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New rules for buying and selling homes are in play now that a class-action settlement has gone into effect.
In Marchthe National Association of Realtors agreed to a $418 million settlement in an antitrust lawsuit in which a federal jury found that the organization and several major brokerages had conspired to artificially inflate agents’ commissions for selling and buying real estate.
In a statement at the time of the verdict, the NAR he refused wrongdoing.
The settlement took effect on August 17.
Prior to the settlement, the NAR’s Multiple Listing Service, or MLS, used locally in all areas in the U.S., facilitated compensation rates for both a buyer’s and seller’s agents. At the time of listing a property, the home seller negotiated with the listing agent what the compensation for a buyer’s agent would be, which was displayed on the MLS. However, if a seller did not know they could negotiate, they would usually commit to paying the listed broker’s fee.
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Now, as a result of the settlement, commission rates are officially being removed from the MLS, and home sellers are no longer required to offer a commission for both buyer’s and sellers’ agents.
“Now, the buyer chooses how much the buyer’s agent makes, the sellers choose how much the seller’s agents will make,” Glenn Kelman, CEO of online real estate brokerage Redfin, told CNBC. “It’s a new competitive ball game.”
Any confusion over the new practices among agents and consumers will likely be temporary, said Kerry Melcher, head of real estate at Opendoor.
“Real estate agents are good at moving the market,” he said. “That’s their job. So I don’t think that’s going to slow down the market.”
Here’s what you need to know.
What about buyers and listing agents
Potential homebuyers may encounter inconsistencies in the market as estate agents familiarize themselves with the new rules.
Before Aug. 17, if you called five buyers for the same inquiry about buying a home, “four out of five times” you would get the same answer, said real estate attorney Claudia Cobreiro, founder of Cobreiro Law in Coral Gables. , Florida.
“Now, maybe two out of five times, you’ll get the same answer,” Compreiro said.
That’s because real estate agents receive different instructions from their brokerage firm about how to implement the NAR settlement changes, and that translates into confusion among consumers, he said.
Meanwhile, on the listing side, real estate agents are educating home sellers about the benefits of offering a buyer’s agent a commission, even if it’s not a set amount or percentage, Cobreiro explained.
For example, offering a commission can create more competition for agents who want to show their property, which increases the sale price, he said.
“Explaining these benefits of offering a commission, despite the fact that the commission is not mandatory, is part of the work I’m now seeing brokers do,” Compreiro said.
What you need to know about buyer-broker agreements
A buyer-broker agreement is a contract between a real estate agent and a home buyer that sets out the terms of their working relationship, Cobreiro said — the goal of which is to identify a home for the buyer to purchase.
If the client buys a property that meets the deal’s criteria within the specified time frame, the agent is entitled to the commission for that purchase, Cobreiro said.
“The purpose of this form is to tell buyers that they are responsible for their own buyer-side procurement,” he said.
If the seller does not offer a commission, the buyer will be responsible for any commission listed in that buyer brokerage agreement, Cobreiro said.
Buyers should be comfortable with what buyer-broker agreement forms look like and be prepared to ask questions about the language and terms, Melcher said.
“The forms are designed to be read by buyers and understood by buyers,” he said.
— CNBC associate producer Ryan Baker contributed to this story.
