Big Changes Are Coming for Realtors

Real estate agents across the United States are getting ready for a major change in how they do business. Starting on August 17, new rules will change how Realtors get paid for helping people buy and sell homes. These changes are part of a $418 million settlement announced by the National Association of Realtors (NAR) in March.

How Realtors Get Paid Now

Before these changes, when someone sold a home, they typically had to pay a 5% or 6% commission, which was split between their own agent and the buyer’s agent. This system has been the standard for a long time, but it’s about to change.

Why the Change Is Happening

The reason for the change is that some people believed this way of doing things was unfair. There were lawsuits claiming that the standard practice of splitting commissions might have violated antitrust laws. While NAR argued that these commissions were always negotiable, they decided to settle the lawsuits by agreeing to make some big changes.

Preparing for the New Rules

Since the settlement was announced, Realtors have been preparing for these changes. They’ve been attending training sessions and learning about the new contracts they will need to use with homebuyers. Some agents think these changes might lead to new ways of doing business, while others are unsure of what will happen.

The Two Major Rule Changes

The first major change is that agents’ compensation details will no longer be included in the multiple listing services (MLS), which is a database used by Realtors to share information about homes for sale. This information can still be shared in other ways, but it won’t be automatically available.

The second big change is that buyer’s agents will need to discuss their payment with clients upfront. Starting August 17, before showing a property, agents must sign a written agreement with the buyer. This agreement informs buyers that they might have to pay their agent if the seller doesn’t.

Some States Are Already Doing This

Interestingly, Realtors in 18 states have already been using similar buyer agreements. For example, Mary Schumann, a Realtor in Minnesota, says that her state already requires buyer agreements, so these new rules don’t seem like a huge deal to her.

New Business Models Might Thrive

Some experts believe that these changes could lead to a drop in real estate commissions by as much as 25% to 50%. This could open up opportunities for new business models, like flat-fee and discount brokerages, which could become more popular as a result.

Companies Are Adapting

Some companies are already looking to take advantage of these changes. For instance, Redy, a company that allows agents to bid on home listings, thinks the new rules will benefit their business model. Flyhomes, another company, has launched an AI chatbot to answer questions for homebuyers, anticipating that people will be looking for more information as the rules change.

Will Some Realtors Quit?

The old system allowed buyers to get representation without directly paying for it, as the seller usually covered the commission. With the new rules, some Realtors worry that fewer people will be willing to sign agreements with less experienced agents, which might drive some Realtors out of the industry.

Young Realtors Facing Challenges

Younger agents, like 19-year-old Madison Mathias from South Carolina, may find it tougher to convince clients to sign agreements. However, Mathias believes that confidence and knowledge are key. She thinks that while some Realtors might leave the industry because they don’t like change, it won’t necessarily be because of their age.

The Future of Real Estate

As August 17 approaches, the real estate industry is on the brink of a significant transformation. While some agents are worried, others are confident that these changes will bring more transparency and choice for consumers. Only time will tell how these new rules will reshape the world of real estate.