What the Big Realtors Settlement Means for Home Buyers

Major changes are potentially coming to the real estate industry which will shift the way we have historically bought and sold homes.  A powerful group, the National Association of Realtors has agreed to a rule change on how real estate agents are compensated which could be a big deal for homebuyers. Starting in July 2024 (pending federal court approval) home sellers will no longer be responsible for paying both their agent and the buyer’s agent. Instead, home buyers who want representation will have to pay their agents separately.

What’s Changing

Home sellers and buyers typically hire their own agents, to help them navigate the real estate market to assist with one of the biggest purchases they will ever make.  Most agents belong to the (NAR), which collects dues and has over 1.5-million-member agents.  Belonging to the NAR gives agents access to the organization’s listings known as the MLS “multiple service listing.” Selling agents can post properties up for sale and buyers’ agents can see what is on the market.

Currently, the NAR has a rule that requires sellers’ agents to include the commission that are being paid to sell the house which is typically 5% to 6% of the purchase price.  Because seller agents and buyer agents usually split the commission, which is paid by the home seller, many homebuyers do not pay their agents directly. Rather, sellers increase the price of their homes to compensate for the commission they pay the real estate agents. NAR will no longer allow commission rates to be posted on its listings.  The organization will also require buyer agents to have written agreements with their buyers. 

Why Does This Change Matter

Consumer advocates are praising the settlement as a step toward transparency in the home-buying marketplace.  Since buyer agents will be required to write up agreements with their clients, buyers will have more room to negotiate commissions with their agents, depending on what services they need from them. Some may opt for a flat-rate fee or pay their agent by the hour.  Homebuyers are going to have to become savvier about what they can get from an agent and what services they are willing to pay for.

While it’s unclear what changes the settlement will bring to home prices, experts agree that it will likely change who gets to continue working in the real estate industry. The settlement will probably encourage buyers to become more invested in who they choose as their agent, as they will be paying them more directly, making it more competitive for buying agents to find clients. This may also lead to a more experienced pool of real estate agents and, ultimately, better service for more competitive prices for buyers.