Jonesboro, Arkansas – (JonesboroRightNow.com) – Aug 19, 2024 – Big changes have come to how homes are bought and sold as new rules have rolled out that will revamp how Realtors get paid. Many analysts are calling this the biggest change in the real estate market in a century.
The changes, which are part of a $418 million court settlement that the National Association of Realtors announced in March, put an end to the decades-old practice of home sellers paying 5- 6% of a home’s purchase price to cover the commission for both the listing agent and the buyer’s agent.
Real estate agents that represent a seller usually have a “listing appointment” where an agreement is signed, and a percentage of the sale price is agreed on… usually in the 4-7% range. When an agent representing a buyer enters into the equation, that agent would be able to determine the commission he/she can earn by splitting the agent commission posted on the multiple listing service in half. By the way, another change is that an agent’s commission will no longer be posted on the multiple listing services.
For example, a Jonesboro property for sale is listed on the MLS with a price of $100,000. The posted commission is 5%. Generally, what that would mean is the selling side of the transaction would receive 2.5% as commission and the buying side would receive the other 2.5%. So, that’s $2,500 for each side.
Keep in mind: all of that commission doesn’t go into the agent’s pocket. There are several fees and expenses that agents are liable for, including a portion of the commission automatically going to the brokerage an agent is associated with.
This process is the way it’s been for years. Not anymore.
Home buyers will now have to set an appointment with an agent and sign an agreement before they can even look at a property that’s for sale.
Instead of splitting the commission 50/50, the signed agreement for the property purchase will determine who will make that payment. It has become part of the negotiation process. It’s no longer automatically assumed that the seller covers it. Depending on the agreement, the buyer might have to chip in, adding to the money already needed up front, including a down payment, closing costs, a home inspection, and other fees.
Some real estate professionals believe this might have a “chilling effect” on the home-buying market since more buyers might be expected to come up with cash to pay their own agents.
JRN spoke with a local industry expert, who offered this opinion: “The change in REALTOR compensation has not changed. It’s just now required that the Seller has the option to NOT pay a buyer’s agents commission which ultimately would be a detriment to the Seller. Buyers will be forced to pay for representation. Most buyers are not financially able to pay for a down payment, closing costs and now a Buyer’s Agent. In my opinion, we have always covered commission with the purchase price. REALTORs work by commission only. If our compensation goes away, so does representation. In that case buyers and sellers both will lose. There will be no negotiation process, no disclosure. If representation goes away, there won’t be anyone to help with the process. New home buyers will pretty much be on their own.