The real estate sector is undergoing significant changes following the introduction of new rules for the 1.5 million members of the National Association of Realtors (NAR), which began last month. These reforms, part of a $418 million settlement, aim to give consumers more control over agent commission fees and have already started reshaping market dynamics.
The new regulations prohibit sellers from advertising the buyer’s agent’s commission on multiple listing services (MLS), aiming to prevent bias toward properties offering higher compensation. Instead, fees can now be negotiated directly between the buyer and their agent. Additionally, buyers must sign agreements specifying how their agent will be compensated, either through a percentage of the sale or a flat fee, potentially placing the financial responsibility on the buyer unless negotiated otherwise with the seller.
Even before these changes officially took effect on August 17, their impact was evident. Agent commissions began to decline as buyers exercised greater bargaining power, with average commissions falling to 2.55% in July from 2.62% in January, according to Redfin.
Michael Rodriguez, a first-time homebuyer, experienced these changes firsthand. Initially unaware of how agents were compensated, Rodriguez was informed by his agent, Temi Akojie, about the new settlement’s implications. Although Rodriguez’s agreement predated the new rules, he chose to supplement Akojie’s commission from his own funds, valuing her contribution despite the reduced compensation.
While Rodriguez sees the new transparency as beneficial, some experts warn that the changes could disadvantage financially constrained buyers, such as first-time buyers and individuals without significant family wealth. A recent study by economists from Stanford, Columbia, and Northwestern universities suggests that while the settlement may reduce agent fees, it is unlikely to significantly improve housing affordability for these buyers.
On the seller’s side, the new rules have prompted shifts in how fees are handled. Bruce Satrom, a seller from Alexandria, Minn., found himself adapting to the new system when listing his vacation home. Initially reluctant to pay the buyer’s agent’s fee, Satrom eventually negotiated to cover part of the fee to secure a sale, reflecting a shift toward more flexible fee structures based on market conditions.
Real estate agents are also adjusting to the new landscape. Philip Sexton of the Sibbach Team with eXp Realty in Scottsdale, Ariz., notes that agents must now use new forms and adapt to heightened transparency requirements. Although some agents are moving to work exclusively with sellers or finding new ways to demonstrate their value to buyers, demand for their services remains stable. Sexton anticipates that open houses may become more popular as buyers seek to explore properties without committing to an agent prematurely.
Overall, while the new commission rules are reshaping the real estate market, they are also prompting both buyers and sellers to navigate a new set of expectations and agreements. The evolving landscape reflects a broader push towards greater transparency and flexibility in real estate transactions.
