New Real Estate Commission Rules Haven’t Made It Much Cheaper to Buy or Sell a Home
It was hailed as an “earthquake” for how homes would be bought and sold in America, and a shift that would unleash “total confusion” in the real estate industry. But as the first spring homebuying season since new Realtor commission rules went into effect approaches, business is pretty much as usual.
Last March, the National Association of Realtors (NAR) agreed to pay $418 million to settle claims that the powerful trade group’s rules inflated fees for buyers and sellers. Rule changes prohibiting certain practices that helped agents control commissions took effect in mid-August, ushering in hopes that fees — and home prices — might fall.
But so far, that hasn’t happened, according to agents and other housing market experts around the country. While some of the mechanics behind negotiating commissions have changed, the dollar amounts have remained close to pre-settlement averages. And the practice of buying or selling a home without an agent — which some thought might take off in the wake of the settlement — remains niche.
What’s Changed, What Hasn’t
In a typical pre-settlement transaction, a seller listed their home with an agent, while a buyer toured homes with their own agent. When a sale closed, the buyer's and seller’s agents would typically split a commission of 5% to 6%, paid by the seller. For the median-priced home, that translates to a fee in the $21,000 to $24,000 range.
The settlement made two key changes: Sellers are no longer allowed to make promises of compensation to buyer’s agents on the databases of homes for sale known as multiple listing services. Buyers using an agent must also have a representation agreement in place detailing compensation before they tour homes.
Those changes were designed to make agents’ fees more transparent and negotiable. Under the old system, sellers would typically share the commission they were willing to pay a buyer’s agent in their MLS listings, sparking concerns that buyer’s agents would steer their clients away from listings that offered lower rates. While 5% to 6% has long been the norm in the US, it’s far above global averages, where 1% to 3% is more typical.