3 Ways To Take Advantage of New Real Estate Rule That Gives Homebuyers Upper Hand
Written by
Heather Altamirano
Edited by
Gary Dudak
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Over the last few years, the real estate market has been challenging for homebuyers to navigate. High interest rates, skyrocketing housing prices, low inventory and bidding wars have made it nearly impossible for many to enter the market. However, thanks to the new real estate rule, potential homebuyers could benefit.
For decades, sellers traditionally paid a 5% to 6% commission fee based on the home value that was split between the listing agent and the buyer’s agent. However, the National Association of Realtors (NAR) settled a class-action lawsuit that alleged “the existence of an anticompetitive agreement that resulted in home sellers paying inflated commissions to real estate brokers or agents in violation of antitrust law” and changed the commission policy, shaking up the industry.
In March, the NAR agreed to pay a $418 million settlement over four years but opposed any misconduct. Instead, the organization, which consists of over 1.5 million Realtor members, amended the rules. Now, sellers are no longer required to pay the buyer’s fee, and homebuyers can negotiate their own rate before hiring a Realtor.
But things were much different prior to the verdict. According to CNBC, “At the time of listing a property, the home seller negotiated with the listing agent what the compensation would be for a buyer’s agent, which appeared on the MLS. However, if a seller was unaware they could negotiate, they were typically locked into paying the listed brokerage fee.”
The new commission rule will reduce costs for consumers and help out some homebuyers. Read on to find out how.
Sellers Can Still Pay the Fees
While the seller is not expected to cover the fees for the buyer’s agent to sweeten the deal, that offer could be on the table to entice a potential buyer. In a recent report, Redfin Chief Economist Daryl Fairweather said, “In slow markets where there’s less demand from homebuyers, like Austin, agents report that most sellers are still willing to pay the buyer’s agent commission to attract buyers, and agent fees are mostly the same as before.”
Buyers Can Make More Competitive Offers
As a result of the new rule, there are multiple options for paying the buyer’s agent, “including as a percentage of the home price or a set fee,” per CNBC.
In addition, the homebuyer can not have an agent at all if they choose. “But the change in policy also gives buyers an edge by allowing them to remove the seller’s obligation to pay the agent’s commission, potentially making their offer more competitive than other bids,” the LA Times reported.
Relief for First-Time Homebuyers
While first-time buyers now have to pay their agent’s commission fee, it will be agreed upon before shopping around for a new home.
“But the real solution is for the industry to work to remove regulatory barriers that make it difficult for buyers to include this compensation in their mortgages,” Stephen Brobeck, a senior fellow with the Consumer Federation of America, said in a statement. He continued, “We are fairly confident that the industry will pursue this issue in part to preserve buyer brokerage. Without the option, more buyers will contact listing agents, losing fiduciary representation though also potentially lowering their costs.”
The Bottom Line
The new policy would help both parties in certain ways. “This settlement over time will benefit home sellers and buyers greatly, eventually lowering agent commissions by tens of billions of dollars a year and helping align agent compensation and services rendered,” Brobeck said.
While there are benefits, there is also a disadvantage for homebuyers. A contract must be signed with an NAR agent before the process of shopping for a home can begin, which doesn’t leave a buyer much time to develop a relationship with their agent. In addition, there can be more back-and-forth when working out the terms of the contract.
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