How new real estate rules affect San Diego realtors and home buyers
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Illustration: Natalie Peeples/Axios
Real estate brokers may have to work harder, as new commission rules went into effect last weekend.
Why it matters: The major industry shakeup changes how agents get paid and will likely mean lower costs for home sellers. But it could make the transaction more expensive for buyers, who might decide realtors' services aren't worth the price.
Catch up quick: The National Association of Realtors (NAR) agreed to settle a class action lawsuit brought by sellers that increases transparency around agent profits.
- Typically, sellers paid a standard 5%-6% commission that's split between their broker and the buyer's agent.
- That commission rate for the buyer's agent was advertised in the Multiple Listing Service (MLS), the industry database that shows homes for sale.
Friction point: That posting caused concerns that agents could steer clients toward homes with higher commissions. Sellers also argued they shouldn't be footing the bill for someone who isn't working in their best interest.
Yes, but: Now, those rates can't be posted, and buyers are responsible for their agents' fees, not the sellers.
- Buyers also must sign a compensation agreement before their realtor can show them listings.
Reality check: Industry leaders expect sellers will still cover some of the buyer's agent fees.
Driving the news: The changes are expected to reduce real estate commissions, and they've already fallen a bit since the settlement was announced in March.
- The average buyer's-agent commission fell to 2.55% in July, from 2.62% at the beginning of the year, according to an analysis from Redfin of the 50 most populous metro areas in the U.S.
By the numbers: In San Diego, the average commission percentage paid to buyer's agents was 2.2% as of July, compared to 2.3% in January, per Redfin.
- Caveat: With median home prices rising locally, the actual dollar amount buyers' agents took home increased a bit — to $21,780 from $20,907.
The big picture: Commission rates have been falling slowly for decades, as buyers have gotten savvier about asking for deals and technology has demystified home shopping.
The intrigue: Industry veterans expect the changes to weed out mediocre agents in a field that's grown too big.
- People are already fleeing the profession nationwide, as the volume of home sales has fallen.
- Analysts expect the decline to continue now that the settlement is in full effect.
What to watch: California lawmakers are currently considering a bill that also requires buyer-agent contracts — as at least 20 other states already do — but limits them to three months.
- State lawmakers must vote on the bill before the current legislative session ends Aug. 31.