One of the biggest changes ever in the residential real estate market is scheduled to take effect Saturday.
In MarchThe National Association of Realtors finalized a landmark $418 million deal that will eliminate rules on sales commissions for brokers and agents.
Starting on Saturday, sellers typically pay a standard initial commission of 5% or 6%. will no longer exist. Agents can negotiate with the seller on their fee. Some experts predict commissions will fall to 4%. This is a massive change for agents, brokers and realtors who will no longer be subject to receiving an automatic commission payment for selling a home.
Related: Barbara Corcoran Sounds Off on NAR Settlement: “It's a Scary Time for Real Estate Agents”
“These changes help further empower consumers with clarity and choice when buying and selling a home,” said NAR President Kevin Sears in a statement. “I am confident in the abilities of our members to prepare for and embrace this evolution of our industry and help lead consumers through the new landscape.”
What does the NAR decision change?
Starting Aug. 17, real estate agents are prohibited from disclosing compensation for more than one listing service, but can share those details in other mediums, including over the phone and in person.
According to economists analysis earlier this year, Real estate commissions for agents are estimated to drop by as much as 30%.
Real estate agents often split the commission with the buyer's agent. Now that there is no standard commission, buyer's agents must discuss compensation upfront in a buyer's agreement before viewing properties together. This way, the potential buyer knows in advance if they have to pay their realtor or if the seller of the home they are looking to buy is covering the cost.
Related: US mortgage rates are at a 15-month low – Here's why
Some realtors are warning that this could lead to more buyers forgoing using an estate agent, which could lead to more added costs to buyers. Others claim that the seller's commission was often “baked” into the sale price, which already increases the cost to buyers.
New laws come into effect only days as US mortgage rates hit a 15-month low.
“Change is nothing new to the real estate industry. What I do know for sure is that real estate agents and their agents are some of the most resilient people in the world,” real estate magnate Barbara Corcoran. said about the solution. “They're creative and tough, and that opens the door for agents to use that resilience and creativity to find new and better ways to serve their sellers and home customers.”
The final approval hearing for the NAR settlement is scheduled for November 26.