The way we buy and sell homes in America is on the verge of a major shift. This month, the National Association of Realtors (NAR) agreed to a landmark settlement that could fundamentally alter the real estate commission model. This blog post dives into what this means for you, whether you're thinking of buying or selling a house, and explores the potential rise of off-market transactions.
Goodbye to the 6% Assumption?
For decades, the standard commission on a home sale has been a hefty 6%, typically split between the buyer's agent and the seller's agent. This settlement challenges the NAR's practices that allegedly inflated these commissions. The result? The traditional model where sellers automatically cover the buyer's agent fee is no longer a given.
What Does This Mean for Sellers?
The potential for savings is significant. Sellers could negotiate lower commission rates or explore alternative fee structures with their agent. However, it also introduces uncertainty. Will buyer agents be as motivated to show properties if their compensation isn't guaranteed?
What Does This Mean for Buyers?
While the settlement could lead to more competitive commission rates for buyers as well, it might also make finding the right agent more challenging. With less certainty about compensation, some buyers' agents could be less inclined to go the extra mile.
A Rise in Off-Market Transactions?
With the loosening of commission restrictions, some sellers might consider going the for-sale-by-owner (FSBO) route or leverage online platforms to find buyers directly. This could lead to an increase in off-market transactions, where properties are sold directly by the homeowner without being listed on the Multiple Listing Service (MLS).
Forgoing a realtor requires extra legwork for sellers. They'll need to handle marketing, paperwork, and negotiations themselves. Online platforms can help with marketing and buyer outreach, but navigating legalities and disclosures might still necessitate consulting a real estate attorney.
Benefits and Challenges of Off-Market Deals
Off-market transactions can potentially save on commissions, but they also come with challenges. Finding qualified buyers can be difficult, and sellers might miss out on the wider exposure offered by the MLS. Additionally, appraising and setting a fair market value can be tricky. Tools like Higa can help overcome these challenges by providing exposure to potential buyers, soliciting direct feedback on homes and helping to provide an accurate picture of home value. Ultimately, sellers and buyers will need to determine if saving thousands on realtor commissions is worth a bit of extra effort.
The Future of Real Estate Commissions
The long-term impact of the NAR settlement remains to be seen. It's likely to usher in a period of change and innovation in the real estate industry. New models for agent compensation could emerge, with a focus on value delivered rather than a fixed percentage of each transaction. The role of realtors might also evolve, with some specializing in buyer or seller representation, while others offer flat-fee or hourly services.
