NAR settlement to change 6% commission, but local realtors say price drop on homes remains unlikely
MARYLAND- A longstanding part of the process of buying a home will no longer be taking place, following a suit brought by home buyers against the National Association of Realtors.
Despite settling without admitting fault, the association says that the standard 6% commission on a sale that was factored into the price for a home, will no longer be included as part of the listed price for a home on the electronic marketplace used by NAR merchants known as the MLS.
That commission was often split between the buyer’s brokers and the seller’s brokers, known as cooperative compensation, but the settlement argued that it led to non-competitive practices where buyers’ brokers were incentivized to push higher-priced homes onto consumers.
However in Maryland that 6 percent fee was already negotiated and was often lower. According to NAR’s code of ethics, it was also against their bylaws to make sales conditional on the rendering of that fee.
Now the fee will no longer be listed on the MLS, and local realtors say it will mean that competitive buyers and brokers will be able to prove their worth to customers.
“It’s going to add a whole different level of professionalism and transparency to the consumer,” said local realtor Brandon Brittingham adding “The consumer can ask, if I’m paying you the commission, you know, I need to understand the value as to why I’m paying a commission, which I don’t think is a bad thing whatsoever.”
Brittingham tells 47ABC that buyers brokers will still need to be compensated, and does not believe it will lead to a drastic fall in prices.
“Ultimately what that will do is commission becomes a conversation between buyer, between seller. There’s going to be some new documentation around it. And essentially what I think is is kind of going to happen is the commission is kind of almost going to be negotiated before a buyer sells a house,” he said.
“It is important for the consumer to understand that it’s very much something that is part of the cost of doing business, so the fact that is selling a seller’s agent, the listing agent, wants to hear that compensation with their colleagues out there with different companies. It should be encouraging and inviting rather than looked at as a suspect,” said Alex Karavasilis, CEO and Broker, Record RE/MAX Advantage Realty.
These changes would also only apply to licensed NAR members, which are the only sellers allowed to call themselves realtors.
Across the US NAR affiliated sellers encompass just over half of homes sold.
