CNN
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On Saturday, new rules governing how most real estate professionals do business in the U.S. officially go into effect — and the changes could improve how Americans buy and sell homes.
The National Association of Realtors, a powerful trade association with 1.5 million members, adopted the rules as part of a $418 million settlement in antitrust claims. The rules are designed to change how realtors get paid and who pays them. It is the biggest change in company rules in at least a generation.
Kevin Sears, president of NAR, said in a statement that it “helps consumers become more empowered with clarity and choice when buying and selling a home.”
“I am confident in the abilities of our members to prepare for and embrace this evolution of our industry and guide consumers through the new landscape,” he said.
Here’s what you need to know:
Historically, buyers were not expected to pay their real estate broker directly. That’s because real estate commission fees — to both buyers’ agents and sellers’ agents — are paid by a home seller.
Commissions Generally the total is 5% or 6% of the sale price of a home, so for a $450K home, the average price of a home in the US, the seller is responsible for a fee of $27,000. There are many experts These commissions are baked into a home’s list price, driving up home prices.
But starting this week, seller’s agents will no longer be allowed to advertise commission payments to buyers’ agents on many of the listing services that realtors use to list, find homes for sale and facilitate transactions.
That means a buyer’s agent can’t use the database to search for homes based on how much they’ll be paid, a practice known as “steering.” Offering commission rates below a seller’s market has led some agents to avoid showing homes that fit their client’s criteria, critics allege.
“With no commission in the MLS anymore, it makes it harder to navigate because you can’t look for 3% commissions,” said Tonya Monestier, a law professor at the University at Buffalo School of Law. “You can still call everyone and figure out what the lay of the land is, but it makes it more difficult.”
A second change affects the relationship between prospective home buyers and their real estate agents. Buyers must sign a legal representation agreement with their agent before they start visiting homes together.
These contracts are designed to inform homebuyers how their agent gets paid, and if sellers don’t agree to pay the agent’s commission, the buyer can be involved in paying that fee. They are designed to inform buyers that this commission is fully negotiable.
“If buyers knew they could negotiate commissions, and if they actually paid them, not the seller, it could create a more complete market and a menu of services in the future that would be more comparable to other developed countries,” said Norm, emeritus professor of real estate at the University of San Diego. Miller said.
A key feature of these contracts is that the buyer’s agent cannot receive more compensation than the buyer initially signed up for, even if the seller is willing to offer more.
on it WebsiteNAR said these two changes “eliminated any theoretical diversion because a broker may not overcompensate by steering a buyer to a particular listing because it has a ‘higher’ offer of compensation.”
A final approval hearing is scheduled for Nov. 26, but the judge granted preliminary approval of NAR’s settlement in April.
Some brokers realize that buyers can be nervous about signing a legally binding relationship with an agent before starting to tour homes. So, they created short-term contracts that could cover a week or an hour, requiring buyers to be comfortable with an agent.
But Monestier cautioned that buyers should be careful about signing any legal contract without reading it thoroughly.
“You’re going to see all kinds of different versions of these contracts, state-by-state, broker-by-brokerage. There could be thousands of them out there,” he said. “It worries me that buyers and sellers can blindly sign something and then be surprised when things aren’t what they think they are.”
Leo Pareja, CEO of eXp Realty, one of America’s largest brokerages, told CNN that he prepared his company’s buyers’ contracts simply to avoid potential confusion.
“It’s designed to be readable in the driveway of a home without a consumer feeling like they’re in an uncomfortable situation,” Pareja said. “You don’t need a law degree to read it.”
Pareja decided to make his contracts widely available for other companies to use.
“We want consumers and agents to have the least amount of friction going forward, because that’s the last thing we need right now,” he said.
Some real estate industry experts have warned that the new rules could have a chilling effect on the home buying market. Expected to bring money to pay their own agents.
But Monestier said he believes the long-term changes will help consumers.
“I would say that if commission rates go down over time, that’s a great thing for home buyers and sellers,” he said.
It’s unclear whether the cost of buying and selling homes in the U.S. will immediately become affordable for most people.
“Eventually, I doubt anyone will say, ‘Let’s compete on price.’ If it’s a big company, it’s going to be a revolution,” said the University of San Diego’s Miller. “But when will that happen? “I don’t know,” he said.
In the short term, Miller believes mortgage rates will have a bigger impact on housing affordability than any specific rule change.
The average rate for a 30-year fixed mortgage recently hit 6.49%, still up from recent history but near the lowest levels in more than a year.
“It has more of an effect on affordability than what we’re talking about here,” Miller said. “If mortgage rates fall further, rule changes will be louder in the equation, relative to that.”