May 16, 2024 - Real Estate

How the big real estate settlement could change N.C. real estate

Illustration of a set of keys with a percent sign keychain

Illustration: Sarah Grillo/Axios

The National Association of Realtors recently agreed to settle a big lawsuit and change the way real estate agents get paid — from effectively a standard commission to something truly negotiable.

Why it matters: The seemingly small change, which a court preliminarily approved in April, is causing major confusion.

The big picture: If approved, come summer, agents won't be able to make offers of compensation in the Multiple Listing Service, the database where real estate agents post homes for sale.

How it works (currently): Sellers and their broker negotiate a fee, and that broker decides how much they want to share with the buyers' agent.

  • That number is advertised in the MLS listing, and the seller pays both agents from the home sale earnings.
  • Many are concerned this causes buyers' agents to steer clients toward homes that offer them higher commission.

Buyer agreement forms are already required in North Carolina.

  • Generally, these forms help buyers better understand which services their agent will provide — and how much it'll cost.

Yes, but: If the settlement is approved, offers of compensation will not be listed in MLS. Buyers and their broker will negotiate how much the broker should earn — and how they'll get paid, antitrust lawyer Brian Schneider says.

  • Increased transparency around agent profits could lead to more competition, he says.

Between the lines: Agents who can't communicate their value won't prosper.

Yes, but: Many are worried about cash-strapped first-time buyers. Most can't pay their agent out of pocket, but they'll be "financially slaughtered" without representation, former Zillow exec and Tomo cofounder Greg Schwartz says.

  • For that reason, sellers aren't entirely off the hook.

Buyers' agents aren't going to work for free.

  • Sellers will likely offer concessions to cover buyer agent costs, Faron King, a VP with NAR, tells Axios.
  • King, who operates brokerages in Georgia and North Carolina, says some sellers have already tried cutting buyer commissions to keep more cash in their pockets.
  • Ultimately, forgoing a commission split could yield fewer offers, he says. It's an option, of course, but it may not save sellers as much as they'd hope.

What's next: "[Real estate] is in the greatest state of disruption I've seen in the last decade-plus," Schwartz says.

  • Schwartz and other observers see opportunities for new business models to emerge, from paying an agent hourly to ChatGPT-like agent bots.
  • He expects minimal innovation in the short term, but radical change over the next five to seven years.
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