The National Association of Realtors recently announced it would pay $418 million to settle class action lawsuits over broker commissions.
The settlement will change how commission fees are paid to real estate agents. Instead of the traditional 5-6%, buyers and sellers can now negotiate lower fees.
The NAR acknowledged no wrongdoing but agreed to the settlement, which still needs to be approved by a federal judge before the fee commission changes start to take effect.
Liz Kenney, a realtor with HomeSmart Realty West, shared her reaction before showing a house in San Diego.
“I’m very surprised,” Kenney said. “I’m an optimist. I thought this would get resolved, and there would be no changes.”
Kenney acknowledged that with the NAR agreement there are probably changes coming to how homes are bought and sold, specifically with that traditional 5-6% commission.
“As a real estate agent, I think the the biggest change will be that we’re going to have to have our buyers sign something called a buyers representation agreement that will put us in a binding contract,” Kenney said. “Then, from there, we will have to determine who’s going to pay my commission. Will it be the buyer? Will it be the seller? Will it be the seller’s agent? Or will we have a whole new business model?”
Many housing experts believe the commission fee structure change could mean thousands of dollars in savings for home sellers and buyers.
“This is historic,” Brandi Summers, a professor at the University of California, Berkeley, said. “This will free up a lot of money for people who want to buy a house. It’s going to shift the industry market and hopefully give more people opportunity to buy now.”
Summers says the existing structure has been blamed for agents pushing buyers into higher-priced homes.
“There’s been a professionalization of real estate, where consumers just haven’t been able to get what they need,” Summers said.
Kenney believes that ultimately the process will become more transparent, but what’s unknown is how the commission structure will reflect the ease, difficulty and time of buying and selling homes.
“When you list a house, someone generally buys it in that first weekend, but when you’re showing a house, it could be a year before someone actually buys a house, so it’s important you get something, but we don’t know how this is going to work out or how we are going to determine that,” Kenney said.
According a recent study by Zillow, residents need to earn $275,000 a year to comfortably afford a median-priced home in San Diego. So any potential financial relief to homebuyers would be welcome.
