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<figure class=""></figure><figure class=""></figure><figure id="figure-e4tpkpn6frm071l79i" class=""><img id="e4tpkpn6frm071l79i" src="https://cdn.durable.co/blocks/3a2ShgvwNLNgBr8qF9UH3cNzcO39FVfSNkVaDIIvLDAdhqpC2444WoBm3z0hZKVz.png" alt="person using laptop on white wooden table" title="person using laptop on white wooden table" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl selected" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://cdn.durable.co/blocks/3a2ShgvwNLNgBr8qF9UH3cNzcO39FVfSNkVaDIIvLDAdhqpC2444WoBm3z0hZKVz.png" data-mce-style="aspect-ratio: 16/9; object-position: center center;" data-mce-selected="1"></figure>Top real estate journalists from the <a data-mce-href="https://nytimes.com/" href="https://nytimes.com/">New York Times</a> and the <a data-mce-href="https://wsj.com/" href="https://wsj.com/">Wall Street Journal</a> published four terrific articles on the changing real estate commission rules and what it means for buyers, sellers, and agents.&nbsp;<ul><li><a data-mce-href="https://www.nytimes.com/2024/08/16/realestate/home-buyers-sellers-rules.html" href="https://www.nytimes.com/2024/08/16/realestate/home-buyers-sellers-rules.html" target="_blank" rel="noopener">Buying or Selling a Home? The Rules Have Changed.</a> by <a data-mce-href="https://www.linkedin.com/in/debra-kamin-89850b13/" href="https://www.linkedin.com/in/debra-kamin-89850b13/">Debra Kamin</a>, New York Times, Aug. 16, 2024.</li><li><a data-mce-href="https://www.nytimes.com/2024/08/16/realestate/realtor-commission-fee-rules.html" href="https://www.nytimes.com/2024/08/16/realestate/realtor-commission-fee-rules.html" target="_blank" rel="noopener">Realtors Resist Changes in Commission</a> by <a data-mce-href="https://www.linkedin.com/in/debra-kamin-89850b13/" href="https://www.linkedin.com/in/debra-kamin-89850b13/">Debra Kamin</a>, New York Times, Aug. 16, 2024.</li><li><a data-mce-href="https://www.wsj.com/real-estate/real-estate-commission-changes-homebuying-cf5d2448" href="https://www.wsj.com/real-estate/real-estate-commission-changes-homebuying-cf5d2448" target="_blank" rel="noopener">So Much About Real-Estate Commissions Just Changed. Here's What to Know</a> by <a data-mce-href="https://www.wsj.com/news/author/nicole-friedman" href="https://www.wsj.com/news/author/nicole-friedman" target="_blank" rel="noopener">Nicole Friedman</a> and <a data-mce-href="https://www.wsj.com/news/author/laura-kusisto" href="https://www.wsj.com/news/author/laura-kusisto" target="_blank" rel="noopener">Laura Kusisto</a>, Wall Street Journal, August 14, 2024.</li><li><a data-mce-href="https://www.wsj.com/real-estate/new-real-estate-commission-rules-impact-9a880731" href="https://www.wsj.com/real-estate/new-real-estate-commission-rules-impact-9a880731">Cutting Fees. Going It Alone. New Rules Are Changing How We Buy and Sell Homes.</a> by <a data-mce-href="https://www.wsj.com/news/author/nicole-friedman" href="https://www.wsj.com/news/author/nicole-friedman" target="_blank" rel="noopener">Nicole Friedman</a> and <a data-mce-href="https://www.wsj.com/news/author/laura-kusisto" href="https://www.wsj.com/news/author/laura-kusisto" target="_blank" rel="noopener">Laura Kusisto</a>, Wall Street Journal, August 16, 2024.