By Samantha Delouya, CNN
[On August 17th] A new set of rules governing how most real estate professionals do business in the US officially took effect — and the changes could potentially upend how Americans buy and sell homes.
The rules were agreed to by the National Association of Realtors, the powerful trade association that counts 1.5 million members, as part of a $418 million settlement into antitrust claims. The rules are designed to transform the way Realtors get paid and who pays them. It’s the largest change to the organization’s rules in at least a generation.
Here’s what you need to know:
Two key changes
Historically, buyers were not expected to pay their real estate broker directly. That’s because Realtor commission fees — to both the buyers’ agent and the sellers’ agent — were paid by a home seller.
Commissions usually total 5% or 6% of a home’s selling price, so for a $450K home, roughly the average price of a home in the US, a seller would be responsible for $27,000 in fees. Many experts have said these commissions have been baked into a home’s listing price, inflating home prices.
But [with the new rule], seller’s agents will no longer be allowed to advertise commission fees to buyers’ agents on multiple listing services that Realtors use to list and find homes for sale and to facilitate transactions.
That means that a buyer’s agent can no longer use the database to search for houses based on how much they’ll get paid, a practice called “steering,” which led some agents to skip over showing homes that fit their client’s criteria solely because a seller was offering below-market commission rates, critics allege.
The second change affects the relationship between prospective home buyers and their real estate agents. Buyers must now sign a legally binding representation agreement with their agent before they can begin touring homes together.
These agreements are designed to inform home buyers how their agent gets paid, and if sellers do not agree to pay the agent’s commission, the buyer may be on the hook for that payment. They’re also designed to inform buyers that this commission is fully negotiable.
The final approval hearing is scheduled for November 26, but a judge granted preliminary approval of NAR’s settlement in April.
How this may affect home affordability
Some real estate professionals have warned that the new rules could have a chilling effect on the home-buying market since more buyers may now be expected to come up with cash to pay their own agents.
