CNN
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The seismic settlement announced by the National Association of Realtors earlier this month has yet to be approved, but it's already sending shock waves through the real estate industry.
The prospect of a future settlement has already changed the behavior of some Americans when buying and selling their homes. Some prospective home buyers said they plan to restart their home search after the new rules take effect, while some home sellers are hoping to find lower home prices. They are not waiting for the new rules to come into force in July to reduce – or eliminate – the commission they offer to buyers. Agents.
Real estate experts say $418 million settlement It would effectively dismantle the current real estate business model, in which home sellers pay both their agents and their buyers' agents, which critics say has inflated housing prices.
If approved by a judge, the settlement comes with new rules for real estate companies.
Debra Dobbs, a realtor in Chicago, said of the potential new rules.
Experts say the new rules will help lower house prices.
That's what Jeremy Cannon, a 34-year-old teacher in Corona, California, believes.
Last year, Cannon and his wife tried to buy their first home, making offers on several properties.
“All of our offers were rejected because other people outbid us,” Cannon said. “We've already tried to bid above the asking price for all the locations.”
At that point, Cannon decided Hit pause In his dream of owning a house. But for Cannon, the new rules established by the NAR settlement will clear up what he felt was an insurmountable obstacle: the high cost of housing.
Sales commissions, traditionally shared between the buyer's agent and the agent listing a home on the market, are typically 5% to 6% of a home's sales price. According to the Census Bureau, the median home price in the U.S. is $417,000, meaning the average seller could pay more than $25,000 in brokerage fees.
groups The sellers sued This practice was brought against the NAR, which it accused of violating antitrust laws.
Under the proposed settlement terms, sellers' agents would not be required to share their commissions with buyers' agents, decoupling commissions from the price of homes and opening the door to a more competitive housing market.
Many experts believe that commission costs are baked into the prices of home listings. Lower commissions can mean lower house prices.
“I think it's helpful,” Cannon said. “I believe it will be cheaper and lower housing prices further.”
He plans to resume his home search this summer.
The price drop will be a much-needed relief for Cannon and others looking to buy a home: The median sales price of a new home has risen 21% since January 2020, according to Census data.
The new rules require agents to enter into written contracts with their buyers. Many agents plan to stipulate that if a home seller does not agree to pay their commission, the buyer will be the buyer.
But Cannon said she's willing to pay an agent out of pocket if it's more affordable to buy a home, as long as it's “someone who has my best interests at heart.”
Matt Hanley, 49, who works in insurance in Minnesota, has lived in his home since 2007. He was reacquainted with how real estate transactions work when he recently bought a new home.
“We were confused,” he said. “I was like, 'Wow, I wonder if the seller has to pay my agent's commission.' It seemed like a conflict of interest.
Hanley now plans to list her home in April. After the NAR settlement was announced, he reversed course: Instead of offering a commission split between his agent and the agent of his prospective buyers, he asked his agent to write “0%—negotiated” as buyers. Agent commission on his home listing page.
“Why wait for a solution? It's common knowledge now,” Hanley said. “I'm going to try to be at the beginning of this bell curve.”
Hanley's test may be premature. The new rules will prevent agents' compensation from being added to centralized listing portals, which some critics say has led to agents pushing overpriced properties to clients. But for now, buyers' agents can still see that Hanley hasn't compensated them, which would prevent them from showing their homes to potential buyers.
But Hanley pointed to favorable conditions in his market because he believes buyers may still consider buying his home, even if they have to pay their realtor.
“We've got everything going for us. We don't have any inventory and we're selling at peak time, so we can try,” he said. “If someone really wants it, they'll come with a buyer's fee.”
“They have to report to their agents and we have to report to us,” he added.
Maria Ledin, associate professor of business at Florida State University, said the settlement helped raise awareness that people have the right to negotiate. Even so, Ledin said, the status quo is likely to continue.
“Consumers on both the seller's side and the buyer's side need to bring this into wider use,” he said. “I think it's going to take more than a judgment. I think it's going to take consumers advocating for themselves and not being passive.
“They now have a legally protected voice, and they need to use it if we want to see change happen,” Ledin said.
