How buying and selling a home is about to change

The traditional commission-based real estate industry in the US has drastically changed following a legal duel between home buyers and sellers versus top brokerage firms. In late 2023, a group of Missouri home sellers took the National Association of Realtors and other brokerage firms to court, won their federal case and were awarded about $1.8 billion. Less than a year later, in March 2024, the NAR reached a settlement of $418 million. Starting July 2024, clients will be more informed of their ability to negotiate their agent’s commission rates, rather than being locked into the industry standard of 5.5 to six percent. Although the NAR denies setting a standard, in practice most clients have been unaware that the commission rate is negotiable. As it stands, the expected commission is posted on behalf of the seller by the seller’s agent on the MLS, or Multiple Listing Service, a database where a seller’s agent lists a property alongside the projected commission rate, which is then viewed by buyers’ agents. Then, the rate is usually split evenly by both agents. For clients, it has meant that buying a house in the US has been exorbitantly high since commission fees are baked into the listing price. As shared in a March 2024 New York Times profile on those involved in the Missouri case, a home seller paid over $15,000 in commission when her house was listed for $275,000, but it was sold for $250,000. The increased transparency means that the new norm will consist of clients negotiating their agent’s rates — in writing — outside of the MLS. Although a client can request access and view a listing in a MLS, typically an agent can only post and update the listing itself, meaning that clients are limited in what direct control they have under the hood. Moving forward, the role of agents in the marketplace could drastically change. Although there may be more flat rates and a la carte services that clients can choose from, (i.e. hosting open houses or assisting during negotiations) it could also mean clients may face unknown territory by forgoing a real estate agent. Although it waits to be seen how the new model will be put into practice, giving clients a better seat at the table could be a good start.