It's usually the biggest purchase someone makes in their life—buying a home.
Now, significant changes are coming to this process as real estate agents across the nation adjust to new transparency rules about their compensation.
The new regulations follow a $418 million settlement with the National Association of Realtors, aiming to clarify who pays what when purchasing a home.
“That could be a game changer for us in a negative way, because now buyers and agents who didn’t have to sit down and negotiate commissions before will really have to,” said Mike Safiedine, a broker and owner of several RE/MAX locations in San Diego County.
Previously, home buyers weren’t expected to pay their realtor’s commission directly. That cost usually came out of the home seller’s pocket, typically ranging from 5% to 6% of the home’s selling price.
But that’s not necessarily the case now.
“They actually want the buyer to have those conversations with the buyer’s agents and negotiate compensation, rather than having it done for them. Another real estate shake-up is the visibility of commission fees,” Safiedine said.
Agents helping to sell the home can no longer list the realtor’s commission fees on listing sites. This means realtors cannot determine how much they will be paid for a property by simply checking a website.
“And this is partly why the whole thing came about—agents wouldn’t show property if the compensation was too low or nonexistent. So now that compensation is removed from the MLS, you really have to have buyer representation before you tour a property,” Safiedine said.
For first-time home buyers, this additional step of signing a contract before viewing homes can be daunting. Experts advise working with someone you trust.
“I mean, if you're a first-time home buyer, you already have down payments, closing costs, and everything else. Now there’s a conversation about paying your agent, and that’s a game changer. A lot of buyers don’t have the extra money to cover agent compensation along with down payment and closing costs,” Safiedine said.
As for what to expect in the future —
“It all depends. If sellers start to view concessions or compensation to the buyer’s agent negatively and become less open-minded, that could hurt prices,” Safiedine said.
