A major shakeup in the real estate industry is transforming how agents are compensated. These changes, effective as of August 2024, stem from a settlement between the National Association of Realtors (NAR) and plaintiffs challenging the decades-old practice of commission sharing. Here’s what homebuyers and sellers need to know about the new rules and how they could impact real estate transactions moving forward.

What’s Changing?

Traditionally, home sellers have been responsible for paying commissions to both their own agent and the buyer’s agent, typically splitting a 5-6% commission. However, under the new rules, this is no longer mandatory. Now, sellers have the choice to negotiate whether they will pay a buyer’s agent at all, and if they do, they can set terms, such as a flat fee or percentage of the sale price. Additionally, real estate agents are now required to enter into written agreements with buyers that clearly outline the services offered and the associated costs. This makes commission negotiations more transparent and gives buyers a clearer understanding of what they’re paying for.

Potential Benefits for Buyers and Sellers

For sellers, this rule change could lead to significant cost savings. By eliminating the obligation to pay the buyer’s agent, sellers can potentially reduce the total commission they pay by half, making selling a home less expensive. For buyers, the new system offers more flexibility. Although buyers may now need to negotiate and pay their agent’s commission directly, this gives them greater control over the services they pay for. Additionally, buyers might benefit from lower home prices, as sellers no longer have to factor in the cost of paying both agents.

Key Considerations

While this change could save money for both parties, it also introduces new complexities. Buyers need to be proactive about negotiating their agent’s fees upfront, and both buyers and sellers will need to carefully vet real estate agents to ensure they’re receiving quality service at a fair price. For those entering the market, researching and interviewing agents becomes even more critical. In the long term, experts believe these changes could lead to a more competitive and transparent real estate market, but it remains to be seen how it will impact overall costs and transaction dynamics​ For more detailed information on these changes, check out the original article on Money.com.