How the Commission Settlement Impacts Real Estate Agents

While the prospect of decoupling commissions holds the promise of transformation, it also introduces a wave of uncertainty regarding its implications for real estate professionals. One of the key conc...
How the Commission Settlement Impacts Real Estate Agents
Written by Staff
  • In a recent announcement, the National Association of Realtors (NAR) disclosed plans for a significant settlement that could reshape the real estate landscape. Though not yet finalized, the settlement has been approved by NAR’s legal team and is slated to undergo court filing within the next two weeks. However, it’s important to note that the settlement must still navigate the federal court approval process, indicating a prolonged period of uncertainty ahead.

    The settlement’s crux revolves around decoupling commissions, specifically removing buyer agent commissions from Multiple Listing Services (MLS). This move aligns with the Department of Justice (DOJ) ‘s demands to foster greater transparency and competition within the industry.

    While the prospect of decoupling commissions promises transformation, it also introduces uncertainty regarding its implications for real estate professionals. According to real estate expert Ricky Carruth, one key concern is how this change will affect agents’ day-to-day operations and income streams.

    Under the existing system, buyer agent commissions are typically negotiated between the listing agent and the seller, integrated into the agreement, and advertised on MLS. However, with the proposed decoupling, buyers may be responsible for negotiating and covering their agent’s commission—a departure from the current norm, where commissions are typically covered by the seller.

    Opinions regarding the potential impact of this shift vary widely. Some speculate that it could reduce home prices, as sellers may adjust their asking prices to compensate for the absence of buyer agent commissions. Conversely, others argue that sellers may retain the additional funds, effectively transferring the burden of commission payment to buyers and potentially inflating overall home costs.

    Amidst the uncertainties, industry professionals are encouraged to embrace the forthcoming changes as opportunities for growth and innovation. While acknowledging the challenges ahead, many express optimism about the potential for positive long-term outcomes.

    Agents are urged to adapt their strategies to accommodate the evolving landscape, emphasizing the importance of educating clients about the value of professional representation. Additionally, there’s anticipation that the settlement may spur the emergence of new business models and technologies designed to enhance efficiency and transparency within the industry.

    Despite the initial apprehension surrounding the settlement, industry insiders generally agree that this period of transition represents a rare opportunity for innovation and advancement. By embracing change and leveraging emerging opportunities, real estate professionals stand poised to navigate the evolving landscape and emerge stronger than ever before.

    Real estate agents expressed their thoughts about the settlement as well:

    “This is how its done in the commercial real estate industry. The market will adjust appropriately. Buyer’s agent commissions aren’t going away. It’ll be wrapped into the purchase price or rolled into the mortgage payment alongside closing costs. You’ll see a lot more buyer’s agent require exclusive representation agreements with clauses that stipulate a buyer is to cover their commission if the seller does not. Again, that cost will be wrapped into the total closing costs.”

    “When the market flips to buyers sellers will be begging to get buyers and will post on listings “buyer agency plus bonus offered.” The only people who won were the lawyers.”

    “Having NAR involved in MLS is the incestuous problem. Fortunately i am in a MLS where I’m not required to be a NAR member. I saw this coming years ago when i kicked NAR to the curb. I’m still getting my commission.”

    “Great. Let’s go. I also wonder what type of pivots Mortgage Lenders may make. Will they come up with Loan products that allow for Buyer’s Agent compensation to be included in the loan….. This is interesting. I am already a Listing Agent so I will need to double down and identify more training on the implications of this new model.”

    “If less people can afford to buy a house even more than the market is right now, that’s going to shrink the buyer pool even more. Supply and demand will take effect. While I am going to focus on the good and crush some listings, this is a sad day for the consumer.”

    “Agent here. I dont think people realize how this is actually going to backfire on sellers and buyers. Very interesting on how this plays out.”

    “All the people saying “great, agents have been screwing us all this time” you should know that this change reverts the industry back a few decades. The reason it changed into what it is today is because people just like you felt they didn’t have enough representation when buying homes so they started bringing lawsuits to real estate companies who represented the seller. So for decades homes have been selling faster and buyers have had more representation during the process all while significantly reducing the amount of lawsuits for misrepresentation by buyers. It will take longer to sell your home with these changes, you’ll sell for less most likely due to less offers. The current system is the absolute best for all parties. It’s the most efficient because of the law of supply and demand. You put thousands of agents to work for you by incentivizing them to bring you a buyer. Pay them $0 and see how many buyers they bring you.”

    “Get ready to negotiate the buying agent’s commission with your seller, as it appears that starting in July, it will be included in the purchase agreement.”

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