Homebuyers will end up holding back on buying homes as a result of new laws that change the rules for real estate transactions.
New rules were initiated in the class action lawsuit by home sellers against the National Association of Realtors (NAR), America’s largest trade association that represents 1.5 million members. The case ended in NAR paying $418 million in damages and amending rules on commissions to allow more freedom in negotiation.
Experts say this case will have clear benefits and disadvantages for both the average citizen looking to buy or sell a home and the real estate agent.
The real estate agent’s commission when a person buys or sells a house is now flexible, with a new rule being initiated in mid-July that gives homebuyers who are attending house tours on multiple listing services (MLS) the opportunity to sign some paperwork: a notice of what services the buyer may need from the agent and how much that will cost.
These minuscule changes are going to play a large role in how much both home buyers and sellers pay and how much the real estate agents earn. Real estate agents may not necessarily need to know every skill in the book if they are being paid for only so many services. For example, a real estate agent could be paid for individual services, such as helping in showing a house and negotiating for a house price, but not aiding in paperwork. This destroys the standard 6 percent commission agents are expected to earn, according to Ben Harris, a director of economic studies at the Brookings Institution.
Although there are many benefits from the updated commission rules, not all buyers are going to experience them equally. It’s hard to predict if commissions will fall, potentially below 2 percent, or if the margin will be raised through inflation. The change may also suppress opportunity for low-income citizens, minorities and first-time buyers by lessening the chance of finding not only budget-friendly, but also highly-experienced agents needed for extra guidance in the complicated process of buying a house.
