In the realm of real estate transactions, the United States has long stood out for its comparatively high commissions paid to realtors. While countries like Australia and the UK typically see commissions in the 2% range, selling a house in the US often entails shelling out around 6% of the sale price in commissions. However, recent developments suggest that this might be on the verge of a significant shift, potentially impacting homebuyers across the nation.
A pivotal moment arrived with a recent class action settlement and subsequent court ruling that found the National Association of Realtors (NAR) guilty of conspiring to maintain inflated commission rates. As a result, the NAR agreed to a substantial settlement and proposed fundamental changes to longstanding commission policies, pending court approval.
So, what exactly is changing? Currently, sellers shoulder the burden of paying commissions to both the selling and buying agents, with the overall commission rate typically ranging from 5-6% of the sale price. However, if the proposed changes take effect in July, the selling agent will only determine their own commission rate, relinquishing control over the buyer’s agent commission. This shift will require homebuyers to negotiate separate contracts with their agents, introducing a new dynamic into the real estate market.
For homebuyers, this change heralds a new era of flexibility and negotiation. With the proliferation of real estate apps and readily available data, buyers today have more tools at their disposal to conduct independent research and property searches. While buyer agents still provide valuable services, the unbundling of commissions presents an opportunity for more transparent discussions regarding compensation.
But how might this impact housing prices? While it’s too early to make definitive predictions, the potential for negotiated commissions could lead to reduced transaction costs. Lower costs could enable sellers to adjust asking prices without sacrificing their bottom line, potentially influencing market dynamics. Moreover, this shift might prompt the emergence of innovative commission models, potentially requiring buyers’ agents to adapt to new compensation structures, such as flat fees.
In conclusion, the proposed changes in realtor commissions mark a significant departure from the traditional norms in the US real estate market. For homebuyers, this shift offers newfound freedom in negotiating commission rates and fosters a more transparent exchange of value between agents and clients. While the full impact remains to be seen, these changes hold the promise of reshaping the landscape of real estate transactions in the years to come. As July approaches and the new policies take effect, homebuyers will undoubtedly navigate this evolving terrain with keen interest and cautious optimism.
Our main audience is younger home buyers, and our advice for post-July transactions is to be keen and wise with negotiating with your buyer’s agent!
