CNN
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When Dana McMahan sold her house this spring, she decided to eschew the help of a full-service real estate firm and try to maximize her take-home profit.
Traditionally, home sellers in the United States have been responsible for paying real estate commissions. A fixed 5% or 6% commission is usually split between the seller’s broker and the buyer’s broker, referred to as cooperative compensation.
“I think it’s safe to say that I haven’t felt for some time that it’s fair for a home seller to pay 6% commission,” McMahon said.
McMahon, a content creator based in Louisville, Kentucky, was a little ahead of the curve when it moved away from the standard commission-sharing model: As of Aug. 17, the new rules went into effect for the 1.5 million real estate professionals who are members. The National Association of Realtors is designed to change the conversation about how realtors get paid.
Amid extremely high home prices and high mortgage rates, the NAR changes The opaque process of buying and selling a home can seem like only transitions. But many experts predict the new rules could ultimately increase price competition in the real estate industry, opening the door for Americans to save thousands of dollars in future real estate commissions.
Cutting a traditional real estate firm means doing extra work.
“I hosted an open house myself; I provided my own photo and wrote my own listing description,” McMahon He said. “But if I try to put a value on my time, I’m not spending anywhere near what I spent on that commission.”
By selling her home without a full-service realtor, McMahon, who enjoys fixing up and reselling older homes, pocketed some extra cash: Instead of paying an agent 2% or 3% of her home’s final sale price, she paid a broker. $500 to list her home on her local MLS, a centralized database that real estate companies use to find out which homes are for sale in their area.
Despite saving money on her side of the deal, she Commission is not completely avoided. Ultimately, he paid a fixed 3% commission to the agent representing the buyer of his home, McMahon. He felt that it was necessary to entice agents to bring in buyers.
“I knew the house would sell itself. I just had to get eyeballs on it,” she said.
But the NAR’s changes aim to prevent that calculation. After August 17, sellers and their agents are prohibited from advertising how much they want to pay a buyer’s agent on the MLS. Critics have often accused some real estate firms of commission-based steering, in which they avoid showing their clients’ homes on the market, offering commissions below market value.
The NAR said the practice had always been prohibited but the new rules “removed any theoretical steering.”
NAR’s rule changes stem from a series of lawsuits that accused the powerful trade organization of keeping artificially high commissions by forcing home sellers to pay commissions to agents on both sides of the transaction. NAR, a prominent lobbying group for the real estate industry, denied the allegations, saying real estate commissions are always negotiable. However, the group agreed to pay $418 million to settle some of the claims — and as part of the settlement agreed to enforce new rules on its members.
A final approval hearing is scheduled for Nov. 26, but the judge granted preliminary approval of NAR’s settlement in April.
According to the new rules, McMahon She said she might reconsider the 3% buyer’s broker commission the next time she sells her home.
Another aspect of NAR’s rule change: Buyers must sign representation agreements with a realtor before they start visiting homes together. These agreements are intended to inform buyers that if a seller chooses not to provide one, they will be responsible for paying their realtor’s commission.
Some prospective buyers may balk at thousands of dollars in commission payments, turning instead to lower-cost alternatives such as flat-free brokerages or a la carte services.
In any case, experts caution that homebuyers should read the legally binding representation agreement carefully before signing it.
Some realtors warn that in competitive markets where homes for sale receive multiple offers, buyers may be forced to pay their own agents to make their bids more attractive to sellers. A house.
Bill Coulson, who is preparing to sell his Maryland home next year and buy a retirement home outside Blue Ridge, Georgia, believes the changes will create higher costs.
Coulson, 57 and retired from the Navy, said a real estate firm in Maryland instructed him to split a fixed 6% commission between his agent and the buyer’s agent when selling his home — but in Georgia, Coulson told another realtor. He should be willing to pay his own agent out of pocket to make a potential offer more competitive. That means Coulson will be responsible for paying commissions on both transactions, something that would have been unthinkable for many homebuyers and sellers before the changes.
“If you want to stand out, you have to pay,” Coulson said.
“Eventually, we might pay something like 9%,” he said. “Instead of making things better, it just got worse.”
