HOUSTON – (Realty News Report) -The way homes are bought and sold and the commission compensation practices for Realtors will be changing significantly.
The evolution comes as a result of a settlement of a major lawsuit against the National Association of Realtors, the latest chapter of a blitz of suits regarding commissions paid to realty agents and related issues..
Under the terms of the agreement announced Friday, NAR will pay $418 million over four years.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,” said Nykia Wright, Interim CEO of NAR, which has about 1.5 million members.
The agreement will lead to new practices that will be implemented this summer.
The new rules include informing buyer’s agents how much they will be paid for bringing the buyer to the deal. The NAR has agreed not to place buyers agent compensation with the listing information on the MLS.
The new system is expected lead to lower commission rates and more negotiations with Realtors about compensation.
Entrepreneurs Will Arise
On other hand, new business models developed by innovative brokers will surely arise as entrepreneurs get a fuller sense of the emerging opportunities. Will buyers be willing to pay an agent a flat fee or an hourly rate for their services? Various hybrid business models and marketing tactics could be developed to meet the new environment.
Some have warned that buyers may not be able to afford to pay their agents in these times when budget-stretched buyers find it hard to come up with down payments. Can young buyers find the funds to pay for a buyer agent while home prices and mortgage rates are higher?
First-time homebuyers typically rely on Realtors advice for locating homes, identifying the strengths and weaknesses of homes and neighborhoods, negotiating the terms, navigating through home inspections, mortgage questions and the closing process. If there is a downside to the new ways, the first-time homebuyers will be the consumers who experience the most negative impacts. In almost every instance, the first-time homebuyer will be sitting across the negotiating table from a seller that has been through a home transaction before.
The settlement, which is subject to court approval, makes clear that NAR continues to deny any wrongdoing in connection with the Multiple Listing Service cooperative compensation model rule (MLS Model Rule) that was introduced in the 1990s in response to calls from consumer protection advocates for buyer representation, NAR says.
NAR agreed to establish a new rule that would require MLS participants working with buyers to enter into written agreements with their buyers regarding the compensation for agents.
March 19, 2024 Realty News Report Copyright 2024
Photos: Cynthia Lescalleet, CALpix Copyright 2024
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