Dana McMahan sold her home this spring without the help of a full-service Realtor, hoping to maximize her profits by avoiding the standard 5%-6% commission fees typically paid by home sellers in the U.S. Traditionally, these fees were split between the seller’s and buyer’s brokers as cooperative compensation.
McMahan felt that it was unfair for home sellers to bear these costs, so she opted to forgo the standard model, a decision that coincided with new rules affecting how Realtors are paid. Starting August 17, the National Association of Realtors (NAR) introduced new rules aimed at altering the payment structure for real estate professionals.
Selling without a traditional Realtor meant McMahan had to take on additional responsibilities, such as hosting her own open house, providing photography, and writing the listing description. Although it required more work, McMahan ultimately saved money.
Instead of paying the typical commission rate, she paid a broker $500 to list her home on the local Multiple Listing Service (MLS). While she managed to cut costs, she still offered the standard 3% commission to the buyer’s agent to attract attention to her property.
McMahan noted that the house was easy to sell but needed visibility, which is why she still opted to pay the buyer’s agent commission.
NAR’s new rules aim to change the way commissions are handled. Starting August 17, sellers and agents can no longer advertise the amount they are willing to pay a buyer’s agent on the MLS. This change addresses accusations of commission-based steering, where some Realtors would avoid showing clients homes that offered lower commissions.
NAR has long denied these accusations but agreed to modify its rules following several antitrust lawsuits. The new rules are intended to increase transparency and fairness in the process of buying and selling homes.
The changes are part of a settlement in response to lawsuits accusing NAR of inflating commissions by requiring sellers to pay agents on both sides of the deal. NAR denied the claims but agreed to a $418 million settlement and implemented the new rules as part of the agreement.
Buyers are now required to sign representation agreements with Realtors, indicating that they may be responsible for paying their own agent’s commission if the seller does not offer one. This shift might prompt buyers to seek lower-cost alternatives like flat-fee brokerages or a la carte services.
Some Realtors are concerned that these changes may lead to higher costs for both buyers and sellers, particularly in competitive markets where multiple offers are common. Buyers may be forced to pay their agents out of pocket, which could add to the already high costs of buying a home.
As Realtors adjust to the new rules, prospective buyers and sellers are advised to carefully review any agreements they sign to ensure they understand the potential financial implications. Despite the intended benefits of these changes, some worry that the real estate process may become even more expensive for those involved.
