Starting August 17, new rules will revolutionize how real estate agents are paid, creating uncertainty and opportunities in the industry.
The U.S. real estate sector is bracing for what could be the most significant shift in its payment structure in a century. On August 17, new regulations will come into effect that will radically alter how real estate agents are compensated. These changes are the result of a $418 million settlement reached in March by the National Association of Realtors (NAR) in response to lawsuits alleging violations of antitrust laws.
Traditionally, home sellers have been responsible for paying a commission ranging from 5% to 6% of the sale price, which was split between the seller’s agent and the buyer’s agent. Some experts argue that this model has inflated home prices by incorporating these costs into the listing price. However, the new rules aim to dismantle this structure by eliminating the informal practices that supported it, providing consumers with greater clarity and choice.
The most significant change prohibits agents’ compensation from being included in multiple listing services, the centralized databases used by Realtors to share details about homes for sale. Additionally, buyer’s agents will now be required to discuss their fees upfront and formalize a written agreement with buyers before showing them properties—a move that could significantly alter market dynamics.
The impact of these reforms has been met with mixed reactions. While some agents predict that this will pave the way for new business models and could drive many Realtors out of the industry, others, like Mary Schumann, a Realtor from Minnesota, believe the changes are manageable and not vastly different from existing practices in certain states.
On the other hand, companies operating with alternative models, such as flat-fee and discount brokerages, see this as an opportunity to thrive. Redy, for example, a platform that allows real estate agents to bid on property listings, expects to benefit from these changes. “This is part of the shift in how real estate has always been done,” said Shelly Cofini, Redy’s Chief Strategy Officer.
Not everyone shares this optimism, though. Madison Mathias, a 19-year-old Realtor, acknowledges that these new rules could deter less experienced agents, as buyers might be hesitant to sign binding contracts with newer agents. Despite potential challenges, Mathias remains confident that the key to overcoming them lies in confidence and continuous education.
As the deadline approaches, the industry is cautiously watching to see how these changes will impact the market. What’s clear is that August 17 will mark the beginning of a new era for the U.S. real estate sector.
By Orlando J. Gutiérrez