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Realtors are nervous: ‘It could be the worst thing ever’

CNN  —  Lower pay, intense competition for clients and a massive exodus of realtors. Those are some of the predictions that real estate professionals are making, anxiously, after the recent settlement from the National Association of Realtors with homebuyers, which establishes new rules for brokers that could upend the way Americans buy and sell their homes. On Friday, the NAR announced that it had agreed to change some of its guidelines that critics said were behind inflated home prices. If approved, the settlement will likely lower commissions brokers have charged sellers and shared with buyers’ agents. Experts say it will likely dramatically change how some real estate professionals get paid for their services. Feeling the ground shift under them, some who are helping people buy and sell homes say they aren’t sure what these changes will mean and whether they will damage the way they make their living. Some are holding out hope for the best in an uncertain time. “It could turn out to be a good thing,” said Belinda Tucker, a Realtor who started her own real estate firm last year in Moore County, North Carolina. “Or it could turn out to be the worst thing ever.” A potential payment shift Under the current system, most home sellers pay a commission, usually 5% or 6%, upon selling their home. The commission is generally shared between the agent representing the seller and an agent representing the home buyer. Single family homes in a residential neighborhood in San Marcos, Texas, US, on Tuesday, March 12, 2024. The National Association of Realtors is scheduled to release existing homes sales figures on March 21. Photographer: Jordan Vonderhaar/Bloomberg via Getty Images Jordan Vonderhaar/Bloomberg/Getty Images Related article The way Americans buy and sell homes is about to get turned on its head Groups of sellers brought lawsuits against the NAR for this practice, alleging it was a violation of antitrust laws. Under the proposed terms of the settlement, sellers’ agents will no longer be required to offer commissions to buyers’ agents. That means some buyers’ agents will probably have to find another way to get paid. “I don’t know how we’re going to negotiate, but we’re going to have to because we have to get paid,” said Tucker. The new rules also require agents to enter into written agreements with their buyers. Many of the Realtors who spoke to CNN said they plan to stipulate that if a home seller does not agree to pay their commission, their buyer is on the hook for payment. “I have cleaned houses; I’ve moved people out. Anything to be helpful,” said Tucker. “Nobody works for free.” However, many first-time buyers, already shelling out their savings for what is often the largest purchase of their lives, may be unwilling or unable to pay thousands of dollars more for their Realtor. Some may look to negotiate their agent’s commission down to 2%, 1% – or possibly less – perhaps in the form of a flat fee. In fact, the settlement is expected to slash overall real estate commissions by 25% to 50%, according to an estimate from TD Cowen Insights. NAR currently counts more than 1.5 million members, but some Realtors and other experts predict that lower pay and increased competition may push many members out of the profession. Jing Pu, the CEO of Edgewise Realty, a real estate technology company, said the added expense may spur more home buyers to turn to internet listing sites and other technologies for their home searches rather than relying on a Realtor. “We think a lot of buyer agents may ultimately shift to selling – to the listing agent side,” he said. A good deal for home buyers? Many experts predict that the new rules will dramatically slash the cost of buying and selling a home since sellers often bake their commission fees to the overall price tag of their home. A price drop would be a much-needed reprieve for those looking to buy a home: the median sales price of a new home has surged 21% since January 2020. Homes in Aldie, Virginia, US, on Tuesday, Feb. 20, 2024. Nathan Howard/Bloomberg/Getty Images Related article The NAR settlement could slash home prices for many Americans However, some Realtors estimate that the opposite will be true now that homebuyers are tasked with paying their own agents. “This is just going to be an added expense for buyers who are already really struggling to get into this housing market,” said Brita Kleingartner, a Realtor in Los Angeles, CA. “We’re at an all-time high for housing prices and affordability and this is just going to make it more difficult for buyers.” Though under the new rules, agents are still allowed to negotiate a deal in which sellers pay a buyers’ agent fee, Kleingartner pointed out that in a competitive market like Los Angeles, where she works, most homes go into bidding wars. “Buyers with extra down payment money are going to offer to pay their buyers’ agent commissions themselves,” she said. “I think it’s just going to add to the competitive nature of this market.” Silver-lining? Tucker said the new rules and the discourse surrounding commissions make it feel like “Realtor is a bad word.” “99% of us are your neighbors. We go through the same things that any buyer and seller do,” she said. “Just like you pay your hairdresser or you landscaper or anybody else for a service, we do provide a good service.” But not all agents think the new rules spell doom for their industry. Crystal Tran, a Realtor in Chicago, said that she thinks asking buyers to agree to payment will “weed out the people who are not serious about homebuying.” “I think there’s a lot of confusion out there,” Tran said. “But this is going to make us refine our business to really show our clients our value.” When the dust settles, Tucker said she feels “confident” that her business will still be standing. “Will we be as busy with buyers? I’m not sure.”