When news broke about the National Association of Realtors (NAR) settlement, many home sellers called their real estate agents wondering: Am I off the hook to pay you? This article will delve into what this settlement means for home sellers, breaking down its impact in simple terms.
Why It Matters
Traditionally, home sellers have been responsible for paying a 5-6% commission fee, which is then split between the buying and selling agents. This means that if you sell a house for $300,000, you could be looking at paying $15,000 to $18,000 in commissions. The NAR settlement, however, is shaking things up. According to the settlement, while sellers can still offer to pay both broker fees, buyers should now be compensating their brokers.
The Impact on Buyers and Sellers
This change brings a significant shift in how commissions are handled. Some home buyers, especially first-time buyers, might hesitate to pay a broker fee on top of a down payment and other costs. Real estate agents, like Joey Oslund from the Twin Cities, suggest that offering to cover the buyer’s broker fee could help close a deal. However, many sellers, who are also often buyers, may not be willing to add this expense, preferring to save their money for their next home purchase.
Steve Brobeck from the Consumer Federation of America recommends that sellers offer no more than 2% of the home’s sale price in concessions. Buyers can then decide to use those funds to pay their agent or cover the cost themselves.
The Reality Check
A 2023 NAR report revealed that 15% of consumers were unaware they could negotiate the commission. This percentage doubles to 31% among younger buyers, ages 24-32. Some real estate companies have already moved away from traditional commission structures. For example, Kris Lindahl Real Estate in the Twin Cities has eliminated agent fees, while others, like Home Avenue in Golden Valley, charge a flat fee.
By August 17, the databases brokers use will no longer include offers of compensation, signaling a significant change in the industry. According to Brobeck, this shift will occur gradually and unevenly, leading to a lot of confusion.
The Cost of Selling a Home
Selling a house involves various costs, with commissions often being the largest expense. According to a survey conducted in May 2024, the median expenses for selling a home include:
- Seller’s agent commission: $11,136
- Buyer’s agent commission: $10,467
- Repairs: $10,000
- Closing costs: $8,000
- Buyer concessions: $7,200
- Moving costs: $3,300
- Marketing costs: $2,300
- Staging costs: $2,300
What’s Next for Sellers?
The big picture here is that selling a house is expensive, and commissions are typically the largest cost. Brobeck anticipates that the NAR settlement will drive commissions closer to 4% of the home sale price. Additionally, closing costs, which average about 3% of a home’s purchase price in Minnesota, will continue to affect a seller’s profits.
The bottom line is that the NAR settlement opens the door for sellers to potentially keep more profit from their home sales, but it also introduces new challenges and uncertainties in the real estate market.
