The already exorbitant cost of purchasing a new home in San Francisco may get even higher for first-time buyers thanks to new commission rules due to go into effect this summer.
Last week, a $418 million settlement agreement by the National Association of Realtors radically reshaped a key part of how homes will trade hands in the U.S. Soon, sellers will no longer have to pay commission fees to both buying and listing real estate agents involved in brokering the deal.
But what’s good for sellers may turn out to be bad for buyers, who will now possibly have to account for an expense they haven’t had to pay for in the past.
The powerful association, which sets guidelines for most home sales in the country, agreed to eliminate its rules on commissions, changing a decadeslong system that required homesellers to pay both buyer and seller commission fees. Pending court approval of the settlement, the new policy is set to take effect as early as July.
Most experts agree that the settlement will be an immediate boon for homesellers. Even though broker commissions are technically negotiable, the norm has generally been 5% to 6% of the sale price. If a house is sold for $1.57 million today—the median price for a single-family home in San Francisco—the seller would have to pay around $95,000 in fees split between the buying and selling agents. With the new rules, half of that bill could be wiped away.
“Sellers win off the bat because they no longer have to pay for something they weren’t really responsible for,” said Avil Soleiman, a Bay Area residential real estate agent for Compass. “But in real estate, everything is negotiable, and nothing is firm until it’s on paper.”
Irrespective of new rules, buyers and sellers might still offer each other concessions to help move a sale along, said Soleiman. For example, in a slower market, sellers could offer to pay for some or all of their counterparts’ agent commissions, even if they’re no longer obligated to do so.
That means home sales negotiations probably won’t shift dramatically overnight because demand still greatly outstrips supply in the region and consumers have more online research tools than ever, according to Danielle Lazier, a San Francisco real estate broker.
