The new real estate commission rules took effect on Saturday, August 17. If you’re feeling confused by them, you’re not alone.
Traditionally, sellers paid a 5-6% real estate commission based on the sales price. This amount was usually split evenly between the listing agent and the buyer’s agent, though this wasn’t a legal requirement—just common practice. The new real estate commission rules have changed all that.
Today, buyers can do much of the home search on their own. Open houses and new listings are easy to find online. This means that unless it’s a property that hasn’t been listed yet, buyers don’t necessarily need an agent to locate a home.
While the process of buying a property has changed significantly, real estate commissions have stayed the same.
However, with the complexity of real estate laws and the risk of legal issues, I always recommend that buyers use a real estate agent when they’re ready to make an offer. A good agent will manage everything from the offer to closing the deal, providing invaluable advice and expertise along the way.
The new rules came into effect after the National Association of Realtors settled a series of class-action lawsuits that alleged that the group’s compensation rules violated anti-trust laws.
Here’s how these new rules will affect you.
First, whenever you, the buyer, visit an open house, you will be required to sign in and indicate whether you already have an agent and who that person is.
Instead of the seller automatically paying the entire commission, they get to decide if they (the seller) want to pay the buyer’s agent’s portion. Yep, you heard that right. The seller can opt to pay only the listing side.
This means that buyers must negotiate what they will pay their agent. It is a negotiation between the buyer and their agent only. The agreement will have to be formalized in writing. Further, buyers’ agents cannot advertise their buyer commission on the “Multiple Listing Service (MLS)”. It will always be a negotiation.
What do these new real estate commission rules mean for buyers?
- Previously when the seller paid 100% of the commission, the loyalty of the agents on both sides of the deal had to be to the seller. That was always a stick situation because the sellers agent wanted to represent and protect their buyer, but since the seller was paying their fee, they had a fiduciary responsibility to the seller. Conflict of interest anyone?
- Additionally, often, an agent would show a buyer dozens of homes over a period of months when the buyer suddenly finds a home on their own and makes an offer with a different agent. This leaves the original agent, who has spent hundreds of hours working to find them a house out in the cold.
- Buyer costs will increase, making the cost of buying a home even greater at a time when buyers are already struggling with down payments and closing costs.
To further confuse things, the new real estate commission rules will create more paperwork. A real estate transaction is already paper-heavy since every tiny detail is documented to protect the parties on both sides. With the change in these rules, you can expect to see about 30 additional pages of documentation.
All in all, expect it to be a mess until everyone gets used to the new way of buying and selling real estate. Like any significant change, it’s a learning curve for everyone involved, and kinks will have to be worked out.
As if we need even more craziness in our lives. Is anyone else ready to move off-grid?
Leave a Reply