What Does Clark Think About the New Real Estate Rules? – Technologist

Starting on Aug. 17, the long-standing U.S. system for real estate commissions legally changed.

Until then, the home or condo seller would pay a commission to the seller’s (listing) real estate agent and the buyer’s real estate agent. The commission, typically 2.5 to 3% for each agent (5 to 6% total), was included in virtually every Multiple Listing Service (MLS) listing.

Under the new real estate rules, the seller can no longer include the buyer’s agent commission in the MLS listing. And buyers employing an agent must sign a legal agreement with the agent stipulating how and how much the agent will get paid.

The new rules also mean that the seller must decide whether to pay the buyer’s agent at all. And if so, how much. Since that information can’t be included in the MLS listing, sellers can communicate it personally via phone, text, social media, lawn sign or some other informal way.

The National Association of Realtors (NAR) agreed to a legal settlement.

Some felt it was unfair, or at least didn’t make common sense, for sellers to be required to pay for the buyer’s real estate agent. Others felt that even though the commissions were “negotiable” in the past, the old structure artificially inflated the commissions. Those who legally challenged the NAR hope the new rule will lead to a more robust negotiation over compensation between the real estate agents and individuals.

The real estate community seems uncertain about the impact of the legal changes — or at least how long it will take for the market to fully adjust.

Should I Avoid Hiring an Agent As a Buyer To Save Money?

Under the new real estate rules, it’s tempting to avoid using a real estate agent as a buyer. After all, who wouldn’t want a 3% discount on what’s typically the biggest purchase you’ll ever make in your life?

The rule change puts the onus on you as a buyer to decide what you’re willing to pay for the services a buyer’s agent provides. But don’t dismiss the value a real estate agent offers you as a buyer, Clark warns.

“Under the new rules, you as a buyer will decide. Are you going to hire a buyer’s agent?” Clark says. “People will find that unless you are very experienced, you will benefit from having a buyer’s agent.

“But you will also decide what that’s worth to you. And is it going to be a flat rate in dollars? Is it going to be a percent of the purchase?”

Some sellers may also wonder if they should go the “for sale by owner” route. Clark gave advice on whether you should sell your house on your own.

Clark Predicts the Impact of the New Real Estate Rules

In theory, the new real estate rules should create a splintering of the typical buying process.

Before, it was clear. The seller paid the listing agent and the buyer’s agent, typically 2.5 or 3% each. And the seller included the buyer’s agent commission in the MLS listing.

Now, the seller still can decide to pay the buyer’s agent commission. He or she just has to communicate that to the potential buyer. On the buyer’s side, you can decide to ask the seller to pay the commission, you can pay the standard rate or you can negotiate.

Market factors will dictate whether your potential buyer’s agent will accept your ask. For example, the best real estate agent in Manhattan may not agree to a 0.5% commission. But you can potentially get a buyer’s agent for less than 2.5 or 3%.

In theory, market pressure will encourage some agents to offer alternative pricing. Flat-rate fees or hourly rates, perhaps. Or different commission percentages based on real-time market conditions rather than the previous standard every time, no matter what.

Clark’s Prediction: Don’t Expect an Instant Difference

Some real estate agents see the change as a positive. It gives them a chance to talk about the value they provide in exchange for the commission. Others think it could burn inexperienced or first-time home buyers who now must avoid savvy but greedy veteran real estate agents.

Clark expects change, but he expects it to come gradually.

“At first what will happen is the commission will stay pretty much as it has been. And then only gradually over time will the pricing model change. Because there’s so much history in how the pricing has worked in terms of commissions,” Clark says.

“[Change] will happen haphazardly. And it will vary regionally around the United States how things settle down over time.”

Can (and Should) Experienced Real Estate Buyers Skip Agents Now?

On the Clark Howard podcast, Clint in Texas recently asked how the new law will impact his upcoming real estate purchase.

For background, Clint is:

• Familiar with the area
• Targeting a specific type of property
• Experienced at buying houses
• Comfortable researching and negotiating
• Not intimidated by contracts

So, with the new real estate rules in effect, should Clint become his own buyer’s agent? Can he call the listing agent and request a showing? And will he get incentives or a discount if the seller offers a buyer’s agent commission?

“You will be able to represent yourself and there will not be a 3% buyer’s agent commission,” Clark says. “The seller will just pay 3% [to the listing agent].

“The net benefit should not be based on what incentives they have for a buyer’s agent. What it will be is the price will effectively be 3% lower. Because the seller is no longer paying that buyer’s agent commission.”

Final Thoughts

The new real estate rules arrived in August: The buyer’s agent commission can no longer be listed with the MLS information. Additionally, buyers must sign a written agreement with their real estate agents that explicitly outlines how the agent will be compensated.

Despite these changes, sellers may still offer to pay the buyer’s agent commission.

In theory, the new rules give buyers more control and options for structuring those fees. But Clark thinks change will come gradually. He expects that in the short term, most real estate deals will continue to include a 2.5 or 3% fee that the seller pays to both the listing agent and the buyer’s agent.