A new set of rules governing real estate professionals in the US is set to take effect, potentially changing how Americans buy and sell homes. These changes were agreed to by the National Association of Realtors as part of a settlement into antitrust claims. The rules aim to transform how Realtors get paid and who pays them, marking the largest change to the organization’s rules in at least a generation. Kevin Sears, NAR’s president, stated that these changes will empower consumers with clarity and choice when buying and selling a home.
Historically, home buyers were not expected to pay their real estate broker directly, as commission fees were paid by the seller. However, beginning this week, seller’s agents will no longer be allowed to advertise commission fees to buyers’ agents on multiple listing services. This means that a buyer’s agent cannot search for homes based on the commission rate offered by the seller, reducing the practice of “steering.” These changes aim to create a more fair and competitive market for buyers and sellers.
Another change requires prospective home buyers to sign a legally binding representation agreement with their agent before touring homes. These agreements inform buyers about how their agent gets paid and that commission rates are negotiable. Buyers must be aware that they may be responsible for paying the agent’s commission if the seller does not agree. A buyer’s agent cannot receive more compensation than what was initially agreed upon, even if a seller offers more. These changes aim to eliminate any potential steering by brokers.
Some brokerages have created shorter-term contracts for buyers to get comfortable with an agent before committing to a legally binding relationship. However, buyers should be cautious about signing any agreements without thoroughly reviewing them. Real estate professionals are taking steps to ensure that contracts are simple and easy to understand for consumers to prevent any confusion or discomfort. The hope is to reduce friction in the home-buying process.
While some believe that the new rules may have a chilling effect on the home-buying market, others see it as a positive change for consumers in the long run. The ultimate goal is for commission rates to go down over time, benefiting buyers and sellers. It remains uncertain whether the cost of buying and selling homes in the US will immediately become cheaper, but the changes could lead to increased competition and potential cost reductions in the future. In the short-term, mortgage rates may have a larger impact on home affordability than the rule changes.
Overall, the new rules in the real estate industry aim to create a more transparent and competitive market for buyers and sellers. By changing how Realtors get paid and preventing steering practices, consumers may benefit from lower commission rates and increased negotiation options. While some concerns exist about the immediate effects on the market, the long-term impact could lead to a more efficient and consumer-friendly real estate industry. It remains to be seen how these changes will affect home buyers and sellers in the coming months and years.
