SAN DIEGO — Major changes are hitting the real estate market starting August 17.
Those changes will impact how agents across the United States get paid to help people buy and sell homes. For decades, the model surrounding real estate commissions has been fairly straightforward.
At the close of escrow, the seller typically pays a 5% to 6% commission, sometimes less, with half going toward their agent's brokerage and the other half going to the buyer's side.
But on August 17 that will change.
"Overall, it's a huge change. It really is. It changes the way buyers agents get compensated,” said Mike Safiedine, a real estate broker with Remax Connections in San Diego County.
Safiedine admits the changes are confusing, and some agents are scrambling to figure them out. Under the old system, listing agents published an offer of compensation when listing homes on multiple listing services, known as the MLS.
While those commissions were always negotiable, several antitrust lawsuits alleged the requirement to post them reduced competition and kept commission rates artificially high.
The changes
So, as part of a settlement, the National Association of Realtors agreed to two key changes.
- The first change prohibits agents' compensation from being included on the MLS.
- The second change requires homebuyers to enter into a written buyer agreement before touring a property together - agreeing to pay their realtor commission if a seller doesn't cover the cost.
"I think a lot of buyers agents now are scrambling around saying, well, how am I going to get paid? So now they're sitting down with their buyers and having those conversations when they previously didn't have those conversations. So, I think that's the biggest impact," said Safiedine.
The changes could save sellers money, but force buyers to come up with more to pay those fees.
On the other hand, sellers may be willing to part with their homes for less if they're not paying as much commission.
The fees can also be negotiated on both ends as part of the deal.
"Having said that, the next question is, will we see fees drop," said Norm Miller, a professor emeritus at the University of San Diego who specializes in real estate finance.
Miller believes commissions could drop, especially for higher-priced homes, which may result in some agents leaving the industry.
"That's a good thing for consumers, that the part timers leave the industry, and the full-time agents that do add value, stay in the industry and do more business," said Miller.
Despite the changes, experts are advising against buyers and sellers forgoing agents altogether.
In a statement, the California Association of Realtors President, Melanie Barker told CBS 8,
“These changes will give consumers more choice and more clarity about the services they are getting from the REALTOR they choose to help them through this complex transaction. And they also ensure consumers will know, from the outset, what they will pay for those services.
What’s not changing ― and in fact, is clearer than ever ― is the important role that real estate professionals play for both sellers and buyers in providing guidance and expertise. It’s in everyone’s best interest to have a trusted advisor to guide them through the largest purchase of their lives.”
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