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Home buying, selling changes to go into effect
Beginning Aug. 17, there will be changes on how homes are bought and sold after the National Association of Realtors announced it would pay $418 million to settle lawsuits. FOX 26 Consumer Reporter Heather Sullivan has a look at what this means.
HOUSTON - Changes to the way homes are bought and sold begin Saturday, Aug. 17. This comes after the National Association of Realtors announced it would pay $418 million to settle lawsuits accusing it of conspiring to keep realtor commissions high.
Last November, a federal jury ruled the National Association of Realtors conspired with two brokerages to keep agent commissions high. The NAR is settling the lawsuits without admitting wrongdoing.
Two changes are coming to how realtors are paid for helping you buy or sell a home.
Before, sellers typically paid 5% to 6% of a home's selling price, with half going to the seller's agent and half going to the buyer's agent.
SUGGESTED: New rules governing how homes are bought, sold will soon go into effect
Selling a $400,000 home could cost the seller $24,000 in commissions.
The first change is that commissions cannot be listed on the Multiple Listing Service, or MLS, but can be advertised elsewhere, or an agent can tell you their commission rate.
And buyers must now sign a contract with a buyer's agent before touring a home, agreeing to pay the agent's commission unless the seller pays it.
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"They’re going to ask you to sign a written agreement that could be as short as one house, one day, and that’s all the agreement is good for. Or it could be more extensive if you want to exclusively work with that realtor," said Jef Conn of the Texas Association of Realtors.
The Consumer Federation of America is concerned that some of these contracts may be too complicated.
"Buyers should make certain they should be able to read and understand the contracts. And if they can’t, its very important they seek assistance from an attorney or other expert," said Steve Brobeck of the Consumer Federation of America.
An analysis by TD Cowen Insights predicts competition between agents could cause commissions to fall 25% to 50%, which would bring them more in line with commissions in other countries.
If rates come down from 5% - 6% to 3% - 4%, that will represent a savings to consumers of $20 to $30 billion a year.
Regardless of the changes, many experts advise people not to buy or sell a home without a qualified agent.
"Ask your realtor how long they’ve been in the business, how many homes they have sold. Make sure you feel comfortable having a conversation with them, because during the process of buying and selling a home, you’re going to talk to your realtor a lot," said Conn.
The Consumer Federation of America recommends buyers ask for a short, touring contract first to see one home to see how they like working with the agent.