New real estate rules for selling homes take effect
Bill Hughes head shot
New real estate rules for homebuyers and sellers went into effect last weekend.
The rules, which impact the way commissions work, stem from a $418 million settlement between the National Association of Realtors and home sellers earlier this year.
The federal class-action lawsuits claimed that homeowners were being forced to pay artificially inflated real estate commissions when they sold their homes.
The rules boil down to two significant changes.
First, under the new rules, homes listed on a Multiple Listing Service, or MLS, will no longer include a seller’s offer to cover the cost of a buyer’s agent’s services.
“That’s the biggest change for us in Western Pennsylvania. Now, we are not allowed to advertise the buyer’s agent’s commission in the MLS,” said Scott Cavinee, a real estate agent for SWC Realty in Uniontown.
A seller can still allow a commission split, but the agreement cannot be listed on the MLS.
Second, home buyers who want to work with an agent will have to sign an agreement up front that details exactly what commission the buyer will pay the agent – including whether it’s through a commission split with a seller’s agent – before working together or touring homes in person or virtually with their agent.
That’s not entirely new, said Beverly A. Herndon, president of the Washington-Greene Association of Realtors, as about a dozen states already required those written agreements.
“Pennsylvania has had a buyer agency agreement since 1999 – we’ve been doing it for about 25 years – so nothing in regard to that should change,” said Herndon.
Traditionally, an agent for a person selling a home would typically take a 5 or 6% commission on a home sale. It was intended to be shared with the buyer’s agent and was considered a standard, if informal, practice.
Armand Ferrara, a real estate agent with SWC Realty in Belle Vernon, noted commission has always been negotiable.
“Commission has always been negotiable,” he said. “Let’s say I’m going to list your house and I’m going to list for 6% commission, but we want to give the buyer agent a part of that commission, maybe 3%. You might say, ‘I don’t want to give the buyer agent anything and I don’t want to give you 6%. Commission is optional; that’s not new.”
Cavinee said sellers should be aware that buyers can still ask the seller to pay some, or all of the fees of their agent.
“If the only offer coming in is a buyer who asks for the seller to cover “X” percent, the seller will do it if he wants to sell that house,” said Cavinee. “It’s like saying, ‘Will you leave that living room suit?’ It’s part of the negotiations.”
If a seller doesn’t agree to pay the buyer’s agent, the buyer is responsible for it, which can impact first-time and low-income buyers who might not have a lot of cash, Cavinee said.
Herndon said it’s important to have a trusted, licensed agent to navigate the complicated process of purchasing or selling a home, which is often the biggest financial purchase a person will make.
Kim Shindle, vice president of communications for the Pennsylvania Association of Realtors, agreed.
“It’s important for home buyers or those selling their homes to understand the important role Realtors play guiding them through home buying or home selling,” she said. “They lend their knowledge about the local marketplace, where each area is different.”
Herndon said it’s too soon to tell what impact the changes will have, but said ultimately, the purpose is to provide transparency “so the consumer is fully informed as to what is required on both sides.”