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Is the 6% commission gone? What this means for your next home

Find out how the end of standard commissions could change the way you buy and sell your home

For decades, the 6% commission on buying and selling a home has been as ingrained in the real estate industry as "sold" signs on front lawns. But a recent seismic settlement has shaken things up, potentially leading to a fundamental shift in how Americans buy and sell homes.

On March 15, 2024, the National Association of Realtors (NAR), the leading trade group for real estate agents in the United States, agreed to a historic settlement with home sellers who had filed antitrust lawsuits challenging the standard commission. The terms are clear: NAR will no longer be able to dictate commission rates for its members. This decision comes after years of legal battles questioning whether the 6% commission stifled competition and inflated home prices.

So, what does this mean for you, the homeowner? Here's a breakdown of the changes and what you can expect in the evolving real estate landscape.

Unbundling services and finding the right fit

Eliminating the standard commission opens the door for a more flexible and potentially more affordable way to buy and sell homes. Here's how things might play out:

  1. Negotiating Commissions: With the standard 6% commission gone, sellers can now negotiate a rate with their listing agent. It could lead to lower commissions overall, especially for high-value properties. For buyers, the landscape is less clear. Traditionally, the seller's agent compensates the buyer agent through a split commission. Without a standard, it's unclear how buyer representation will be structured. Buyers may negotiate directly with agents or pay a separate fee for their services.
  2. Unbundling Services: Traditionally, a full-service realtor handles everything from marketing to negotiations. Now, sellers may choose to "unbundle" these services, picking and paying for specific tasks they need help with. It could be a cost-effective option for tech-savvy sellers who are comfortable handling some aspects of the sale themselves, like listing photography or virtual tours.
  3. Rise of Discount Brokerages: The settlement could pave the way for the growth of discount brokerages, which offer limited services at lower commission rates. It could be a good option for sellers who are comfortable with a more hands-on approach.
an agent and customer discussing a real estate contract

Potential benefits and challenges regarding commission

While the elimination of the standard commission has the potential to benefit consumers, there are also some potential challenges to consider:

  1. Finding Qualified Representation: With more flexibility in commission structures, some worry about the quality of representation. When they are lower, it might be less attractive for experienced agents to take on certain listings. Buyers and sellers must do their due diligence in researching potential agents, focusing on experience and expertise over just their rates.
  2. Impact on Home Prices: While some predict lower commissions will lead to lower home prices, it's not a guarantee. Sellers may simply pocket the savings or the freed-up dollars could be used for additional marketing or staging to attract buyers.

The future of real estate

The real estate industry is on the cusp of significant change. While it's too early to say exactly how things will shake out, the end of the standard commission presents an opportunity for buyers and sellers to be more informed and engaged in the transaction process.

Here are some tips to navigate the new landscape:

  1. Educate Yourself: Research different structures and the services offered by different agents.
  2. Shop Around: Compare rates and services offered by traditional realtors, discount brokerages, and flat-fee services.
  3. Focus on Expertise: Don't just pick the agent with the lowest rates. Look for someone with experience in your area and a proven track record.

The elimination of the standard commission signifies a shift towards a more consumer-driven real estate market. By being informed and adaptable, buyers and sellers can leverage this change to their advantage, making smarter decisions and potentially saving money when buying or selling a home.

Miami's real estate scene just got a major shakeup! Wondering how this impacts the process of buying or selling your home? Don't stay in the dark! Get the inside scoop on the end of standard commissions and what it means for you.

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