How new real estate rules will impact Minnesota Realtors, home buyers
EDINA, Minn. — The experience of buying or selling a home is changing. A recent National Association of Realtors settlement now requires buyers and sellers to negotiate house sale commissions, including who pays and how much.
A recent overhaul changed the way realtors get paid to help people buy and sell their homes. It's part of a $418 million settlement announced in March between a nationwide group of homeowners and the National Association of Realtors.
"For consumers, it's going to be more transparent and it really should be a smooth process," said Jamar Hardy, president of Minneapolis Area Realtors. "Historically, a seller's agent charged home sellers a fee, usually 5% or 6%, which was then split with the buyer's agent. On a $500,000 home that would be $30,000 in commission."
Lawsuits alleged the standard practice violated antitrust laws, though the association has long argued that the commissions were always negotiable.
Moving forward, buyers who previously didn't have to pay a commission to their realtor who helped them purchase a home will be expected to pay for the service. Sellers will have to pay for their agent but will no longer have to pay for the buyer's agent.
Listing agents and sellers will be prohibited from including offers of compensation to buyer agents on the multiple listings services, better known as the MLS.
"If sellers aren't offering payouts right up front, that negotiation is going to happen at a time of offer, so we'll see a little change there because again, that offer of compensation won't be visible to us anymore," said Hardy.
Real estate commissions in Minneapolis have fallen minimally since March, after the announcement of the settlement. It fell from 2.6% in March to 2.56% in mid-July.
Analysts with TD Cowen expect the settlement could reduce realtor commissions by 25% to 50%. Another change requires buyers' agents to discuss their compensation upfront.
"I think that's going to be the biggest change for both consumers and agents. It's not just allowing somebody to walk through that house because we have a showing, let 'em run through really quick to see things," said Hardy.
There are 22,000 real estate agents in Minnesota. Hardy says some may leave the business because of the changes,but others will thrive.
"I think competition is going to win out in the end, and people are going to truly know what we do for a living and understand what they're paying for," said Hardy.
The new rule changes the National Association of Realtors agreed to as part of the settlement take effect on Saturday.