New Rules Set to Overhaul Real Estate Agent Compensation

Aug 23

New rules stemming from the landmark settlement between the National Association of Realtors and groups of homesellers are set to take place this month. Traditionally, a seller’s agent charged the homesellers a fee – typically 5%-6% of the purchase price – that was intended to be split with the agent for the homebuyers. This placed a significant cost burden on homesellers, which in turn caused homesellers to increase listing prices to account for these payments. Some have argued that this model left sellers in an unequal bargaining position where they risked offering lower commissions that could drive buyers’ brokers to steer clients to other properties with higher commissions.

Effective August 17, 2024, however, the current home buying and selling model will drastically change. Now, sellers’ agents will no longer be required to offer commissions to buyers’ agents, which means buyers’ agents will need to find new ways of being compensated through the sale transaction. Agents will now also be prohibited from including listings on multiple listing services though agents are permitted to advertise compensation details through other means, such as in-person communications or over the phone. Moreover, buyers’ agents will now be required to discuss compensation up front and enter into written agreements with their buyers, which will preclude buyer brokers from later receiving more compensation than agreed to in the contract. Proponents of the rule changes hope that this will create more transparency to sellers and buyers about how their agents are paid and will even the playing field when it comes to negotiating commissions.

The implications of these rule changes could be staggering. For starters, whereas commissions were previously relatively static, they are now expected to be competitive and negotiable, which allows both sellers and buyers to shop rates. Some estimate that real estate commissions could fall up to 50%, which proponents of the rule change hope will result in lower home prices. However, while buyers might see lower home prices, they are now faced with paying their own agents or going unrepresented altogether. This burden may be exacerbated by what many believe will be an exodus of real estate agents from the industry.

As the industry waits with bated breath for these rule changes to take effect, we can only speculate what the ramifications will be at this point. Will home prices drop or will buyers end up paying more now that they are responsible for their own agents’ commissions? Will agents pivot from a more traditional commission-based model to a flat fee? Will buyers and sellers still readily be able to procure representation or will agents flee the industry for greener pastures?

All of this remains to be seen. However, attorneys are an oft overlooked resource when it comes to the purchase or sale of real estate, whether it be a basic question about the transaction or the handling of the transaction itself. As attorneys experienced in real estate purchase and sale transactions, the attorneys at the Blake Law Firm are ready, willing, and able to consult on your purchase or sale.

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Andrew Hall

Attorney Andrew Hall has over 10 years of experience handling complex real estate, business, and litigation matters throughout California and Washington. Andrew has vast experience with a wide range of clients – from residential to commercial property owners, landlords to tenants, real estate agents to brokers, title to escrow companies, hard money lenders to banking institutions. Andrew has handled cases ranging from administrative disputes, to unlawful detainers, to bankruptcies, to litigation, leaving his clients with the confidence that he can handle all of their needs from soup to nuts.

Andrew is committed to exploring efficient and cost-effective resolutions for his clients, whether that be through informal conversations with parties or attorneys, mediations, or settlement conferences. However, when litigation is inevitable, Andrew has counseled his clients through all stages of a dispute, including arbitrations, court trials, jury trials, and appeals at both the State and Federal Court levels.

Andrew resides in Carlsbad with his wife Lauren, son Nolan (7), and daughter Madeline (5). Andrew is actively involved with the Magdalena Ecke Family YMCA, where he can often be found on the weekends cheering Madeline on in any variety of youth sports or with Nolan participating in the Y’s Adventure Guides Program. Andrew enjoys playing golf, tennis, softball and good barbeque.

Andrew is committed to identifying his client’s goals and employing his big firm experience with small firm attention to help his clients achieve those goals.