New Rules on Buying and Selling a House

The way Americans buy and sell homes is about to get turned on its head.
An earth-shattering, multibillion-dollar antitrust ruling against the National Association of Realtors late last year led to a settlement on Friday that will loosen the powerful trade group’s stranglehold on America’s housing market. The $418 million settlement with a group of homebuyers is expected to take effect sometime around July, pending a judge’s approval. It would transform a number of rules and guidelines set by the NAR that critics say have kept housing prices artificially inflated.
The TL;DR: 6% commissions, split between the buyer’s and seller’s brokers, will no longer be the norm. Agent commissions are expected to fall - in some cases, dramatically - because they will be competitive and negotiable, and sellers will be able to shop around for better rates. And other broker tactics that critics say are anticompetitive, such as a rule that made sellers’ agents set compensation for buyers’ agents, will be prohibited.
It’s not all good news: Buyers may have to pay their broker directly in the future, which could be tough for buyers accustomed to financing that commission as part of their mortgage. And some buyers could choose to forgo using a broker altogether. Also, a bunch of brokers are probably about to quit. But the biggest takeaway for homebuyers is undoubtedly welcome: The overall cost to buy a home should fall by thousands of dollars on average.
For decades, Americans have paid a standard commission of around 6% when selling a home, split between the seller’s broker and the buyer’s broker. The National Association of Realtors and its 1.5 million agents say those fees are negotiable. But certain NAR rules have kept commissions significantly higher than in other countries, where they can average around 1% or 2%.
After the settlement, those commissions will be fully competitive, meaning brokers can advertise their rates to prospective sellers, and people can shop around for bargains. Real estate commissions are expected to fall between 25% and 50% because of the new rules, according to TD Cowen Insights. Without the guidelines that buyers’ and sellers’ brokers split commissions evenly, homebuyers may have to change they way they pay their own agents.
Typically, the 6% commission (typically 3% for the seller’s broker and 3% for their own agent) was passed on to the buyer in the overall cost of the home, which buyers can pay off over decades in their mortgages. But after the settlement is finalized, buyers may end up paying their agents in new ways; including, perhaps, a flat fee. A separate new rule will require buyers’ brokers to enter into written agreements with their buyers. Although that will add transparency to the homebuying process, it could become burdensome - particularly for first-time buyers, many of whom already have difficulty coming up with all the money they need for a down payment, closing costs, a lawyer and all the other fees associated with buying a home.