Big changes are set to take effect this month in the real estate industry, which means significant shifts in how most Americans buy or sell their real estate property.
Earlier this year, a federal judge approved a settlement agreement between the National Association of Realtors and home sellers who filed a suit claiming the trade group conspired to artificially inflate the commissions of its agents. The provisions outlined in that settlement are scheduled to go into effect on Aug. 17.
Here are the changes that will take effect next week.
Written Buyer Agreement
Under the settlement, real estate agents would now be required to enter into a written agreement with a buyer before assisting them with a transaction or touring a home. In the contract, the agent and buyer must agree on how the agent will be compensated for their services, whether through a flat fee, a specific share of the purchase price, or another method.
If the seller agrees to cover the buyer agent's commission, this must also be stated in the written contract, per the NAR.
Written Seller Contract
Apart from requiring agreements between the buyer and their agent, the NAR now requires written contracts from the seller's agent detailing any service fees and commissions for their assistance.
Compensation Amount
In the written contract, agents must also make it clear that broker commissions are fully negotiable. The compensation agreement cannot be open-ended or dictated by the seller's agent.
In addition, the buyer's agent may not receive any compensation from any source exceeding the amount stated in the written contract.
Changes to MLS
Contrary to the previous process, agents will no longer be allowed to put offers of compensation on Multiple Listing Services (MLSs). However, compensation offers will continue to be an option that buyers or sellers can pursue with the agents off-MLS through negotiation and consultation.
Sellers would still be allowed to offer buyer concessions on an MLS, such as concessions for buyer closing costs.
Academic papers have predicted that the changes to the NAR's processes could lead to a decline in agent fees by 30% to 50%, which could drive commissions and home prices down. The new rules will apply to single-family homes and condo properties of one to four units.
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