Real estate brokers scramble for workarounds ahead of new rules on commissions
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Real estate brokers are scrambling to figure out workarounds to an industry-wide legal settlement that threatens to upend their businesses starting in August.
Why it matters: The settlement reached in March has the potential to revolutionize the homebuying process, and save people a lot of money — but resistance in the industry could slow down or even block that change.
- Homebuyers and sellers might have to be extra savvy to benefit.
Catch up fast: Right now, if you're selling your home, you pay about 6% in commissions, half to the agent who helped you sell and the other half to the buyer's agent.
- Buyer agents can see the commission sellers are offering when they look at the Multiple Listing Service, the industry database brokers use. There is a "compensation" field.
- That field will go away, as part of a deal that the National Association of Realtors (NAR) reached to settle a class action lawsuit filed by home sellers. They'd alleged the industry group conspired with real estate companies to fix prices.
What's next: By August 17, listings on the MLS won't include that "offer of compensation," the NAR confirmed to Axios.
- The idea, per the settlement, is that buyers should be paying their brokers. That's because when sellers pay the buyers' broker, the latter's interests aren't aligned with their clients.
Yes, but: Consumers can still pursue arrangements in which the seller pays both broker fees, "through negotiation and consultation with real estate professionals," the NAR said. The powerful industry group added that it's been "proactively communicating" with stakeholders to prepare for the changes.
State of play: Brokerages are also looking for workarounds — a way to make it clear that sellers will pay a commission to buyer agents, maybe on a brokerage's website.
- Seller agents could also start spelling out the commission in another field in the home listing, says Steve Brobeck, senior fellow at the Consumer Federation of America. They'll write out something like "3% of sales price," and "everybody will know what that represents," he says, adding that it's not clear if that would be permissible.
- "These issues are not resolved yet."
Zoom out: Glenn Kelman, CEO of Redfin, says the settlement probably won't change the industry as much as he initially thought it would. "We think many listings will continue to offer a fee, just via channels outside the MLS."
- Half-serious jokes abound on social media about alternatives.
- "Nothing will change other than the fact that I'll now probably have a lot of calls and texts to confirm that we are paying buyer's agents until some other system is devised," says one agent in a Facebook post.
The bottom line: Ultimately, it will be homebuyers and sellers who control what happens next, experts say.
- The news coverage around this settlement may have raised awareness, says Brobeck, and buyers and sellers might realize they have more power to negotiate.
- Kelman said something similar. "Maybe the real change is that consumers are going to start expecting a better deal."
