Realtor Commission Rules Changed

The real estate industry is going through a transformation as the National Association of Realtors changes its commission structures. Traditionally, sellers covered both the listing and buyers' agents' commissions, amounting to around 5% to 6%. Critics argue that this percentage inflated home prices and limited competition.

In July, pending court approval, the National Association of Realtors agreed to a landmark settlement to eliminate this commission. This new rule doesn’t allow listings that describe how much the buyers’ agents are getting paid. In addition, this new rule requires a buyer brokerage agreement, where the buyers’ agents enter into a written agreement with their clients.

At present, when a homeowner decides to list their property on a multiple listing service (MLS), they are obligated to pay a brokerage fee, typically around 5% to 6% depending on location. Upon successful sale, this fee is divided equally between the listing agent representing the seller and the buyer's agent.

Should the settlement gain approval, brokerage commissions on MLS platforms would be removed, allowing sellers to negotiate directly. Additionally, homebuyers would find it simpler to negotiate fees should they opt to engage a broker, although analysts suggest this revised setup could encourage more buyers to bypass brokers altogether.

A preliminary hearing to approve or deny this agreement will occur in the upcoming weeks.