Home sellers would no longer need to pay their buyer's broker under a new set of rule changes from the National Association of Realtors (NAR).
The NAR, a powerful organization that has set the guidelines for home sales across the U.S. for decades, recently agreed to settle a series of lawsuits by paying $418 million in damages and agreeing to amend its rules on how real estate agents for sellers and buyers are compensated.
At the heart of the NAR's proposed rule changes is commission "decoupling." Under the new model, buyers and sellers would now be responsible for paying their own agents. In comparison, the current model requires sellers to cover both fees.
This change could significantly bring down housing prices. Real estate commissions are also expected to fall by 25% to 50%, per CNN, citing TD Cowen Insights. However, this also means buyers need to save more money to cover the down payment, their agent's fee, and other housing costs.
For the average-priced American home for sale, which is $417,000, sellers are covering more than $25,000 in brokerage fees. The new model could pass this cost to the buyer.
That being said, real estate commissions could go down from 6% to 4% or lower, according to USA Today, citing real estate industry analyst Ryan Tomasello.
Other Proposed Changes
Apart from commission decoupling, the NAR also proposed other changes to their commission model. First, agents working with buyers would be required to enter into written agreements with their clients.
The NAR would also forbid listing agents from advertising commission rates to buyers' agents on most databases where homes for sale are listed. This can effectively end a practice called "steering" in which a buyer's agent directs clients toward properties with a larger commission.
Another rule ends requirements that property brokers subscribe to multiple listing services-local centralized listing portals where all homes for sale are listed.
The new rules are pending court approval but will likely be enforced as early as July, the New York Times noted.
The proposed changes come after a federal jury in Missouri found the NAR and two major brokerages liable for conspiring to artificially inflate agent commissions.
