This Weekend, There Will Be Changes To Commissions On Home Sales

Realtor commissions will no longer be able to offer compensation on multiple listing services (MLS) as of this Saturday. 

This will reduce the negotiating power of buyers and sellers of homes and may result in more paperwork for all sides.

Until now, home sellers traditionally had to pay commissions

Home sellers are now allowed to negotiate down commissions, typically 5% to 6%, with their agents, following a $418 million settlement with the National Association of Realtors. This move aims to make it more appealing for buyers to forgo agents entirely and allow more room for negotiation.

Mike McCann, a realtor in Philadelphia said “It’s the biggest change probably in the history of real estate, It has created a lot of fear, a lot of anxiety”

With the MLS no longer operating as a bargaining venue, it is unclear how agents, buyers, and sellers will choose to pay commissions. While sellers could pass on any commission savings to the buyer in the form of a lower property price, it is also feasible that sellers will increasingly expect the buyer to bear some, if not all, of the costs.

To ensure that purchasers are aware of the compensation that they may be liable for, the NAR is implementing a reform that will take effect Saturday, forcing agents to enter into written agreements with clients before viewing a home.

The new rules add more work to the experience of homebuying

Jan Jaeger, a McCann’s client, says the new laws add more work to  the homebuying process, which she is currently experiencing in Philadelphia after selling her house earlier this month.

He said “It’s just another step in already a very difficult process, and I only say that because I have bought and sold many homes in the past, and what’s happening today is very different. It used to be fairly simple,”

The National Association of REALTORS (NAR) has reaffirmed its commitment to ensuring that MLS participants do not limit listings their clients see due to broker compensation. The settlement was triggered by a class-action antitrust lawsuit alleging brokers were steering clients to listings with better commissions. The NAR also clarified that offers of compensation are prohibited on the MLS.

The revisions come in the midst of a cooling housing market, as high home prices and mortgage rates have pushed existing home sales to fall since the pandemic-era homebuying boom. For first-time homebuyers who are already concerned about affordability, the thought of paying commissions adds to the potential costs.

Younger buyers are struggling to pay commissions for real estate agents due to saving, rent payments, and financial constraints. Experts suggest that fees could decline further, as commissions for buyers’ agents have been declining for years. 

The settlement may have made consumers more aware they can offer any commission to a buyer’s agent or none at all, contributing to the decline since March. 

However, new changes should provide transparency for homebuyers and sellers in how they compensate brokers.