The National Association of Realtors has announced that significant rule changes will be implemented as part of an upcoming settlement that will take effect on August 17.
Real Estate News reported that the deadline on August 17 aligns with the date when class notices will be sent out for the $418 million settlement.
Revised MLS policies provide clear guidance on compensation offers and stress that MLSs should not endorse any methods that violate the rules.
The policy modifications are anticipated to impact the commissions for buyer agents, and as the deadline approaches, there has been a noticeable decrease in the standard commission rates.
According to a report by Redfin, the average commission paid by U.S. home sellers to the buyer’s agent has decreased to 2.55%, down from an average of 2.62% in January.
Here is more of what Real Estate News had to report on what we can expect from the upcoming settlement:
It appears buyer agent commissions are already going down as the August 17 deadline for NAR settlement-driven rules changes nears.
A report from Redfin found that the typical U.S. home seller is paying a 2.55% commission to the buyer’s agent. That’s down from an average of 2.62% in January.
Others have noticed a decrease as well. During Opendoor’s second quarter earnings call on Aug. 1, CEO Carrie Wheeler said the company has seen about “10 to 15 basis points of pressure” on commission rates in Opendoor’s market since April.
While rule changes stemming from the $418 million NAR settlement are factors, they may not be the only ones, said Redfin Chief Economist Daryl Fairweather. Those changes include mandatory buyer agent agreements and the removal of offers of compensation from MLSs.
“Even before the blitz of publicity around the class-action lawsuits and NAR settlement, commissions were coming down,” Fairweather said. “That’s partly because of the competitive housing market before and during the pandemic — which motivated some sellers to offer a low commission because they knew they could still attract buyers — and greater fee transparency.”
How fast have commissions been dropping? According to Redfin’s research, the buyer’s agent commission posted modest declines in the past decade, from 2.89% in 2013 to 2.66% in 2023. That decline has picked up momentum in the first seven months of 2024.
Fairweather said that historically the commission rate has declined very slowly, but that decline could pick up given the consumer awareness of the lawsuits and that the onus on buyers to agree on commissions at the outset. One exception was in 2020 and 2021, when commission rates decline during an intense market that saw many multiple offers on low inventory.
Attorneys for home sellers in the Sitzer/Burnett case successfully argued that commissions were not coming down fast enough because of price fixing and steering, leading to the jury awarding $1.8 billion in damages. Faced with such a huge penalty, the defendants were able to negotiate a lower settlement that included changes to the buyer’s agent commission system.
Regional difference: As one might expect, buyer agent commission rate changes varied by region in the Redfin report. While still higher than the national average, Detroit’s average commission has dropped the most, from 3.18% in January to 2.87% in the four weeks ending July 14. Cincinnati has actually seen a slight rise in average buyer’s agent commission rates, from 2.93% in January to 2.95% in July.