(NewsNation) — It happened to stockbrokers. It happened to travel agents. Now, the demise of a locked-in commission for a home buyer’s real estate agent could put the buyer-side of the realty business into chaos.
“You’re going to see a buy-side price war by next year,” Vishal Garg, CEO of mortgage company Better, told Bankrate.
The first shots in that price war may be underway now that a $418 million settlement between homeowners and the National Association of Realtors (NAR) has taken effect.
Under the agreement, home sellers are now only responsible for paying their agent’s commission, typically around 2.5%. The buyer and the buyer’s agent will separately agree on a commission, which will no longer be taken from the sale price.
“In the best-case scenario, consumers are going to shop around for buy-side agents in the same way they shop around for mortgage lenders,” said Garg.
The deal will save home sellers thousands of dollars, but creates a dilemma for a buyer, as the commission for their agent may not be rolled into a mortgage. The government may change the rules and allow Fannie Mae and Freddie Mac mortgages to include commissions, but that change could be months away.
In the meantime, Bankrate lists four strategies to avoid realtor commissions.
- Fly solo. Pound that “for sale by owner” sign into the front lawn. The NAR says 7% of home sales last year were made without an agent. But it is a lot of work.
- Negotiate. Ask potential agents about their commissions up front and compare. You might also gain a bit more leverage if both agents work at the same firm.
- Discount agents. Some firms tout their low commissions, usually 1 to 1.5%. Others work on a flat-fee basis.
- Cash homebuying company. You won’t pay commission, and you’ll close quickly. But you will have to settle for a lower price than you would get with a traditional sale.