What Changes to Real-Estate Commissions Mean for Buyers and Sellers
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What is the main topic discussed in this episode?
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Here's your money briefing for Tuesday, August 20th. I'm J.R. Whalen for The Wall Street Journal. In addition to mortgage rates trending lower, homebuyers now have more options as a result of a jury verdict against the National Association of Realtors last year. That impacts how real estate agents are paid.
Buyers will have an opportunity to directly discuss with their agents what services the agents will provide and what that will cost and have that negotiation up front before even touring homes together.
What prompted the lawsuit and settlement that changed real-estate commissions?
We'll talk to Wall Street Journal housing reporter Nicole Friedman about how it could affect home prices.
After the break.
The way real estate agents are paid could mean big changes for homebuyers and sellers. Wall Street Journal reporter Nicole Friedman joins me to go through the details. Nicole, what led to the settlement reached earlier this year that resulted in these changes?
There was a lawsuit and a jury last fall determined that the system for how real estate agents were paid kept fees for real estate agents artificially high. And the jury found the National Association of Realtors and some real estate brokerages liable for about $1.8 billion in damages. And following that jury verdict, a lot of other similar lawsuits were filed around the U.S. And so this was a major threat for the National Association of Realtors and for the real estate industry. And so the National Association of Realtors reached this large national settlement in March to resolve these claims. And part of the settlement was changing some of the rules for how real estate agents get paid.
So how will this change in the rules impact prospective buyers when they look at homes?
Buyers may already be finding that when they want to go tour a home before even going on a home tour with a real estate agent, that agent is now asking them to sign an agreement. And the idea here is that buyers will have an opportunity to directly discuss with their agents what services the agents will provide and what that will cost and have that negotiation up front before even touring homes together.
Does this mean a buyer has to use a real estate agent?
No. So buyers have never had to use real estate agents, and they still don't. It's possible for buyers to go through this process themselves. They can tour homes and do research and make offers on their own. Some buyers choose to work with an attorney instead of a real estate agent. But historically, most buyers do choose to work with agents, and they often want somebody to guide them through the process.
So if somebody does hire an agent, how would the agent's commission change?
So that's really up to buyers, right?
How does the settlement alter when and how buyers negotiate agent fees?
It's now really buyers who are having these conversations directly with their agents. And so it really remains to be seen how those conversations go and what buyers decide is a fair amount to pay an agent, whether they want to pay less than agents have historically been paid or whether they want different types of pricing systems. The typical way of paying an agent is as a percent of the sale price. But there's some theories that going forward, more buyers might want flat rates or hourly rates or other types of pricing models.
Under these revised rules, who actually pays the agents?
it could come from a couple of different places and so the buyer is the one who signs this agreement and that does mean that the buyer could ultimately be on the hook for the money which is why buyers should really read these agreements carefully and think through what they think the value is of the agent services and how much they want to pay for that but buyers can ask the seller to cover the cost of the agent, or in some cases, sellers might proactively offer to cover that cost. And so it's not expected that buyers will universally pay their agents. There are probably many situations in which sellers will continue to cover that cost, but buyers should think about this when making these negotiations and having these conversations as if they might ultimately be the ones responsible for that cost.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:00–0:53
2
What prompted the lawsuit and settlement that changed real-estate commissions?
0:53–3:44
3
How does the settlement alter when and how buyers negotiate agent fees?
3:44–5:12
4
Do buyers now have to sign an agreement or must they use an agent to tour homes?
5:12–6:06
5
How might agent commission structures (percent, flat, hourly) change after the new rules?
6:06–7:49
6
Who ultimately pays buyer-agent commissions under the revised rules?
7:49–9:58
Speakers
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