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.
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% 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 beginning this week, 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.
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.
A key element to these agreements is that a buyer’s agent cannot receive more compensation than what the buyer initially signed onto, even if a seller is willing to offer more.
The final approval hearing is scheduled for November 26, but a judge granted preliminary approval of NAR’s settlement in April.
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