Real Estate News

New Real Estate Rules: What Buyers and Sellers Need to Know

The real estate industry is navigating new rules that shift how sellers and buyers approach broker commissions. Now, sellers must decide if and how much they’re willing to contribute toward a buyer’s broker fee—an option that reshapes business practices and transparency within transactions.

Traditionally, sellers covered the buyer’s broker fee, streamlining costs for buyers. Under the new rules, sellers can choose to pay the entire fee, only a portion, or none at all. This added flexibility, however, brings complexity: one seller might cover the buyer’s broker fee, while another might not, leading to inconsistent buyer experiences and potential questions about house pricing.

Up until recently, covering the full broker compensation—often between 2-3% of the sale price—was standard practice for sellers. This arrangement, disclosed in the Multiple Listing Services (MLS), provided a clear, predictable fee structure. But in a recent legal settlement, the National Association of Realtors (NAR) faced accusations of inflating commission rates, which was argued to impact home affordability. As of August 17, 2024, the new rules enforce transparency and negotiation around fees while prohibiting blanket offers in MLS listings.

Here’s a closer look at the main changes and what they mean for buyers and sellers:

• No Blanket Offers in Listings
  Sellers can no longer include blanket offers in MLS listings to cover the buyer’s broker fee. While offers to cover some or all of the buyer’s broker fee are still possible, they must be communicated outside the MLS listing.
• Buyer-Broker Negotiation
  Buyers now need to negotiate commission terms with their agent and sign a buyer-broker agreement. This step clarifies the agent’s commission and ensures that both parties agree on compensation before proceeding.
• Required Written Agreements
  Before any in-person or virtual tours, buyers must sign an agreement with their agent that outlines services and payment terms. This document specifies the commission amount and helps establish clear expectations from the start.
• Seller Flexibility in Contributions
  Sellers can still choose to pay a buyer’s agent’s fee but are no longer obligated to do so. The contribution amount is also flexible: sellers may pay a full, partial, or no fee at all.

These adjustments aim to foster transparency and a fairer playing field. Yet they may also introduce new budgeting challenges for buyers, who are now more directly involved in commission payments. Buyers may experience uncertainty around out-of-pocket expenses, which could make planning and budgeting for a home purchase more complex.

For sellers, this new landscape requires strategic consideration. Covering the buyer’s broker fee may offer a competitive edge by making a property more appealing and potentially speeding up the sale. Conversely, sellers who opt out of contributing might find some buyers deterred by the additional expense.

In this evolving environment, communication is key. Educating clients about their options and guiding them through the nuances of these new rules can enhance their understanding and lead to smoother transactions. At our brokerage, we believe that these changes ultimately benefit our clients by promoting open dialogue and ensuring everyone is aware that commission structures are fully negotiable.