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A $418 million settlement will also cause major changes in the real estate industry, namely how brokers and agents handle commission for sales. | FILE PHOTO COURTESY OF UNSPLASHED/TIERRAMALLORCA[/caption]
With broker fees and commissions fully negotiable come August, Delaware real estate brokerages and realtors are preparing to adapt locally.
It all comes about after the National Association of Realtors (NAR) settled a lawsuit this past spring, which will pay out $418 million to those who may have sold homes. But it also includes major changes for the real estate industry.
For decades, home sellers paid both their realtor and the buyer’s agent, and that commission had to be agreed upon before the sale through a public notice. Those commission rates typically range between 5 and 6%.
Now, there will be more room for negotiation – for buyers and sellers – and leading brokers and agents are poised to finetune their value propositions.
As representatives from the Delaware Association of Realtors (DAR) see it, such changes will enhance professionalism and clarity within the industry, benefiting both agents and the public alike. For example, it will no longer be so easy for potential homebuyers to make last-minute requests for showings – at least, not without prior discussion about their agent's services, scope, and how they will be compensated.
“Members of the public are going to need to understand that they need to allow their real estate agent a little more time to do their job properly,” said Andrew Taylor, legal counsel for the Delaware Association of Realtors.
Boasting approximately 4,200 realtor members statewide, in addition to about 500 out-of-state members, the DAR is affiliated with the national association but operates independently. The NAR Settlement agreement covers the DAR and most individual realtor members in Delaware, as well as the regional multiple listing service database, Bright MLS. Real estate agents can operate in Delaware regardless of realtor association membership.
Bright MLS did not respond to requests for comment, but has publicly stated they will be removing compensation fields from listings by Aug. 14.
In anticipation of the new process – which goes into effect Aug. 17 – the DAR has been updating its suite of forms available to members, including its listing agreement, buyer agency agreement and agreement of sale.
However, it will be up to each real estate brokerage to determine how they react to the settlement agreement itself, Taylor said. Fortunately, he added, Delaware law already allows for different brokerage models to play out in the competitive marketplace.
This isn’t the first time the industry has experienced change, and the best agents have always made the case for what they bring to the table, with many already using a buyer-agency agreement. In any case, Delaware realtors are resilient, said DAR CEO Wesley Stefanick who previously weathered downturns in the economy and the marketplace.
“We're going to continue to provide as much service and benefit as we can to all of them to continue to do well in their businesses,” Stefanick said. “They are all small business owners, and that's something important for everyone to understand. They're independent contractors for the most part, and they work day in and day out to make sure their clients are happy.”
When news of the NAR settlement initially broke, industry followers questioned what this might mean for real estate practitioners and the housing market: Could lower real estate commissions lead to lower housing prices? Might some agents choose to leave the field? Would buyers and sellers pause their processes until after the changes went into effect?
It’s somewhat a waiting game to see what shakes out, both nationally and locally, according to DAR President George Thomasson. But in Delaware, he added, the spring and summer months have been “business as usual” for the residential real estate market.
“We don't have a crystal ball on pricing, as far as home sales or the price of homes. This settlement won't change that at all,” Thomasson said. “It's market value – which translates into what the public is willing to spend – that's what dictates our markets. And so, when you talk about the way an agent is compensated, that's not going to have any effect whatsoever on the price of homes.”
In the meantime, consumers are encouraged to ask questions and have patience, while working with the real estate professionals brushing up on this new way of business.
“Purchasing real estate, selling real estate is very complicated. It's not like walking into a hardware store and picking out a hammer,” Taylor said. “It's a very complicated process and you really need a professional to help guide you through that process.”
