Major changes are coming to the real estate industry | Here's what it means for buyers and sellers

Critics of the new rules say they are especially devastating for first-time home buyers and low-income buyers.

ByNydia Han and Heather Grubola WPVI logo
Tuesday, May 7, 2024
Major changes coming to the real estate industry this summer
These new changes will impact both buyers and sellers and how they work with agents.

Starting this summer, some major changes are coming to the real estate industry.

This will impact both home buyers and sellers, particularly how they work with agents. It all stems from a massive settlement offered by the National Association of Realtors (NAR) to overhaul its longtime commission structure.

The settlement hasn't received final approval but it was preliminarily signed off by a judge in April and the NAR is already planning to change some of its policies, beginning this July.

"We had a very experienced agent to help us," noted Brian Kordeck.

When Kordeck bought his first home in Wayne, Pa. in 2022, he didn't have to pay his agent's commission.

"Buying a house is very expensive to begin with," he said.

It's been customary practice for decades that a home seller strikes a deal with their agent who then splits the commission, usually five to six percent of the sale price, with the buyer's agent.

"We use the multiple listing service. And when we use the multiple listing service, we invite other real estate agents to bring their buyers to look at your house to possibly buy it," explained Albert Cianfarini of RE/MAX Regency Realty.

The lawsuit claimed advertising commissions inflated fees because buyer's agents were more likely to show their clients properties where they would make the most money.

So under a $418 million settlement, the National Realtors Commission will no longer be able to advertise compensation for buyer's agents on real estate databases.

And here's the biggest change come July.

"The change is the seller does not have to pay the buyer's agent. But the buyer can still ask to have their agent paid by the seller, that can still be a request, but it might not be granted," said real estate lawyer Scott Reidenbach.

So, the buyer will now have to pay their agent's commission.

"The consequences of this lawsuit are catastrophic," said Cianfarini.

Critics of the new rules say they are especially devastating for first-time home buyers and low-income buyers.

"So now you got down payment, closing costs, and realtors' fee," said Cianfarini.

But proponents of the new changes say commissions will be more transparent and buyers will have more freedom to pay for only the services they want from an agent or to choose not to hire an agent at all.

And, of course, there is an upside for sellers.

"They'll be paying less in commissions," said Reidenbach. "So this is part of that broader movement to protect consumers and eradicate fees that harm the average homeowner."

Some also believe the settlement will lower home prices since a seller no longer has to bake in the entire commission.

What we know for sure is moving forward, both buyers and sellers should comparison shop agents for services and costs, understanding both sides now have the flexibility to negotiate the agent's commission.