Homes
Lessons From a First-Time Home Buyer: How New Realtor Rules Could Impact Buyers
You may have heard that the rules for real estate agents and realtors were changing. If you’re like me, you might have even caught a segment about it on your local news… that only managed to make things more confusing. I’m not sure why getting clear answers on these updates has proven so difficult but, in my experience, it has been.
Luckily, among the junk, I have found some clarifying sources that have helped give me a better idea about what the new rules do mean for buyers and what else it could mean for them — so let’s get into it.
New Realtor Rules: The Impact on Homebuyers
How we got here
As you may or may not realize, the recent rule changes aren’t simply the result of a new idea that real estate agents are looking to try on for size. Instead, they are the result of an anti-trust lawsuit against the National Association of Realtors (NAR). The basic argument was that requiring sellers to offer commissions in order to be placed on a multi-listing service (MLS) kept realtor commissions higher and, in turn, artificially increased the price of homes — with the theory suggesting that the commissions were largely priced into what sellers were asking.
In a $418 million dollar settlement, NAR has agreed to change its rules. So, updates to MLS, commissions, and more went into effect on August 17th, 2024.
What the rule changes mean and the potential impacts
There are really two main changes that buyers should be aware of. First, MLS entries will no longer include commission information. As CNN explains, this update is meant to curb so-called “steering” — a practice where realtors intentionally lead prospective buyers toward homes offering higher commissions.
The other and perhaps more impactful change for buyers involves everyone’s favorite thing: paperwork. Now, buyers and realtors will be required to sign a formal agreement before the agent is able to show them any houses. Of course, open houses are expected to still be a thing, so those just starting their homebuying journey will still have a chance to check out homes without needing to commit.
This part of the update is also where the largest, most notable, and potentially most costly update comes in. As part of this contract, buyers will also need to negotiate a commission for their agent. However, this doesn’t necessarily mean that they’ll end up paying those fees out of pocket. Instead, just as buyers might ask sellers to pay their closing costs as part of their offer, they might now negotiate that the seller also pays their realtor’s commission — but it won’t be a given anymore. Because of this, buyers will likely want to be prepared and factor a potential commission payment into their homebuying budget.
How these updates differ from our homebuying experience
Looking over these changes, a couple of things stood out to me as they would have definitely affected our experience buying a home. For one, our realtor showed us a few homes before the topic of signing formal paperwork even came up (I honestly didn’t even realize this was a common practice). We did offer to sign said documents, but we didn’t even get around to it as we ended up finding a home much more quickly than expected.
The other difference is that we absolutely counted on the fact that the seller would be paying the buyer’s commission. If this hadn’t been the default, we probably would have asked for it in our offer as we were already butting up against our upfront payment budget with the closing costs and actual down payment accounted for. So, as someone who’s not great at negotiating, I kind of appreciated that this was baked into the deal (even though I also understated the “artificially inflated” argument).
One aspect of our experience that I don’t think would have been adjusted if we were buying today was the process of finding homes to look at. That’s because our agent set us up with an MLS account and allowed us to simply save properties we were interested in seeing. Then, she’d… well… take us to see them. Therefore, I don’t think it was really possible that she could have been “steering” us at all. I suppose that buyers relying fully on their realtors to show them houses rather than looking at MLS themselves might have been susceptible to this — but, as seasoned Zillow aficionados even before we got serious about buying, we were more than comfortable looking at listings and creating a gameplan with our agent.
With these new rules only being a few weeks old, it’s hard to say how these updates will truly impact homebuyers and sellers going forward. Instead, we’ll likely need to wait to see what kinds of trends emerge — along with the inevitable loopholes that will be discovered as well. Ultimately, though, what’s most important is that buyers understand what they’re entering into when signing contracts with realtors and are prepared to pay the negotiated commission if need be. Hopefully, however, these adjustments will eventually prove to be a win for all involved.
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