New rules on buying and selling homes are in play, now that a settlement from a class-action lawsuit has taken effect.
In March, the National Association of Realtors agreed to a $418 million settlement in an antitrust lawsuit where a federal jury found the organization and several large real-estate brokerages had conspired to artificially inflate agent commissions on the sale and purchase of real estate.
In a statement at the time of the verdict, the NAR denied wrongdoing.
The settlement took effect on August 17.
Prior to the settlement, the NAR’s multiple listing service, or MLS, used at a local level across areas in the U.S., facilitated the compensation rates for both a buyer’s and seller’s agents. At the time of listing a property, the home seller negotiated with the listing agent what the compensation would be for a buyer’s agent, which appeared on the MLS. However, if a seller was unaware they could negotiate, they were typically locked into paying the listed brokerage fee.
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Now, as a result of the settlement, the commission rates are officially removed from the MLS and home sellers are no longer obligated to offer commission for both the buyer and seller agents.
“Now, the buyer chooses how much the buyer’s agent makes, the sellers choose how much the seller’s agents make,” Glenn Kelman, CEO of online real estate brokerage firm Redfin, told CNBC. “It’s a new competitive ballgame.”
Any confusion around the new practices among agents and consumers will likely be temporary, said Kerry Melcher, head of real estate at Opendoor.
“Real estate agents are good at moving the market,” she said. “That’s their job. So, I don’t believe that this is going to slow down the market.”
Here’s what to know.
What’s happening with buyer and listing agents
Potential homebuyers might come across inconsistencies in the market as real estate agents grow accustomed to the new rules.
Before August 17, if you called five buyer agents for the same inquiry related to buying a home, “four out of five times,” you would get the same answer, said real estate attorney Claudia Cobreiro, the founder of Cobreiro Law in Coral Gables, Florida.
“Now, maybe two out of five times, you’re going to get the same answer,” Cobreiro said.
That’s because real estate agents are receiving different instructions from their brokerage firm on how to implement the NAR settlement changes, and it’s translating into confusion among consumers, she said.
Meanwhile on the listing side, real estate agents are educating home sellers on the benefits of offering commission to the buyer’s agent even if it’s not a set amount or percentage, Cobreiro explained.
For instance, offering a commission can create more competition for agents wanting to show their property, which increases the sales price, she said.
“Explaining those benefits of still offering commission despite the fact that the commission is not mandatory is part of the job that now I’m seeing listing agents do,” said Cobreiro.
What to know about buyer-broker agreements
The buyer-broker agreement is a contract between a real estate agent and a homebuyer that specifies the terms of their working relationship, said Cobreiro — the goal of which is to identify a house for the buyer to purchase.
If the client buys a property that meets the criteria in the agreement within the specified timeframe, the agent is entitled to the commission for that purchase, Cobreiro said.
“The purpose of this form is telling the buyers they are responsible for their own commission on the buyer’s side,” she said.
If the seller does not offer commission, the buyer would be responsible for whatever commission was listed on that buyer broker agreement, Cobreiro said.
Buyers must get comfortable with what buyer-broker agreement forms look like and be prepared to ask questions about the language and terms, Melcher said.
“The forms are designed to be read by buyers and for buyers to understand them,” she said.
—CNBC associate producer Ryan Baker contributed to this story.