Significant Shifts Begin in the Real Estate Market

Starting today, new regulations that could significantly change the real estate landscape in the United States are officially in place. These changes, resulting from a $418 million antitrust settlement with the National Association of Realtors (NAR), are expected to alter how real estate agents are compensated and could reshape the process of buying and selling homes.

The NAR, a powerful organization representing 1.5 million members, has agreed to these changes, marking the most significant rule shift in a generation. NAR President Kevin Sears stated that the new rules would “further empower consumers with clarity and choice when buying and selling a home.” Sears expressed confidence that Realtors would adapt to the new landscape and continue to guide consumers effectively.

Critical Changes in Real Estate Practices

Traditionally, homebuyers did not pay their real estate broker directly. Instead, the seller covered the commission fees for both the buyer’s and seller’s agents. These fees, usually between 5% to 6% of the home’s selling price, were often factored into the listing price, potentially inflating costs.

With the new rules, sellers’ agents can no longer advertise commission fees for buyers’ agents on multiple listing services (MLS). This change aims to prevent “steering,” a practice where agents might avoid showing homes that offer lower commissions, potentially limiting buyers’ options. According to Tonya Monestier, a law professor at the University at Buffalo, removing commission information from the MLS makes steering more complicated, though possible.

Additionally, prospective homebuyers must sign a legally binding representation agreement with their agent before beginning home tours. This agreement outlines how the agent is paid and emphasizes that the buyer’s agent can receive only what was initially agreed upon, even if the seller offers more. This shift is intended to create a more competitive market and could lead to lower commission rates over time.

Impact on Home Affordability

Some industry professionals are concerned that the new rules could increase the financial burden on homebuyers, who may now be expected to cover their agents’ fees. However, Monestier believes the changes will benefit consumers in the long term, mainly if commission rates decrease.

The overall effect on home affordability remains to be determined. Norm Miller, professor emeritus of real estate at the University of San Diego, suggests that while the new rules may influence costs, mortgage rates will continue to play a more significant role in determining affordability. The average rate for a 30-year fixed mortgage recently stood at 6.49%, which Miller argues has a more significant impact on the housing market than the recent rule changes.

These developments mark a significant shift in the real estate industry, with potential long-term implications for buyers and sellers navigating this evolving landscape.

(CNN contributed to this report: Photo Credit: Unsplash.com)