</li></ul>As the founder of SmartBuyers AI, a startup dedicated to educating and guiding homebuyers, I’ve been closely following the recent rule changes in the real estate industry. I’ve reviewed the legal documents related to the cases leading up to the NAR settlement and engaged in extensive discussions with agents and leaders at major brokerage firms.Last week, the confusion and anxiety within brokerage firms were palpable. While industry insiders anticipated the changes coming on August 17th, homebuyers and sellers were largely unaware. When the articles were published, I was eager to read the comments from WSJ and NYT subscribers, seeing them as an early indicator of how buyers and sellers perceive the value of agents under the new rules. By Monday morning, there were 2,200 comments in total, and I read most of them.<blockquote>The general sentiment of the commenters is that the real estate industry is outdated, overpriced, and in need of significant change. Technology and market competition should drive down fees, improve transparency, and support new business models.</blockquote>Here is a summary of the key issues and concerns expressed by buyers. The TL;DR: The industry has long popularized the Latin phrase Caveat Emptor — buyer beware. Perhaps a new Latin phrase will soon enter our lexicon: Caveat Agens Emptoris — buyer agent beware.<h3>Widespread Skepticism of Buyer’s Agents</h3><ul><li>Value Perception: A significant majority of buyers are skeptical about the value that buyer’s agents provide. Many feel that agents do not add enough value to justify their fees, particularly with the widespread availability of online tools like Zillow.</li><li>Preference for Direct Negotiation: There is a growing preference among buyers to negotiate directly with sellers or the seller's agents, bypassing buyer’s agents entirely. Buyers are increasingly confident in handling transactions themselves, especially with legal assistance.</li></ul><h3>Interest in Alternative and Cost-Saving Approaches </h3><ul><li>Flat Fees and DIY Methods: Many buyers expressed interest in flat-fee services or handling the process themselves, with some opting to hire real estate attorneys instead of agents. This trend indicates a demand for more flexible, cost-effective options in the market. </li><li>Financial Scrutiny of Agent Fees: For the first time, buyers are scrutinizing the financial value of having an agent, especially since they might now have to pay the agent’s fees directly. This financial burden is a significant concern, particularly for first-time buyers who may struggle with upfront costs.</li></ul><h3>Confusion and Complexity Concerns&nbsp;</h3><ul><li>New Rules Create Uncertainty: The recent changes to commission structures have introduced confusion among buyers. Many are unclear about how the new rules will affect their purchasing power and the overall process of buying a home. This confusion could present an opportunity to educate and guide buyers through the process more effectively.&nbsp; </li><li>Potential Additional Costs: Buyers are worried that these changes will result in additional out-of-pocket costs, complicating their financial planning and potentially deterring them from using traditional real estate agents.</li></ul><h3> Positive Experiences and the Role of Skilled Agents </h3><ul><li>Complex Transactions: While many buyers are critical of agent fees, there is still recognition that skilled agents can add significant value, particularly in complex transactions. This suggests a niche market for high-quality, specialized real estate services.&nbsp; </li><li>Negotiation Support: Some buyers acknowledged the benefits of having an experienced agent to negotiate deals, handle paperwork, and navigate the intricacies of real estate transactions. However, this group is in the minority. </li></ul>

Early Sign of Buyer Sentiment Toward Agents After Commission Rule Change.

