PORTLAND, Oregon — There are some significant new rules in the real estate market and they mean changes for anyone hoping to buy or sell a home.
As of Saturday, realtors can no longer publish their commission on some of the most popular real estate databases, called multiple listing services or MLS. The change stems from a landmark ruling back in March, when a federal jury found the National Association of Realtors and some major brokerages liable for colluding to inflate commission fees. It resulted in a historic $418 million settlement.
For decades, real estate agents have posted their commissions on MLS sites. Because of this, there were accusations that some buyers’ agents were steering prospective home buyers toward more expensive homes because that would mean a larger commission. A commission is a percentage of a home’s sale price.
Shana O’Brien, broker and owner of Cascadia Northwest Real Estate with locations in Portland, Vancouver, Ridgefield and Washougal, said the change affects databases regulated by the NAR.
“While they regulate a tremendous amount of the industry, they don’t regulate every single facet of it,” said O’Brien.
While MLS websites will no longer be forums for negotiation, she said commission fees can still be posted by other means, for example on social media or their website.
Home sellers have typically paid the commission for a home sale, which was then split between the buyers and sellers agents. Now, the rule change requires a buyer who uses an agent, to sign a written agreement before touring a home. It would make clear that if the seller does not pay commissions to the buyer’s agent, then the buyer would be on the hook to pay it. Touring a home during an open house would not require signing a written agreement.
“If you’re the buyer, and your agent is making $10,000, that $10,000 is part of the price of the house. It's not some secret bonus that the seller is coughing up. It's factored in. So, we're separating it out to say here's the exact amount it is not a secret.
“The reality is the buyer is the only one writing checks,” O’Brien said.
While O’Brien said commissions have always been negotiable, some say the rule change may prompt more sellers to negotiate those fees down or even result in buyers forgoing a buyers agent entirely.
The concern, O'Brien said, was also that homebuyers who are on edge of affording a home may be stretched thin if a seller does not pay compensation, forcing the buyer to fork it over. In a state like Oregon and Washington, which allows a real estate practice called "dual agency," where one agent represents both the buyer and seller, the buyer may opt to forgo a separate buyers agent to sidestep the commission cost. But O'Brien sees it as a big conflict of interest.
The added paperwork for buyers may be an inconvenience to some people, but O’Brien said it’s a positive change, allowing for more transparency and added assurance that the person is serious about buying a home. O’Brien said when someone signs a written agreement before touring a home, if they decide to buy it, they will work with the realtor who showed it to them.
The overarching goal of the rule changes is to make the home buying and selling process more transparent, something O'Brien said the Pacific Northwest has a leg up on compared to other parts of the country.
“In our area, it’s always been transparent in our contracts, and that’s why these lawsuits haven’t been a big deal in our neck of the woods, per se, whereas in other parts of the country where their contract is not as transparent, it’s a very big deal. So, we’re having to make these little changes.”
O’Brien said Washington and Oregon have always had “buyer agency agreements,” more used in Washington and less so in Oregon. But there are parts of the country that don’t have that type of agreement.
She said the buyer agency agreement is a contract between the buyer and their agent, that says if the realtor shows the buyer a home and they purchase it, the real estate agent will get paid. Now, the new rule change requires more transparency with the specific amount of money agents will get paid.
“So the changes feel less drastic to us because we were already very transparent states,” said O’Brien.