How new real estate rules will impact Phoenix agents and homebuyers
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Illustration: Natalie Peeples/Axios
Real estate brokers have to prove their worth after the most significant industry shakeup in decades rolled out last weekend.
Why it matters: That could prove especially tough for what Business Insider calls the country's "glut of mediocre Realtors," including amateurs and those whose services might not be worth the price to homebuyers.
The big picture: As part of a National Association of Realtors legal settlement, agents can no longer advertise commission rates in the Multiple Listing Service (MLS), the database where real estate agents post homes for sale.
- Additionally, buyers will bear the burden of ensuring their agent gets paid and must sign a compensation agreement before an agent can show them listings.
How it used to work: Sellers and their broker negotiated a commission (most often 5%-6%), which the broker then split with the buyer's agent. The buyer's agent's portion is what was advertised in MLS.
- The seller would pay both agents from home sale earnings.
- Buyers weren't required to have a formal agreement with the agent representing them because they didn't pay their agent's commission.
Reality check: Under the new rules, a seller can still choose to pay for the buyer's agent through negotiation, and many sellers will choose to do so because it will expand the pool of interested buyers, Jenn Newman of The Brokery told Axios.
Between the lines: The old structure was widely criticized because of concerns that buyers' agents steered their clients toward homes that offered them higher commission.
- Some sellers also complained that they shouldn't have to pay the commission of an agent that is technically working against their interests by representing the buyer.
What we're hearing: Now that buyers are responsible for paying their own agents, more of them are questioning whether they really need one.
- Industry veterans expect the changes to weed out lackluster agents who can't articulate their value to buyers.
- That could have a big impact locally because Arizona had the second-highest share of real estate agents among all states in 2022, according to the federal Bureau of Labor Statistics.
By the numbers: People are already fleeing the profession. Nationwide, There were roughly 72,000 fewer full-time real estate agents and brokers in 2023 than the year before, data shows.
- The shrinkage comes as the volume of home sales has fallen, and analysts expect the decline to continue now that the settlement is in full effect.
The intrigue: Commissions have slipped a bit since March, after the settlement was announced, and are projected to fall further.
- The average buyer agent commission fell to 2.55% in July, from 2.62% at the beginning of the year, according to an analysis by Redfin of the 50 most populous metro areas in the U.S.
- Phoenix's average commission was slightly below the national average at 2.5% in July.
What we're watching: Steve Brobeck, a senior fellow at the Consumer Federation of America, tells Axios commissions could drop as low as 1% to 1.5% per agent on each side.