Major changes to real estate agent commissions are underway in Florida
Florida, home to the largest concentration of realtors in the U.S., is experiencing a significant shift in how real estate agents are compensated, thanks to a landmark national legal settlement. These new rules, set to alter the landscape of real estate transactions, are particularly impactful in South Florida, where the number of realtors is unmatched by any other region in the country. Whether you’re buying or selling a home, these changes could reshape your experience in the market.
Upending an industry or small changes?
The extent of these changes depends on who you ask—buyers and sellers might perceive them as minor adjustments, while others see them as a fundamental shift in the industry. The crux of the change lies in how agents and their clients now discuss and negotiate commissions.
Traditionally, the standard 5% to 6% commission was split between the seller’s and buyer’s agents. Although realtors have long maintained that these commissions were negotiable, the new rules eliminate the requirement to include a compensation field in property listings on the Multiple Listing Service (MLS), a key database for real estate transactions.
Previously, even if a seller wasn’t offering the buyer’s agent a commission, the MLS listing had to include a compensation field. That’s no longer the case, as dictated by the terms of the national legal settlement with the National Association of Realtors (NAR).
The changes primarily affect how real estate agents get paid when helping people buy or sell a home. First and foremost, an agent’s commission can no longer be listed on the MLS. This database, where most homes and condos for sale appear, will no longer require a compensation field, allowing sellers more flexibility in how they structure their agent’s pay.
Second, if you’re buying a house and working with an agent, you’ll now have to sign an agreement with your agent that clearly outlines how they will be paid.
How significant are these changes?
Reactions within Florida’s real estate industry have varied, with some downplaying the changes while others see them as a significant shift. David Serle, President of the Broward, Palm Beaches, and St. Lucie Realtors, emphasizes the need to adapt to these changes and views them as an opportunity to protect consumers more effectively. Serle iterated their commitment to enhancing transparency and further safeguarding consumers, surpassing their efforts from previous years.
The long-term impact of these changes on agents’ paydays remains to be seen. For decades, the standard practice involved splitting a 5% to 6% sales commission between the buyer’s and seller’s agents. This cooperative commission was typically included in the house's listing, but the new rules remove this requirement.
While some worry that this could lead to lower compensation for agents, others, like Serle, argue that the focus should remain on transparent negotiation. Hegedus-Garcia also believes that this could be a positive change, fostering more meaningful discussions about the value that realtors provide to their clients.
It’s possible that these changes could lead to lower commissions for agents, as the new rules set the stage for more robust negotiations over compensation. However, Hegedus-Garcia doesn’t foresee a significant drop in compensation, suggesting instead that the new rules will lead to more value-based conversations.
For buyers and sellers, the most immediate impact of these changes will likely be the increased transparency in how agents are paid. Sellers can still offer commissions to their agents and the agent representing the buyer, but these terms will now be subject to more open negotiations.
The changes stem from several federal lawsuits filed against the National Association of Realtors, arguing that its compensation rules for agents were illegal. The NAR eventually signed a settlement agreement in March 2024, which requires the organization to implement these changes and pay over $400 million in damages. While the NAR continues to deny any wrongdoing, the settlement is set to bring about a new era of transparency in real estate transactions.
However, the settlement isn’t final just yet—a court hearing for final approval is scheduled for November 2024.
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