It is usually the largest home purchase in a person’s life.
Now that process is about to undergo significant changes as real estate agents across the country must adapt to new transparency rules regarding their compensation.
The new rules follow a $418 million settlement with the National Association of Realtors and are intended to clarify who pays what when purchasing a home.
“This could be a game changer for us in a negative sense, because now buyers and agents who previously didn’t have to sit down and negotiate commissions actually have to do so,” says Mike Safiedine, agent and owner of several RE/MAX locations in San Diego County.
Previously, home buyers did not have to pay the broker’s commission directly. The home seller usually had to bear these costs themselves and they were usually between 5 and 6 percent of the sales price.
But that is not necessarily the case now.
“They actually want the buyer to have those conversations with their agents and negotiate the compensation, rather than them doing it for them. Another shift in the real estate market is the transparency of commission fees,” Safiedine said.
Agents helping to sell a home can no longer list the agent’s commission on real estate portals. This means agents can no longer determine how much they will get for a property just by reviewing a website.
“And that’s partly why this whole thing came about – agents wouldn’t show properties if the commission was too low or nonexistent. Now that the commission has been removed from the MLS, you really have to have a buyer’s representation before you view a property,” Safiedine said.
For first-time buyers, this extra step of signing a contract before viewing homes can be daunting. Experts advise working with someone you trust.
“I mean, when you’re a first-time home buyer, you’ve already paid down payment, closing costs and everything else. Now there’s talk about paying your agent, and that changes everything. Many buyers don’t have the extra money to pay the agent’s commission as well as the down payment and closing costs,” Safiedine said.
As for the future –
“It all depends. If sellers start to view concessions or compensation to the buyer’s agent negatively and become less open-minded, that could depress prices,” Safiedine said.
