Have you been hearing the buzz about changes in real estate commissions and wondering what it all means for you as a home buyer or seller? Recent changes to real estate commission structures are poised to significantly impact home buyers and sellers in Oklahoma. The media chums the water with headlines declaring things like:
- “Real estate commissions are being slashed!”
- “Selling your house will now be less expensive!”
- “No more paying 6% to real estate agents!”
These changes stem from a series of legal settlements and new regulations aiming to increase transparency and fairness in real estate transactions.
They may sound like a game-changer, but what does it really mean for you? To clear up the confusion, we’ve put together a quick and easy guide. Dive in to understand the recent NAR settlement, how it will work, and how you can benefit from these changes.
First, What’s Changing?
Traditionally, the seller pays the real estate commission for both the seller’s agent and the buyer’s agent, often totaling around 6% of the home’s sale price. The settlements require real estate agents to make their commission structures more transparent and allow buyers and sellers to negotiate commissions more freely. The changes are designed to protect consumers by promoting fair competition and preventing anti-competitive practices in the real estate market. This shift aims to ensure that consumers get better value for their money (www.nar.realtor).
The settlement mandates increased transparency regarding real estate commissions. Sellers and buyers must now be informed about how commissions are divided between agents, which can lead to more informed decisions and potential cost saving. Here’s an excerpt from a National Association of REALTORS® press release that speaks to the changes most likely affect the typical home buyer or seller:
“In addition to the financial payment, NAR has agreed to put in place a new MLS rule prohibiting offers of broker compensation on the MLS. This would mean that offers of broker compensation could not be communicated via the MLS, but they could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. Offers of compensation help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers. They are also consistent with the real estate laws in the many states that expressly authorize them.
Further, NAR has agreed to enact a new rule that would require MLS participants working with buyers to enter into written agreements with their buyers. NAR continues, as it has done for years, to encourage its members to use buyer brokerage agreements that help consumers understand exactly what services and value will be provided, and for how much. These changes will go into effect in mid-July 2024.”
Simply stated, this means that sellers may choose not to offer or agree to pay a commission to buyers’ agents when they list their house for sale. And buyers are now allowed to choose to not work with a buyers’ agent when they buy, in hopes of saving money.
Impact on Home Sellers
Sellers now have greater power to negotiate commission rates with their listing agents. This flexibility can lead to tailored agreements that better suit the seller’s needs and financial situation.Home sellers need to know that:
- You may still offer a commission to buyers’ agents but, you can’t publish how you’re willing to offer or agree to on your listing.
- In most cases when a buyers agent commission is offered, it will likely be paid through the proceeds of the sale.
- Selling price may be impacted. The traditional practice of incorporating commission costs into the selling price may change. Sellers might list their homes at lower prices since they won’t need to cover the buyer’s agent’s commission, potentially making homes more attractive to buyers.
Impact on Home Buyers
One of the most significant changes is that buyers may now need to pay their agent’s commission directly, rather than having it included in the home’s price. This could mean buyers must have more cash available upfront, potentially reducing their purchasing power.
With the new regulations, agents might need to work harder to justify their commission rates, emphasizing their value in the home buying and selling process. This could lead to a more competitive market for real estate services, with agents offering enhanced services or lower rates to attract clients.
Legislative Perspectives
Oklahoma legislators have mixed reactions to these changes. Some, like State Senator James Leewright, saw the new rules as a positive step towards greater transparency and consumer protection in real estate transactions. “These reforms are necessary to ensure that home buyers are fully aware of the costs they are incurring and to promote fair competition among real estate professionals,” Leewright stated.
Others worry about the potential negative impact on the housing market. Representative Mark Lepak expressed concerns that the increased upfront costs for buyers could slow down the market, particularly affecting first-time homebuyers and those with limited financial resources. “While transparency is important, we must also consider the practical implications for our constituents who may find it harder to afford a home under these new rules,” Lepak commented.
The Takeaway
Aside from flashy headlines, the only immediate change for home buyers and sellers is greater transparency in the real estate process and increased control of how they compensate real estate professionals.
Ronn Cunningham, Broker at CJ Real Estate advises:
- Budget Accordingly. Be prepared for potential changes in how you’ll pay your real estate agent. Discuss commission structures early in the process to understand what your out-of-pocket expenses might be.
- Don’t be afraid to negotiate commission rates with your real estate agent. With the increased focus on transparency, agents may be more willing to discuss and adjust their fees.
- Compare Services. As agents strive to prove their value, it’s a good time to compare the services and rates of different agents. Look for those who offer the best combination of services and costs to meet your needs.
While commission change may pose new challenges, they also offer opportunities for savvy buyers and sellers to navigate the real estate process more effectively.