The Way We Buy/Sell Real Estate Is About to Change

The Way We Buy/Sell Real Estate Is About to Change

by Daniel Yukelson, Executive Director, AAGLA

Real estate transactions are about to be “shaken-up” following the antitrust case court ruling against the National Association of Realtors last year which led to an out of court settlement that will modify the way commissions are determined and paid in real estate transactions. The $418 million settlement is set to take effect around July 2024 pending court approval.

Based on the terms of the settlement, the typical five percent (5%) or six percent (6%) commission sharing among seller’s and buyer’s agents will no longer be the standard, and as a result, experts predict that overall real estate commissions are to be lower by as much as 25% to 50% in the future because the determination of the commission rates will become competitive and negotiable, and sellers will be able to shop around for better rates. Furthermore, sellers’ agents will no longer be able to set commission rates for buyers’ agents, and buyers may be required to pay their broker / agents directly as part of the financing of the purchase price. Moreover, real estate buyers may decide to forgo use of an agent altogether or negotiate a flat fee with brokers.

While real estate commissions have always been negotiable, the National Association of Realtors’ rules have always set commission rate rules significantly higher than other countries. In other countries, real estate commission rates can average approximately 1% to 2% versus the typical 5% to 6% here in the U.S. Following the settlement, commissions will be fully competitive and no longer allow brokers to advertise the commission rates they are willing to pay to a buyer’s agents. Experts predict that reduced real estate commissions under the new rules will result in lower home prices.