skills to navigate the evolving real estate market. Ultimately, the industry is preparing for a transformative shift that could lead to new opportunities and challenges for Realtors across the country.
