People selling their homes stand to benefit the most from an overhaul in the way real estate agents get paid, according to housing and property experts in Tampa Bay.
It’s all part of an attempt by the National Association of Realtors to settle a series of antitrust lawsuits that argue the group’s current policies unfairly drive up the cost of selling a home.
The National Association of Realtors has long required agents to advertise a commission rate when listing a home on the Multiple Listing Service, a database Realtors use to find available properties. That commission — usually around 6% — is split between the listing agent and the buyer’s agent once the home sells.
On Friday, the association agreed to scrap that policy and pay $418 million in damages to plaintiffs across the country.
The National Association of Realtors “has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible,” said the association’s interim CEO, Nykia Wright, in a statement Friday. “This settlement achieves both of those goals.”
If the settlement is approved by a judge, buyers and sellers will each be responsible for paying their own agents starting in mid-July.
Sellers will benefit the most, said Lei Wedge, a professor of finance at the University of South Florida Muma College of Business. “They won’t have to take the buyer’s agent fee out of what they get from the sale,” she said.
Some experts speculate that home prices will drop as a result, but Wedge said she doubts most sellers will be willing to pass the savings along to buyers.
Removing commissions from the Multiple Listing Service could leave more room for negotiation instead of defaulting to the standard 6% rate. Analysts from the financial services firm TD Cowen predict that commissions could fall by as much as 25%-50%.
Some buyers may choose not to pay an agent at all to save money. Michael Wyckoff, a managing broker for Engel & Völkers Real Estate in Madeira Beach, fears that will end up hurting the people who need help the most.
“First-time homebuyers, those who have been traditionally underserved in the home ownership market,” he said. “They’re less likely to be able to pay out of pocket.”
He noted that home loans from the Federal Housing Administration and the U.S. Department of Veterans Affairs can’t be used to cover commission.
Reduced profits for real estate agents could lead to a mass exodus from the industry. One report from investment firm Keefe, Bruyette & Woods predicted that changes to the commission structure could eventually cause as many as 1 million agents to abandon the profession.
Those who stay will have to adapt to survive, Wedge said. She predicts some buyers’ agents may switch to charging a flat fee instead of a percentage to scoop up more business. As buyers increasingly turn to online platforms like Zillow to find homes, a new type of agent that just helps with contracts and closings could emerge.
“This changes how we do some of our business but it doesn’t take away the extreme complexities involved in getting a real estate transaction closed,” Wyckoff said. “That’s where our value comes in, and I think some of that’s been lost or swept under the rug with this lawsuit.”
