Middlemen Get Squeezed Again: This Time, It’s Real Estate Agents’ Turn

And Some Shenanigans At the BLS

The real estate industry in the United States is undergoing a profound transformation due to a series of legal and regulatory changes initiated by the National Association of Realtors (NAR) as part of a $418 million antitrust settlement.  These changes, which officially took effect on August 17, 2024, mark the most significant overhaul of the real estate market in at least a century and are expected to drastically alter how Americans buy and sell homes, as well as how real estate agents conduct business. 

Historically, the standard practice in real estate transactions involved sellers paying a commission fee -- typically 5% to 6% of the home’s selling price -- which was then split between the seller's agent and the buyer’s agent.  This practice, however, has long been criticized for inflating home prices and creating conflicts of interest, as agents might steer buyers toward properties with higher commission rates.

As part of the settlement, two major rule changes have been implemented.  First, the inclusion of agents’ compensation on multiple listing services (MLS), the centralized databases used by realtors, has been prohibited.  This change aims to eliminate the practice of “steering,” where agents might prioritize properties based on the commission they would receive rather than the buyer’s best interests.  Second, real estate agents must now have buyers sign a legally binding representation agreement before beginning to tour homes.  This agreement informs buyers that they may be responsible for paying their agent’s commission if the seller does not cover it, and emphasizes that these commissions are negotiable.

The implications of these changes are far-reaching.