Want to Save Money Buying or Selling a Home? A New Policy Will Help

Lower real estate agent commissions may be on the horizon — welcome news for home sellers and buyers who often have to fork over thousands or more to get through the process.

Why? After a litany of lawsuits, the National Association of Realtors (NAR), a powerful real estate trade group, agreed to do away with certain agent commission policies that critics say forced homeowners to pay artificially inflated costs to sell their homes.

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Expected to go into effect in mid-July, this major change to the way real estate agents have operated going back to the 1990s could lead to homebuyers and sellers negotiating lower agent commissions.

As part of the agreement announced Friday, the NAR would pay $418 million to help compensate home sellers across the U.S. Details on who will get a piece of the compensation are not yet available.

6 percent agent commissions a thing of the past? Or maybe no agent at all?

Currently, agents working with a buyer and seller typically split a commission of 5 percent to 6 percent that’s paid by the seller. This practice essentially became customary as home listings included built-in offers of “cooperative compensation” between agents on both sides of the transaction.

The rule changes the NAR agreed to as part of the settlement could give home sellers and buyers more impetus to negotiate lower agent commissions.

“It may take some time for the changes to impact the marketplace, but our hope and expectation is that this will put a downward pressure on the cost of hiring a real estate broker,” said Robby Braun, an attorney in a federal lawsuit brought in 2019 in Chicago on behalf of millions of home sellers.

Analysts with Keefe, Bruyette & Woods also anticipate that the NAR rule changes will lead to lower agent commissions and could persuade some homebuyers to skip using an agent altogether.

“In our view, the combination of mandated buyer representation agreements and the prohibition of blanket compensation offers made by listing agents and sellers should result in significant price competition for buyer agent commissions,” the analysts wrote in a research note Friday.

Setting the stage for homebuyers to negotiate a more competitive price for their agent’s services, the rule changes mean home shoppers will have to factor in how to cover their agent’s compensation.