A $418 million settlement by the leading National Association of Realtors could save home buyers and sellers billions of dollars.
This landmark agreement helps set real estate agent fees for decades to resolve claims that sellers are forced to pay artificially inflated costs to sell their homes. This is a reversal of the policies that have been in place.
Sellers typically pay a 5% to 6% commission, which is split between the buyer's and seller's agents, as a condition of using a multiple listing service affiliated with an industry association.
Home sellers who have filed multiple lawsuits against real estate industry groups and several major brokerages have argued that the rules governing homes listed for sale on the MLS unfairly raise commissions.
They also argued that the rule encourages agents representing buyers to avoid showing clients listings in which the seller's broker is offering a lower commission to the buyer's agent.
As part of the settlement, NAR agreed to no longer require agents advertising homes for sale on the MLS to provide upfront compensation to buyer agents.
The Consumer Federation of America estimates that the measure could save consumers $20 billion to $30 billion a year by reducing commissions paid to real estate agents.
This rule change now allows individual home sellers to negotiate such offers with buyer representatives outside of the MLS platform, but requires home sellers' brokers to disclose such compensation arrangements. There is.
The industry group also agreed to require agents and others who work with homebuyers to enter into written contracts. This is intended to ensure homebuyers know how much their agent will charge for their services.
The rule change is expected to take effect in mid-July. As of February, there were approximately 150,000 NAR members in Texas.
We spoke to two real estate experts dallas morning news How fee changes will impact buyers, sellers, and the industry.
“I think the jury will fail,” said Jim Fitt, president and CEO of Century 21 Judge Fitt in Dallas, one of the region's leading residential real estate companies.
Sriram Villupuram, an associate professor of finance and real estate at the University of Texas at Arlington, said the fee change could cause home prices to drop slightly in Dallas-Fort Worth.
But interest rates and housing inventory are playing a bigger role as supply continues to catch up with demand, he said.
Villupuram said lower commissions will give sellers more room to negotiate.
“If you find a new job in another state, you might be able to sell and move on if the commission is 1% versus 6%,” he said. “That's a big deal. Real estate is known to slow down or limit movement.”
Fitt said Friday's agreement is unlikely to affect the seller's desire to move the property.
“There are millions of people who bought at (low) interest rates over the last three, five, seven years. So this doesn't incentivize them to move up or down. Lifestyle changes are what motivate people to sell their homes.”
Villupuram said the new system will make it easier for buyers to buy a home by allowing them to negotiate fees with their own agents.
As with sellers, mobility could also increase, he said.
“I think this will benefit the entire metropolis,” he says.
Fitt said he doesn't think the settlement will result in a significant change in home prices or the number of buyers entering the market. As long as there is demand from buyers, home prices will not fall, he said.
“I think buyers will buy if they have a need,” Fitt said. “If they were hesitant, I think it was because of interest rates and prices.”
Mr. Villupuram said that while commissions on home sales to agents would certainly go down, the number of homes sold could increase. The number of Dallas listings increased 39% in February, according to Zillow Group Inc.
“They're going to have to work smarter,” he says.
Agents need to become more professional, understand their value, communicate their value and better serve their customers, Fitt said. Agents who cannot do this will not be paid as much as they are currently earning.
Fitt said some brokers may have tried a flat service fee, but it never caught on in the industry because it's difficult to put a dollar value on housing market expertise.
“It might work this time. I don't know. But no real estate company has been able to make it happen. And customers weren't willing to pay that price,” Fitt said.
The Associated Press and Bloomberg contributed to this article.
