The New Rules of Real Estate
How they affect you as a buyer or seller and What you need to know
These new rules that went into effect August 8, 2024 are due to a class action lawsuit known as the Sitzer-Burnett lawsuit against the National Association of Realtors and several large, national brokerages. There were several large copy cat lawsuits filed at the same time late last year and decided this spring.
As a result of these lawsuits, the National Association of Realtors and by extension all State and local real estate boards, including the Long Island Board of Realtors which I am a part of, must change their business practices.
What does all that mean for you?
For Sellers:
If you are selling your home, how real estate commissions work is now different. It used to be the seller negotiated the commission amount with their agent. The agent then chose what amount, if any, to share with any buyer agent that brought the buyer. This was advertised on the MLS for all agents to see. Fairly simple and it worked well.
What hasn’t changed is negotiating the commission charged by the listing agent. There is no standard, set fee and never was. It is up to each brokerage to decide what they will charge.
With the new rules that went into effect August 8, the seller MUST give their permission to allow their agent to share their commission with a buyer agent. This information can no longer be shared on the MLS which makes it harder to figure out who is offering to pay a buyers agent and who isn’t and how much. More on that in a minute.
The other option for sellers is to offer seller concessions, a credit, to the buyer who can use that money to pay their agent. This is allowed to shown on the MLS.
As a seller you can choose whether to allow the agent to share their commission and you can choose whether to offer concessions in any amount you’re Comfortable with.
Sellers, you may be thinking this is a good thing, commissions will be lower because agent no longer have to share it. Yes and no. If you choose to not to allow the agent to share the commission or offer concessions, there is a good chance many buyers will not be able to afford your home as many buyers are struggling to save enough for a down payment. They won’t have the funds to pay their buyers agent. This means less buyers for your property and that means less offers. Which puts you in a weaker position. Less offers to choose from means you might not get the deal you want.
If a buyer goes directly to the listing agent and declines to be represented by their own agent, the listing agent can go back to the seller and request an additional commission as they will be doing the double the work to bring the deal together. Instead of saving money, you could be spending more.
When you sell, if you don’t have a place to go, you’ll need to find a new place to live. You’ll be in the same position as the buyers of your house and you’ll find it much easier to have the listing agent pay your agent.
For buyers:
The new rules change how homes will be shown and how buyers agents will be paid.
All agents are required to have a buyer brokerage agreement in place BEFORE showing a home. This agreement clearly states what You and the agent have agreed to regarding a commission amount, when it is to be paid and the length of the agreement.
These agreements can be short term, 1 house only or 1 day only. Or they can be as long as you feel comfortable, weeks, months. Whatever you agree to.
These DO NOT apply to open houses. You can still tour an open house just like in the past.
Buyer agents will continue to negotiate with listing agents to have the buyers agent commission be paid by the listing agent as has been the norm for decades. If the sellers isn’t offering that, the buyer can request seller concessions from the seller and use that to pay their agent. If that doesn’t work, the last option is for buyers to pay their agent directly out of pocket.
You might be thinking you’ll go direct to the listing agent to avoid having to pay a commission. It is important to remember the listing agent works for the seller not you. They will use any and all information you give them to the sellers advantage. That can cost you far more paying a commission to a buyers agent. Agents negotiate contracts every day. You likely don’t. They will be negotiating for the sellers best interests, not yours. When you are buying the most expensive, most precious possession in your life, I always recommend to have an agent on your team, working for your best interests.
That sums up the new rules in real estate.
Explore my website www.ctabacco.com for lots of free information to guide you on your real estate journey.
I’m here to answer your questions and comments! See you next time!
