As of Aug. 17, it is no longer standard practice for home sellers to pay a commission to the buyer’s agent in addition to their real estate agent
By Aaron Gifford
Realtors in Central New York and across the nation hope new regulations that change the way buyers’ agents are paid won’t turn their industry upside down.
As of Aug. 17, it is no longer standard practice for home sellers to pay a commission to the buyer’s agent in addition to their real estate agent.
Instead, written agreements with buyers’ agents specifying how much they will be paid must be established ahead of time.
In addition, compensation rate offers to buyers’ agents cannot be disclosed on the Multiple Listing Service, which most sellers and buyers access to view available properties.
This regulation follows the $418 million settlement the National Association of Realtors paid out to a group of Missouri homeowners who argued in federal court that the long-accepted practice of paying sellers’ agents led to unnecessary and inflated fees. The court initially awarded a $1.8 billion verdict, ruling last year that NAR and large real estate brokerage firms conspired to keep home prices artificially high in the interest of paying brokers on both sides of the transaction. The two sides later settled on a lesser amount.
The court’s opinion was that the existing commission structure is not in the interest of fair negotiations between the actual customers, according to court documents and published reports. Moreover, the plaintiffs argued that the existing arrangement is outdated considering how technology has increasingly allowed perspective buyers to browse and even tour properties online. NAR argued that the commission structure helps first-time and lower-income buyers who may not have the means to pay commission fees.
In a typical home sale, agents representing the buyer and the seller split the commission, typically between 5% and 6% in total.
In the sale of a $200,000 home for example, which is a typical asking price in Central New York, the $10,000 commission paid entirely by the person selling the house would be split two ways. In the case of a sale by owner, an agent representing the buyer would still expect to be paid that commission.In early August, the New York State Association of Realtors took out a full-page ad in a local Central New York Sunday newspaper to inform readers of the changes.
“This settlement reinforces our commitment to providing transparent, professional and valuable representation to our clients during one of life’s most important moments,” NYSAR’s Aug. 4 ad said. “We are here to make a difference in the lives of our clients and the communities where our more than 63,000 members live and work every day.”
Teri Beckwith, a licensed salesperson who has sold homes in Oswego County for 30 years, said the new regulations will create more paperwork for real estate agents. She’s also worried that the changes could slow down a very strong market right now and potentially drive down prices if agents bring fewer buyers to look at homes.
“It could limit the number of offers. Buyers are just not used to paying their agents. It doesn’t make much sense right now to close out the agents when the market is so strong,” she said. “But I’m pretty confident that it won’t change the industry too much. We just have to remember that before you take a buyer into the house, it’s important to define who is paying who.”
Faye Beckwith, a Hannibal-based real estate broker who sells homes in Oswego, Onondaga, Cayuga and Wayne counties, said she did not encounter any issues after the regulations took effect in mid-August. Her client list includes possible renters, so she will make the same disclosure from the start to landlords and potential renters to establish who will pay the commission.
“Everything is negotiated,” she said. “We’ve always had full disclosure anyway. All of it really just boils down to some extra paperwork.”
The CCIM Institute, a trade organization for commercial real estate professionals, notes on its website that these new regulations should not affect the sale of business and industrial properties, which are typically listed on Commercial Information Exchange systems and not the MLS. Historically, CIE listings did not include compensation information for real estate professionals, though commercial sellers have always been allowed to negotiate fees with buyers and brokers.
On the CNY Realtor website, Greater Syracuse Association of Realtors Chief Executive Officer Regina Tuttle said the Aug. 17 changes were enacted “to benefit consumers.”
“Buyers will now sign a written agreement, outlining negotiated services and compensation for those services, with their agent before touring a home,” Tuttle said. “Sellers will continue to have the choice of offering compensation to buyer brokers and can still offer buyer concessions, such as for closing costs. What isn’t changing is this: Realtors are here to help you navigate the process and are ethically obligated to work in your best interest and compensation for services is fully negotiable.”
A report from real estate industry experts, which was analyzed in the Wall Street Journal, predicted that the new regulations will eliminate billions of dollars in real estate revenues and will greatly reduce the number of men and women who make a living in the property sale profession.
NAR, however, in its June 7 edition of Realtor magazine, reported that NAR membership only decreased by about 2% or 45,000 members, since May 2023. That’s far less than the 10% drop the NAR originally forecasted. The article also noted that high inflation, high interest rates and a home market that appeared to be cooling off over the past several months were also factors in the forecasted membership decrease.
NAR membership was as high as 1.6 million in October 2022 during the “pandemic-fueled homebuying frenzy,” the article said. By contrast, membership reached a historic low at 963,478 in February 2013 when the real estate market was still recovering from the 2008 financial crisis.
The article noted that “any impact the lawsuit and settlement may have on NAR membership likely will not become evident until mid-2025 or later.”
The U.S. Bureau of Labor Statistics Occupational Outlook report estimates that the number of brokers and sales agents in the United States will increase by about 3% over the next eight years.
Those who make a living selling homes in Central New York, meanwhile, have been busy.
According to the Greater Syracuse Association of Realtors, median home sale prices in July were up 13% from one year ago, from $220,000 to $249,450. As for the year-to-date comparisons for 2023 and 2024, the median sale price for the first seven months of this year was $217,000 and increase of 11.3% from $195,000 median sales price for January through July of last year.
There were 708 closed sales in the region for July, a 3.4% decrease from the same month last year, though the 4,025 total for 2024 so far is on par with the first seven months of 2023, according to GSAR.
“July, a traditionally busy month for home sales in Central New York, posted a solid sales total and home selling price growth continued the months-long growth trend,” GSAR member Mark Re said in the monthly report. “Strong competition for newly listed homes continues, driving sales price growth. However, we are seeing significant growth in the overall inventory of homes for sale compared to last summer, which gives homebuyers greater choices and begins to ease the upward pressure on prices. Declining mortgage rates will also benefit buyers in the coming months and may help move potential buyers and sellers off the sidelines.”