The recent settlement involving the National Association of Realtors regarding real estate agent compensation has the potential to impact both buyers and sellers in the industry. As we move into uncharted territory in the summer of 2024, it’s important to evaluate the possible effects of this change. Historically, the industry has accepted a real estate commission of around 6%, which was generally paid for by the seller of the property, but always negotiable.

The seller negotiates a % of compensation to sell their home with a listing agent. The listing agent generally pays out a % of that commission with the buyer’s agent representing the buyer. However, this new ruling opens the door for this fee to be negotiable (always has been), potentially impacting both buyers and sellers. For sellers, they could negotiate a lower commission with their listing agent, say 2.5%, which means the buyer’s agent would need to be paid out of the buyer’s pocket, this could occur. This may become problematic for first-time homebuyers who may not have the economic means to pay for a buyer’s agent out of their pocket when the seller of the property has pre-negotiated something lower. This could also impact cash to close for homebuyers, forcing them to either wait for a lower-priced house, obtain a co-signer or put down even more of a down payment, particularly challenging for families who are using a lower down payment or have seller credits baked into the amount they are pre-approved for.

Furthermore, this dynamic can change from house to house during the home search time frame, making it difficult for buyers and sellers to navigate the negotiation process.  Another element of this change is a buyer will need to sign a buyer agent agreement. It’s unclear how this ruling will impact the real estate industry, but it could potentially shape it very differently transactions can’t close due to cash or compensation discrepancies. Bottom line the ruling has the potential to significantly impact the industry. Buyers and sellers alike should be aware of the potential effects of this change, particularly those who are working with lower or no down payment financing options. As we move forward, it’s important to work with an experienced real estate agent and lender as it relates to finding a home to buy.

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