Massive changes to the housing market are coming – here’s how you can get involved

Changes to a landmark settlement affecting brokers’ commissions by America’s largest real estate trade association go into effect this weekend, potentially creating a more complex and uncertain buying process for consumers, according to industry experts.

The changes made under the $418 million National Association of Realtors (NAR) settlement, announced in March, “add more uncertainty and unknowns to an already stressful and pressured industry,” Phil Crescenzo Jr., Southeast division vice president of Nation One Mortgage. told FOX Business.

While the deal will make the process more complex, CEO-in-waiting Noel Roberts says it will pave the way for more transparency and negotiations with agency committees on deals.

Pending is a technology-powered real estate firm that facilitates off-market transactions.

Under the settlement, NAR agreed to institute a new rule prohibiting compensation offers on group-governed listing databases, also known as multiple listing services (MLS), to end a series of lawsuits alleging the broker’s commission policies resulted in inflated fees and violated antitrust laws.

NAR has denied any wrongdoing and has repeatedly said the trade group does not set commissions.

NAR said these fees are and will remain entirely negotiable between brokers and clients.

Under the new rules, sellers are no longer required to provide compensation to a buyer’s agent, disrupting the traditional 5%-6% commission split, in which the seller typically covers the listing and buyer’s agent fees, according to Roberts.

Deals will now require clear agreements through a buyer’s agency agreement (BAA), a legal contract that sets out what a buyer’s agent will earn regardless of what the seller offers.

Agreement is required before a buyer visits a home.

Since these commission fees were and still are negotiable between the two parties, it doesn’t directly change how much realtors earn, according to Crescenzo Jr.

And because the changes take effect Saturday, Crescenzo Jr. noted that the actual impact on what this will do to the market and how brokers and firms will process transactions going forward remains to be seen.

“The new rules will change the value proposition of using a buyer’s agent. Active inventory does not reflect the actual inventory available in the market,” said Roberts.

“There are many potential sellers who do not wish to list publicly, but are still open to offers. With so many homes easily found online, the real value of a buyer’s agent will become more apparent if they can help buyers uncover hidden or hard-to-find inventory.”

Impact on buyers and sellers

Buyers

The previous structure created the impression that a buyer’s agent was working “for free,” according to Roberts.

The new rules take effect in August. 17 will bring more transparency to buyers, but it could also cost more, he said.

For one, if a buyer agrees to a 2.5% commission for an agent, the buyer will need to ensure they can cover it unless a matching concession is negotiated from the seller.

As a result, buyers can become “more selective about the properties they view or the agents they agree to work with depending on whether a seller is willing to cover some or all of the buyers’ agent fees,” Roberts said.

vendors

The new changes, which reclassify a buyer’s agent’s compensation as a “concession” rather than a “commission,” “may result in more nuanced negotiations,” according to Roberts.

“Sellers may feel pressured to offer these concessions to attract buyers, especially in competitive markets,” he said.

Although Roberts noted that the lack of a standardized way to display these concessions “can add layers of complexity, making it more difficult for buyers and their agents to quickly evaluate potential deals.”