Reeder Companies Megan Reeder, left, and Ashlee Davis

It's a new day for home sellers and buyers

Contributed By: Jonathan Bradford and The 411 News Staff

If you are buying or selling a home in Indiana or Anywhere, USA, new rules went into effect August 17 changing the way real estate agents get paid for their services.

Indiana put portions of the rule changes into HEA 1068, a law that took effect July 1.

In October 2023, a federal jury in Kansas City, MO decided that the work real estate agents perform to seal deals between home sellers and buyers, in particular the commissions agents earned amounted to a conspiracy to fix and inflate those commissions.

The case was a class-action lawsuit against the National Association of Realtors and the four largest residential brokerages in the U.S., resulting in $1.78 billion in damages.

Prior to the start of the Kansas City trial, settlements were reached with Re/Max and Anywhere Real Estate (the parent company of Coldwell Banker, Century 21, Sotheby’s International Realty and Corcoran).

In March, the NAR and the remaining two brokerages Keller Williams and HomeServices (owned by Warren Buffett’s Berkshire Hathaway) agreed to a settlement.

Before August 17, home sale listing brokers operated under the NAR ‘offer of compensation’ rule. Commissions were set at 5-6 percent and paid by the seller; then split between the seller’s agent and the buyer’s agent.

The lawsuit was brought by a group of home sellers who objected to paying the buyers’ agents. They also argued the commissions were too high and couldn’t be negotiated.

The settlement doesn’t prohibit NAR and its brokers from asking for the 5-6%, but they cannot display the commission in their Multiple Listing Service (MLS) databases.

Sellers will now negotiate the commissions for their agents.

Buyers will negotiate their own agents’ pay and formalize it in a written contract – the buyer agreement. Indiana law requires the buyer agreement to contain the amount the agent will receive and the contract expiration date.

Indiana law also requires a sellers’ contract with their agents. The sellers’ contract must include the contract expiration date.

Sellers can still offer to pay the buyer agents’ commission and buyers can ask the seller to pay the agent’s commission. If the seller declines, the buyer must pay.

Locally, some applaud the settlement while others are disappointed.

Over the last 20 years, Michelle Graham has purchased homes in Griffith, Hammond, and Highland.

“I don’t think there’s anything wrong with the buyer agreement. It shows transparency. So many numbers are thrown at you when purchasing property and things get convoluted,” Graham said. “It’s important to find a realtor you are comfortable with and driven to help you; rather than base their work off of how much commission they will receive.”

Eliana Martinez, a Hammond realtor believes the buyer agreement will cause more confusion.

“It is scary for the buyers. We need to educate them. Throwing an extra paper law in the mix is even scarier. If they give us realtors a year to gain more knowledge about the law, it would be good for buyers and sellers,” Martinez said.

Realtor Ashlee Davis sees a bumpy road ahead.

“Buyers now having to sign an exclusive agreement before they can tour a home puts the buyer on the defense,” Davis said. “I believe the market will be rocky for three to five years because of the new law. You will see a spike and then a drop before it becomes stable again."

“Losing the offer of compensation will negatively impact home ownership for first-time and lower-income buyers,” said Reeder Companies owner Megan Reeder. “Adding their agent’s commission to the other closing costs will make buying a home very difficult.”

At 6%, a home selling for $200,000 will yield a $12,000 commission, giving each agent $6,000.

Courtney Johnson Rose, President of the National Association of Real Estate Brokers wrote in the August 22 issue of the Port of Harlem, “This can be a challenge for Black homebuyers, who often struggle to save for their down payment. Adding the agent commission could be even more burdensome for the buyers.”

The NAREB is a trade association for minority real estate professionals.

“It will be a major adjustment and shift for agents. I receive calls from agents worried that they won’t survive in the business as buyers' agents,” Rose said.

Story Posted:08/23/2024