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New rules for buying and selling homes are coming into play and now a settlement has been reached class action lawsuit has taken effect.
MarchNational Association of Realtors agree In an antitrust lawsuit, a federal jury found that the organization and several large real estate brokerage firms conspired to artificially inflate agent commissions for real estate purchases and sales and settled for $418 million.
In a statement at the time of sentencing, NAR rejected Misconduct.
The settlement agreement takes effect on August 17.
Prior to the settlement, the Multiple Listing Service (MLS) used by NAR across the United States increased compensation rates for buyer’s and seller’s agents. When listing a property, the home seller negotiates with the listing agent the amount of the buyer’s agent’s compensation that appears on the MLS. However, if sellers don’t know they can negotiate, they are often forced to pay the listed brokerage fee.
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Now, thanks to the settlement, commission rates have officially been removed from the MLS, and home sellers are no longer obligated to provide commissions to both buyer and seller agents.
“Now, buyers choose what the buyer’s agent makes, and sellers choose what the seller’s agent makes,” Glenn Kelman, CEO of online real estate brokerage Redfin, told CNBC. “It’s a new competitive ball game.”
Kerry Melcher, director of real estate at Opendoor, said any confusion among agents and consumers about the new practices is likely to be temporary.
“Real estate agents are good at moving the market,” she said. “That’s their job. So, I don’t think it’s going to slow down the market.”
Here’s what to know.
What happens to buyers and listing agents
As real estate agents get used to the new rules, potential homebuyers may experience market inconsistencies.
Claudia Cobreiro, a real estate attorney and founder of Cobreiro Law in Coral Gables, said that before Aug. 17, if you call five buyer’s agents and ask the same question about a home purchase , “four out of five times,” you’ll get the same answer.
“Now, maybe two out of five times, you’ll get the same answer,” Cobrero said.
She said that’s because real estate agents have received different instructions from brokerage firms on how to implement NAR settlement changes, which has led to consumer confusion.
Meanwhile, on the listing side, real estate agents are educating home sellers on the benefits of offering a buyer’s agent a commission, even if it’s not a fixed amount or percentage, Cobrero explained.
For example, she said, offering commissions could bring more competition to agents who want to show their properties, thereby increasing sales prices.
“Even though commission is not mandatory, explaining the benefits of still offering it is part of what I see listing agents doing now,” Cobrero said.
What to know about Buyer Broker Agreements
Cobrero said a buyer’s agent agreement is a contract between a real estate agent and a home buyer that sets out the terms of their working relationship with the goal of identifying a home for the buyer to purchase.
Cobrero said if a client purchases a property that meets the agreed criteria within a specified time period, the agent is entitled to a commission on the purchase.
“The purpose of this form is to tell buyers that they are responsible for their commission,” she said.
If the seller doesn’t offer a commission, the buyer will be responsible for paying any commission listed in the buyer’s brokerage agreement, Cobrero said.
Melcher said buyers must be familiar with the form of a buyer’s broker agreement and be prepared to ask questions about the language and terms.
“These forms are designed to be read and understood by buyers,” she said.
—CNBC associate producer Ryan Baker contributed to this story.
