“The 6% commission on buying or selling a home is gone after Realtors association agrees to seismic settlement”

“Should you sell your home now or wait for the Realtor settlement this summer?”

“The NAR settlement could slash home prices for many Americans”

“The way Americans buy and sell homes is about to get turned on its head”

These have been the headlines at CNN over the last 2 weeks in regards to the proposed National Association of Realtors (NAR) settlement so we knew we needed to come to you with clarity on what is actually happening, what is predicted to happen and how this will affect buyers and sellers specifically in the Greater Milwaukee Area.

Here is a simplified breakdown of the proposed changes if you have no idea what we are talking about or need a refresher:

• NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS (Multiple Listing Service). The change is slated to go into effect in mid-July 2024.

• After this new rule goes into effect, listing brokers and sellers could continue to offer compensation for buyer broker services, but such offers could not be communicated via the MLS platform.

• MLS participants acting for buyers would be required to enter into written agreements with their buyers before touring a home.

Using the 4 click-baity headlines above we will clarify and explain how this effects you, as a consumer 🙂

1. The 6% commission on buying or selling a home is gone after Realtors association agrees to seismic settlement
First things first, the commission paid to a realtor has always been and will always be negotiable. You have never had to use a realtor to sell a home or buy a home, similar to how you don’t have to use a CPA to file your taxes. But you choose to pay for a service because you see or have seen the value that it provides.

For context: 6% of the purchase price has been a common (but never required) amount of commission paid by the seller to the realtor(s) in a transaction. In the Greater Milwaukee Area the median amount given to the buyer’s realtor of that 6% commission is roughly 2.4%, leaving the seller’s realtor with the remaining 3.6%.

So while commission paid by seller will be solely between them and the realtor they hire going forward, sellers can still choose to offer compensation to the buyer for them to use towards paying their realtor and/or other fees that come with purchasing a home.

2. Should you sell your home now or wait for the Realtor settlement this summer?
A major aspect of the on-going discussions in our office over the past couple of weeks has been IF most sellers are still going to offer to pay a buyer’s realtor once this settlement is passed. We know some sellers will refuse to offer compensation to the buyer side, we know some sellers will choose to offer lower than 2.4% and we also know some sellers will even choose to offer higher compensation to the buyer side to incentivize buyers to offer on their home.

There are pros and cons to any choice you make, so we're here to take a deep dive into what these could mean for you and your specific home/life situation when the time comes to sell.

3. The NAR settlement could slash home prices for many Americans
Just like any other good or service, home prices are determined primarily by supply and demand, not by how high of a commission is being offered. In our current local market we are experiencing high demand from buyers and because of this, sellers don’t have to work very hard to provide an incentive. If sellers choose to not offer compensation to the buyer to help them pay their realtor’s commission and/or other fees that come with a home purchase, less buyers may be eligible to offer on certain homes, which could ultimately bring home prices down given a smaller buyer pool.

4. The way Americans buy and sell homes is about to get turned on its head
There will be change, but in the end we only foresee it advantaging you and the entire real estate industry. While we have had Buyer Agency Agreements in the State of Wisconsin for the last 15 years, the change will be that this agreement has to be signed right away, prior to showing a client any homes.

This small change will create a higher level of professionalism since a realtor won't be able to simply request a showing, hop in their car and show a home without sitting down and having an honest and educational chat about the buying process, compensation for their services, the current market, etc. Ultimately these new changes will create stronger and more qualified offers for sellers and smoother transactions for all parties involved.

This is why we have always had and will continue to have our coffee/video consults with our buyers before any house hunting begins!

If you read this far, are intrigued at the potential changes to come and want more context…here is a podcast episode talking to one of the real estate reporters from the New York Times:

https://www.biggerpockets.com/blog/real-estate-920

Know we are embracing this necessary change and are hopeful for the positive outcomes it will bring! The goal of the settlement is to provide the upmost clarity and transparency in the real estate industry and we are excited to continue to serve you as your educator, counselor and negotiator throughout both the buying and selling process!