<figure id="figure-in17z280krlza8qi0e" class="selected"><img id="in17z280krlza8qi0e" src="https://cdn.durable.co/blocks/28bJHL19zf25OSXk7Wp2jFXRpLIYo2dUEcCSFUATOd5B9J1wSflaGlb1yDkm4SQG.png" alt="unknown person using laptop" title="unknown person using laptop" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://cdn.durable.co/blocks/28bJHL19zf25OSXk7Wp2jFXRpLIYo2dUEcCSFUATOd5B9J1wSflaGlb1yDkm4SQG.png" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure>Homebuyers across the US who are working with real estate agents are starting to have uncomfortable conversations with their agents.&nbsp;Agents are informing clients that on August 17, 2024, new rules and guidelines on broker commissions will take effect. Buyers will be asked to sign a buyer agreement or amend an existing one. Buyers who agree to the new terms could be responsible for paying their agent’s commission. For a $500,000 home at the standard 3% commission, this would be $15,000.What caused this change and how can homebuyers be prepared?<h3>Lawsuits, a Settlement &amp; New Rules </h3>After a flurry of lawsuits by home sellers, a $1.8 billion jury verdict, and a settlement by the National Association of Realtors (NAR), real estate brokerages and their agents are scrambling to understand and comply with new rules and guidelines.Although the settlement does not protect every brokerage and real estate agent in the US, the impact of the settlement and the resulting changes to the industry will be widespread.The lawsuits were filed by home sellers who alleged that NAR and large brokerages colluded to artificially inflate real estate commissions. The plaintiffs cited the Participation Rule as evidence. This rule requires listing brokers to offer compensation to the buyer’s broker to list a property on the Multiple Listing Service (MLS). The MLS is a shared database of properties for sale used by agents.Here’s how the Participation Rule works: When a seller meets with an agent who wants to list their home, the prospective listing agent will explain that the house will be listed on the MLS. This ensures that buyers’ agents have access to the property details.The MLS also provides the property information directly to search portals such as Zillow, Realtor.com, Homes.com, and brokerage websites.The property listing has a commission data field for buyers’ agents, informing them of their compensation if their buyer becomes the purchaser. The compensation fee is typically 2.5% to 3% of the sale price.The Department of Justice opposes the Participation Rule because it stifles "price competition and innovation in the market for brokers’ services.”In response to the $1.8 billion jury verdict and a flurry of copycat lawsuits, NAR announced a settlement to end litigation against the organization, its state associations, and NAR members. NAR issued rule changes and guidance, but these are not final until the court approves them on November 26, 2024. The DOJ is also expected to offer suggestions.NAR tackled the thorny issues of buyer agent compensation. Here are five key principles that are new to the industry and will be required beginning August 17, 2024:1.&nbsp; Sellers may not include broker agent compensation on the MLS. 2.&nbsp; Buyers must enter into a written buyer agreement with their agent before touring homes. 3.&nbsp; The buyer agreement must specify the compensation and cannot be open-ended. For example, an hourly rate, a flat fee, or a fixed percentage is acceptable. An unacceptable statement would be “buyer broker compensation shall be whatever the amount the seller is offering to the buyer.” 4.&nbsp; A buyer’s agent may not receive compensation that exceeds the amount specified in the agreement.5.&nbsp; The agreement must state that broker fees and commissions are fully negotiable and not set by law. <h3>Impact on Homebuyers </h3>These changes are going to have a major impact on homebuyers.One positive impact will be greater communication between buyers and agents. Unlike today, where most buyer agents don’t enter into a contractual relationship with buyers before showing homes and don’t discuss commissions, beginning August 17, 2024, both are required. The buyer and their agent must sign a buyer agency agreement, and they must discuss agent compensation – how much and who pays.The Buyer Agent AgreementA legally binding agreement before touring requires a level of commitment between the parties. Some buyers today feel no sense of obligation to a buyer agent and will tour homes with any agent who provides access. While that may feel convenient for the buyer, it ultimately does not serve the needs of a serious buyer.Buyers who work with a great agent will gain a deeper understanding of the market and become more efficient with their home search.Home touring educates buyers. They discover what resonates with them in a house and the surrounding neighborhood. When they see multiple homes with a great agent who is familiar