Real Estate Commission Settlement Failing to Reduce Homebuying Prices for Consumers
In a significant shift for the U.S. housing market, new rules regarding real estate commissions went into effect on August 17, 2024, following a $418 million settlement by the National Association of Realtors (NAR) in March of the same year. The settlement, which was a result of allegations that NAR and other real estate companies artificially inflated real estate agent commissions, aims to drive down costs and increase transparency in the industry.
Under the new rules, sellers no longer have to specify a commission for the buyer's agent. Instead, sellers now negotiate fees directly with their own agent and decide whether, and how much, to contribute toward the buyer's agent’s fees. This change opens the door to more flexibility, allowing for flat fees for marketing a home or reduced commissions for tasks like searching for properties.
For sellers, it is essential to discuss fees with their real estate agent at the beginning of the process and sign a document outlining those fees. Similarly, buyers must sign an agreement with their real estate agent outlining exactly how much they’ll pay for the agent’s services.
Traditionally, real estate commissions averaged 5% to 6% of the sale price of a house. However, with the new rules, average commissions have seen a slight increase. Homes under $500,000 saw an increase in commissions, climbing to 2.49% from 2.46% in the fourth quarter of 2024. For homes priced under $1 million, average buyer's agent commissions rose to 2.29% in the first quarter of 2025. Despite the intention to drive down costs, most sellers haven't seen a significant decrease in commissions.
The new rules have resulted in a modest decline in average transaction costs and a shift towards greater consumer choice in the U.S. housing market. Sellers were usually responsible for paying both their own agent and the buyer's agent. However, the new rules encourage more competitive pricing, giving sellers the opportunity to negotiate fees and potentially save on costs.
It is crucial that your real estate agent is able to clearly explain every part of the process of buying or selling a home. They should be transparent about their fees and the services they provide. With the new rules, buyers and sellers have more control over their costs, making it essential to find an agent who is willing to work with you to get the best deal possible.
In conclusion, the new rules regarding real estate commissions aim to increase transparency and consumer choice in the U.S. housing market. While average commissions have seen a slight increase, the new rules have resulted in a modest decline in average transaction costs. It is essential for both buyers and sellers to discuss fees with their real estate agent and negotiate terms that work best for them.
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