The National Association of Realtors (NAR) has new rules regarding real estate commissions that went into effect on August 17th. Sellers were previously responsible for paying the commission to buyer’s agents, but they will no longer have to pay that cost.
While the new rules will undoubtedly save home sellers money, these regulations put homebuyers and agents in an unfavorable position.
How NAR-Affiliated Real Estate Commissions Worked Prior to August 17th, 2024
Traditionally, the home seller has paid real estate commissions, usually a flat 6% fee based on the home’s selling price. The 6% was split down the middle, with 3% going to the seller’s agent and 3% going toward the buyer’s agent. Now, sellers will only be paying the listing agent.
The new rules regarding real estate commissions came after a $418 million dollar settlement ruled against NAR for inflating agent commissions.
New Rules Put Buyers on the Hook
The ruling went into effect Saturday. Realtors are now encouraged to create contracts with agreed-upon prices and an outline of services before showing homes to potential buyers. The problem is that many buyers aren’t ready to choose an agent until after a couple of showings.
The second problem? Buyers already face high closing costs, and paying a realtor for their services is a fee that many will avoid, which may lead to a long, drawn-out process with less-than-favorable results for both buyers and sellers.
First-Time Homebuyers Are in the Worst Position
As sellers celebrate the drop in commission, first-time home buyers will reap the worst effects of this ruling.
First-time home buyers face sky-high interest rates and record-high home prices, making it hard to come up with an adequate downpayment. Now, they’ll also have to pay an agent to help them with the homebuyer process or forgo a buyer’s agent altogether.
Currently, agent fees are not allowed to be rolled into a mortgage, so buyers who lack the cash to pay an agent fee may be out of luck.
Buyer’s Agents are Invaluable
As someone who has recently tried to sell their home and buy a new one, I know the value of a buyer’s agent. I had to look at several homes and go through intense negotiations before finding one to purchase. My buyer’s agent acted on my behalf, negotiating, creating contracts, and keeping me up to date with the seller’s agent.
Without an agent, homebuyers may miss out on homes or agree to terms they don’t fully understand. On the other hand, buyer agents may experience far less demand, creating unstable incomes and a long, complicated buying process for buyers and sellers.