with the area, &nbsp;the buyer will learn about the pros and cons of the house and area. The agent will suggest other properties or neighborhoods that may also suit the buyer’s needs.Some buyers may not feel ready to commit to an agent because they are too early in the home search process. Since a written agreement is now required before they tour a home, these buyers can see homes by either attending open houses or directly contacting the listing agent.Financial CommitmentMost buyers don’t think about their agent’s compensation because buyers do not directly pay their agent. Instead, payment to the buyer agent’s brokerage is made during closing and is one payment among many from the seller’s proceeds. The commission payment is included in the sale price of the house.Beginning August 17th, this will change.&nbsp;When a buyer meets with an agent to discuss representation, the agent will explain that sellers are no longer required to pay the buyer’s agent commission when a house is listed on the MLS.&nbsp;Here is where buyers will be blindsided. If a seller is unwilling to pay all, or part, of the buyer’s agent commission, the buyer will have to pay the agent the difference. This is a huge change from today, where buyers don’t even think about having to pay their agent. The implications for buyers, agents, and others in the real estate industry are significant.<h3>Guidance for Buyers </h3>Understand the four key commission changes:1.&nbsp; Sellers who work with a listing agent are no longer expected or required to pay a commission to the buyer’s broker. 2.&nbsp; If a seller is willing to pay a buyer broker’s commission, the fee will not be published on the Multiple Listing Service (the MLS shares property information to agents and listing portal sites like Zillow and Homes.com). This shifts the responsibility of determining the buyer agent’s commission to the buyer and their agent. 3.&nbsp; Buyers’ agents may not show properties to a buyer unless the buyer and agent have entered into a written agreement. 4.&nbsp; The Buyer Agency Agreement will detail how much the agent will be paid. For example, the fee may be a percentage of the sale price, a flat fee, or an hourly rate. It will also explain how the agent will be paid. For example, if a seller is willing to pay less than the amount specified in the Agreement, will the buyer pay the difference at closing? If you choose to work with an agent:●&nbsp; Decide how much you are willing to pay the agent if the seller does not pay the full commission.●&nbsp; Screen prospective agents. If you are willing to pay for your agent, determine which agents are worth considering before meeting with them. Since you’re agreeing to the possibility that you’ll be paying their commission, take the consultation seriously and meet with three agents who have expertise in your market and whom you think you’ll work well with. You’ll have a much better experience if you respect your agent’s knowledge and enjoy working with them. ●&nbsp; Contact the agents before you meet with them and ask if they are flexible on their compensation. Many top buyer’s agents will not consider being paid less than 2.5% or 3% of the sale price. If this is too high, you should know this before your meeting.●&nbsp; Consider a flat fee compensation. The brokerage industry has been wedded to compensation that is a percentage of the sale price. However, the changes mandated by NAR have opened the door to alternative compensation. Some buyers feel that commissions create a perverse incentive by rewarding agents to direct buyers to more expensive homes or not aggressively negotiating a lower sale price. If this resonates with you, discuss a fair flat fee instead of a percentage commission. By understanding these changes and preparing accordingly, homebuyers can navigate the new landscape of real estate transactions more effectively.Rich Hopen is the Founder of <a data-mce-href="https://smartbuyers.ai/" href="https://smartbuyers.ai/">SmartBuyers AI</a>, a community that empowers homebuyers. <a data-mce-href="https://smartbuyers.ai/contact" href="https://smartbuyers.ai/contact" target="_blank" rel="noopener">Join us</a>.

Homebuyers Confront New Commission Rules

