For over a century, anyone wanting to buy a home had only to walk into a real estate office and ask the agent to show them the properties. That agent was usually paid by the seller if a deal went through.
That all changed on Saturday.
As part of the settlement of an antitrust lawsuit brought by home sellers, the National Association of Realtors (NAR) has agreed to prohibit sellers’ agents from making an upfront offer to the buyer’s agent for compensation for listing a property on the Multiple Listing Service.
This can mean that buyers may need to come to an agreement with their agent to pay for work that was previously automatically covered by the seller, meaning they will need to negotiate a price with their agent before they even view the property.
It’s a change that agents have been preparing for for months. But that doesn’t mean they’re excited about it.
“Buyers and renters are the ones who stand to lose the most because they may not be able to find or afford adequate representation,” said Gregory Gray, a Howard County real estate agent. “That tips the scales in favor of the seller.”
However, NAR President Kevin Sears defended the change, saying in a written statement last week that the changes “help give consumers more clarity and choice when buying and selling a home.”
“As the August 17 deadline for implementing the practice changes approaches, I am confident in the ability of our members to prepare for and embrace this evolution of our industry,” his statement said.
The lawsuit against NAR alleges that previous rules were anti-competitive. The rules required sellers to make an offer of compensation to buyers’ agents if they wanted their home to appear on the MLS, the association’s list of properties for sale.
Following the settlement announced in March, the NAR now prohibits such offers in an MLS listing. While buyers and sellers can later negotiate a payment, it is not set in advance, so buyers must pay the broker’s fee.
The change may be less painful in Maryland, where written buyer agreements have been required since 2016, said Chuck Kasky, CEO of the Maryland Association of Realtors. However, the new written agreements must disclose the amount or level of a buyer’s agent’s compensation, Kasky said in a Resource video Explanation of the change.
“Real estate agents must enter into written agreements with buyers before they view a home. This applies to homes listed with a multiple listing service,” Kasky explained.
Judith Egbarin, owner of Blue Ribbon Realty, said the new rule will primarily affect buyers.
“They want buyers to pay commissions to their own agents. So who will lose the most?” Egbarin asked. She answered her own question by noting that “the buyer now has to pay even more out of pocket.”
She said this would add to the fees that buyers would normally have to pay, such as down payments and closing costs.
Jennifer Young of Jennifer Young Realty agreed with Egbarin. Young said the new rule will negatively impact first-time home buyers in particular.
“I don’t think that’s a good thing. I think it’s going to hurt buyers who have no down payment, have a small down payment, are first-time buyers or are buying under subsidy programs,” Young said. “So it’s potentially more expensive to have proper representation.”
But none of the brokers felt defeated by the settlement, and in fact all were looking forward. Young said her firm had been preparing its brokers for months before Saturday’s postponement, and Gray said the settlement will leave a competitive field for buyers’ brokers.
“It’s going to be tough competition, and they’re going to have to prove their worth if they want to get the commission,” Gray said. “They’re not getting it from the seller or landlord, they’re getting it from their client, and they have to be able to negotiate.”
Egbarin said the real estate sector simply needs to adapt and change.
“We just have to get used to it. And we will adapt,” she said. “I’m not frustrated yet, I’m very optimistic. I want to see what happens.”
– This story was updated on Monday, August 19, to correct Chuck Kasky’s title in the 10th paragraph and to clarify the impact of the NAR settlement throughout.
