What happened?
The National Association of REALTORS® settled a lawsuit that was brought suggesting that there was not enough clarity around how commissions were paid and by whom they are paid. The settlement includes a few rule changes that will begin to take effect over the next few months and will need to be officially implemented starting in July 2024.
What are the changes?
Negotiable commissions. Commissions have always been negotiable and will continue to be after this ruling. Agents with a proven track record of success and the skills to help clients achieve their goals will continue to provide excellent service that will more than warrant the fees paid.
Seller-side commissions. Sellers retain the option to offer compensation to buyer's agents to bring their clients to a listing. However, given the imbalance in the market, this ruling may shift the payment of the buyer's side commission to the buyers more often than not in the short term. There will need to be upfront and continued communication during the transaction to make sure all parties are aware of how much and by whom commissions will be paid.
Buyer representation agreement. Nationally, buyers will now need to have an agreement with their REALTOR® before working together. In Connecticut, this was always the case, so this will remain the same. A representation agreement has always been a useful and important document that outlines the expectations and roles of everyone in the transaction. It will now more clearly outline the agreed-upon commission paid to the buyer's agent should the seller not offer cooperating compensation.
What is going to happen?
Of course, we will need to see how this all plays out over the coming months, but what I believe will happen is that over time people will get used to this new structure and the only real change will be when someone pays the commission. Instead of paying a larger amount when one sells, people will pay half that amount when they buy and half again when they sell. Buyers, who have a set budget for their purchase, will need to adjust their offers to factor in the buyer's side commission, just like they do with closing costs now. Based on this, sellers may receive slightly lower offers and may wind up netting the same amount as they did prior.
How does this affect me specifically?
It will depend on a number of factors, including:
- Whether you are just buying, just selling, or buying and selling together
- When you are starting your real estate transaction
- What the market conditions are at that time
It has never been more important for consumers to work with a professional, experienced REALTOR®. If you need guidance on how to navigate these industry changes, please do not hesitate to reach out.
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