<figure id="figure-fxg4gi6hvolx0t6ogk" class=""><img id="fxg4gi6hvolx0t6ogk" src="https://cdn.durable.co/blocks/asYQgiG0KxbP8x0feSlUt3JPCxaqSI4vJuZeplB0pFSPcQHscAkUQ0bH3sTQl3Nu.png" alt="happy man and woman buying first house" title="happy man and woman buying first house" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: undefined undefined;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://cdn.durable.co/blocks/asYQgiG0KxbP8x0feSlUt3JPCxaqSI4vJuZeplB0pFSPcQHscAkUQ0bH3sTQl3Nu.png" data-mce-style="aspect-ratio: 16/9; object-position: undefined undefined;"></figure>If you just started to look for a home, if you found one and are in the middle of the transaction, or if you just closed on your home, how are you feeling about the homebuying process? My guess, not so great.I know this because I’ve recently talked with lots of homebuyers and here’s a small sample of what I heard:&nbsp; &nbsp; &nbsp;"The mortgage process was very unsettling. It was like a roller coaster ride in the dark."&nbsp;&nbsp;&nbsp; &nbsp; &nbsp;"Making offers in this competitive market is emotionally exhausting. Waiving or limiting inspections and appraisals was unnerving and I wasn’t really sure what risk I was bearing." &nbsp; &nbsp; &nbsp;"It was difficult determining which inspection issues were major. I didn’t know if the agent was minimizing the problems just to move the sale forward. I guess I didn’t really trust her."&nbsp; &nbsp; &nbsp;"Wiring money was a bad experience. I received wiring instructions from my agent and lender. The forms were different and showed different accounts." I have been a real estate broker for 25 years and I’ve read homebuyer surveys by the National Association of Realtors documenting buyer frustration. I was appalled by what I heard.Why are buyers uninformed? Why do they feel intimidated and ignored by real estate professionals?Buyers are everything! Without them, the $94T residential real estate industry would come to a screeching halt. Yet, buyers begin the home buying process not knowing what’s ahead of them. They aren’t even sure of the best way to start.▶︎&nbsp; &nbsp;Do they start searching for homes and go to open houses? ▶︎&nbsp; &nbsp;Do they find a real estate agent? ▶︎&nbsp; &nbsp;Do they find out how much they can afford by talking with a lender? ▶︎&nbsp; &nbsp;Or do they search the internet and try educating themselves?Uncertainty and not having a clear roadmap is NOT how buyers should begin their largest and most significant investment.And, to add fuel to the fire, there is another layer of ambiguity that is going to make it even more difficult for buyers. The commission structure for buyers agents is changing.&nbsp;<figure id="figure-imuq84038lx0tu35k" class=""><img id="imuq84038lx0tu35k" src="https://cdn.durable.co/blocks/136x0INXuB2nQQBV8pYir5rMiMuPHRxDWmg1Qzl0OIcLDGQAHg9tsUZG08e87ruC.png" alt="New York Times article about real estate commission lawsuit settlement" title="New York Times article about real estate commission lawsuit settlement" class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: undefined undefined;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://cdn.durable.co/blocks/136x0INXuB2nQQBV8pYir5rMiMuPHRxDWmg1Qzl0OIcLDGQAHg9tsUZG08e87ruC.png" data-mce-style="aspect-ratio: 16/9; object-position: undefined undefined;"></figure>On August 17, 2024, buyers will have to sign a written agreement with their agents. The agreement will explain that buyers might have to pay their agents the commission if the seller does not. For example, a standard 3% commission to the buyer's agent for a $500,000 house is $15,000.Faced with the possibility of paying a fee like this, many buyers will buy a home without an agent or they will hire an agent for a discrete task, such as preparing an offer or negotiating inspection repairs. No question, buying a home is a complicated process. However, I believe every home buyer deserves to have a great home buying experience. That’s why I built SmartBuyers AI.I began with a core principle: The business will be 100% focused on what’s best for homebuyers. The platform will educate buyers so they are fully informed about the process, the professionals, their transaction, and the foundational changes occurring to the brokerage industry.The platform will help buyers in 3 ways.&nbsp;1)&nbsp; Get immediate expert answers. Buyers will get answers, 24/7, from top real estate professionals. Each market will have 5 top agents available to provide answers. An agent will have their own chatbot trained on national, state, and local real estate information. Their chatbot will provide advice and give the agent’s perspective. Talking with the chatbot will be just like talking with the agent. 2)&nbsp; Hire the right agent. All the agents on SmartBuyers are highly vetted, but not every qualified agent is right for every buyer. Buyers can schedule a live consultation (video or audio) and discover which agent they want to work with. The buyer's identity is not shared with the agent before the call. I respect the buyer’s privacy. 3) Know where you are in your transaction. Once buyers have a house under contract, they will have a “You are here!” interactive timeline that will show them exactly where they are and what happens next.Join other homebuyers and take control of your homebuying experience. Sign up now to become a <a data-mce-href="https://www.smartbuyers.ai" href="https://www.smartbuyers.ai" target="_blank" rel="noopener">SmartBuyer</a>.

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Early Sign of Buyer Sentiment Toward Agents After Commiss...

Homebuyers Confront New Commission Rules

Transforming Home Buying Into a Great Experience