New rules are shaking up the real estate scene in South Carolina, prompting significant changes to how home buyers and sellers negotiate commission fees. These adjustments come on the heels of a $418 million settlement between homeowners and the National Association of Realtors (NAR).
Historically, home sellers were responsible for paying the commission for both the buyer's and seller's agents. Now, sellers have more flexibility, as they can choose what to offer the buyer's agent, which could potentially lead to significant cost savings.
Under the new arrangement, buyers are forced to negotiate separately with their agents, and the commissions are no longer automatically factored from the home sale price. This fundamentally changes the traditional model where sellers would typically cover the real estate commissions.
Gary Pickren, a Midlands lawyer and founding member of the Blair Cato law firm, shed light on how this will work. “Today, more likely what's going to happen is you will agree to pay your agent, the listing agent, and then when the contract is presented, or maybe right before the contract, you as the seller will decide what, if anything, you will pay the buyer's agent,” he explained.
This new arrangement aims to increase transparency and flexibility, benefitting sellers who might find themselves saving thousands on closing costs. According to Vishal Garg, CEO of Better, the mortgage company, "You’re going to see a buy-side price war by next year.”
With the potential for considerable savings, the NAR hopes to promote more negotiation and competition among agents, altering buyer behavior as they search for real estate representation. Pickren, though, has expressed concerns about the transparency of the process and how it could lead to discrimination.
Under these new rules, agents are not allowed to advertise buyer's agent commissions on the Multiple Listing Service (MLS), which means potential buyers may not have all the information they need readily available. “Today, it does not have to be advertised anywhere. It can be hidden," Pickren emphasized.
There are worries this could hamper fair access to real estate, especially for underrepresented groups. Pickren cautioned, “That does bring up the very strong possibility of discrimination—that a seller may decide, I agree to pay for this person's [buyer side], or I won't pay for this person's [buyer side] because of what they look like or where they come from.”
Real estate agents will need to navigate this new marketplace carefully, ensuring clients are well-informed about these significant changes. Taley Hunt, another real estate agent, stated, "I think it's extra important to talk to consumers in a way to educate them, so our approach to how we speak to consumers has been amplified.”
These changes resulted from growing consumer awareness and industry scrutiny over the previous commission structures. Hunt noted, “Commissions and compensation have always been negotiable; that's not new, but a lot of people thought it was new.”
While some buyers might appreciate the freedom to shop around for agents more actively, this could pose challenges for those unfamiliar with the intricacies involved. Buyers, especially first-timers, may inadvertently find themselves without professional guidance.
Concerns expressed by agents like Jill Moylan highlight the risks involved for inexperienced buyers. She believes many might opt for no representation, which could end up being costly for them due to their lack of knowledge about the home-buying process.
South Carolina has had realty practices similar to these rule changes for some time, which may smooth the transition for buyers and sellers. Karen Yip, broker and owner of Yip Premier Real Estate, noted, "Given South Carolina’s prior adoption of buyer representation requirements, the transition here may be smoother than in other states.”
The shifting dynamics have left many wondering how it will affect the market overall. If more buyers forego representation to save some cash, they could miss out on valuable insights and assistance during what is likely the most significant purchase of their lives.
Even so, existing home sales may see some immediate changes, leading to larger shifts down the line as agents adapt to their new roles. While the NAR's settlement reshapes the terrain, real estate professionals like agents and brokers are gearing up for these new challenges.
"I haven't seen a lot of change on my end, but I have seen a lot of people be misinformed about what's going on,” Hunt states, reiteration the importance for agents to clarify the rules to clients. Real estate remains complex, and the success of these new policies will depend on how effectively agents can communicate and navigate these changes.
With growing expectations and adaptations needed, the future of real estate will undeniably look different as new rules take effect. Whether or not these changes lead to meaningful cost savings for buyers and sellers remains to be seen, but one thing is clear: knowledge is power, and agents will need to step up to serve as trusted advisors.
