Home sellers can finally say goodbye to inflated six percent commissions. The big news in the real estate market this month wasn’t the stagnant sales or home prices. The bombshell news for the housing market is NAR’s $418 million settlement proposal to settle litigation over industry commissions.

Stagnant Housing Market Continues

The North Texas housing market continued to stagnate in February. Denton County experienced a 10 percent decline in closed sales for the month compared to last year. Pending sales were four percent lower. The median and average price per square foot of a Denton County home rose one percent year-over-year. The real average price of a typical North Texas home was essentially flat in February, up 0.3 percent.

As a reminder I have been tracking “real” home prices this year to account for distortion of rising land values. The North Texas land grab is still filtering through the nominal home price statistics making home prices appear a bit higher than they really are.

Mortgage interest rates continue to fluctuate around seven percent. That’s keeping a lid on buyer demand and activity while inventory slowly rebounds. We still haven’t seen a big surge in actively listings, but inventory could certainly perk up as we head into the summer.

Bombshell Commission Settlement from NAR

Now for the bombshell commission settlement from the National Association of Realtors. What does it mean? The major news from the NAR settlement proposal means big changes are on the way. It should get cheaper to sell a home when you use a Realtor. According to the settlement proposal, NAR will no longer require MLS listing agents/participants to set compensation for buyer brokers.

This is huge! It means sellers could no longer be paying for the co-op (buyer agent) commission fees which have traditionally been tied into listing agreements. Home buyers could end up paying commission fees for if they want representation when purchasing a home. They could also negotiate with sellers to cover it as a concession, but those co-op commissions would no longer be a set/mandatory fee listed in the MLS.

Buyers will likely need to sign a representation agreement before agents would show them a property. (No one wants to work for free). This will be a big change for both agents and buyers. Many buyers have grown accustomed to having agents at their disposal without formal representation agreements. Under the new rules proposed by NAR that carefree setup will likely disappear. Any rational agent will want a formal representation agreement in hand before spending their time and money to work with a home buyer.

Great News for Home Sellers

The NAR settlement proposal is great news for home sellers. The new rules should translate into lower overall commission fees for sellers. Those traditionally sticky commissions should see a lot more negotiation and scrutiny. The new setup could also complicate things for buyers who want/need representation. Some buyers are experienced enough to navigate the process on their own, but many buyers will have to weigh the costs and benefits of professional representation.

Agents will have to get better at their jobs and justify their worth. Any final settlement will have to be approved by the Department of Justice. Many useless and unqualified license holders may finally decide to exit the industry. That will ultimately be a good thing for consumers and the industry as a whole. As it currently stands there are still too many agents chasing a limited pool of business.

Fleecing by Major Brokerages Should End

Major franchise brokerages could see a big haircut to their profits. Big brokerages have spent a lot of time, effort and capital over the years brainwashing sellers into accepting the six percent model as “traditional” or “standard” when commissions were always supposed to be negotiable.

With the huge increase in home prices, the corresponding inflation of listing fees and buyer agent co-op fees was simply ridiculous. The NAR settlement should put an end to unreasonably high fees pushed by many agents in the industry. As an independent broker, it has been both frustrating and sad to watch so many sellers get taken for a ride. There are still plenty of local & U.S agents who consider a six percent fleecing as their right of passage. Those days should be coming to an end.

If an agent or real estate brokerage tries to sell you on a 6 percent commission fee to sell your home, you should get a second opinion. There are other options available to you. Aaron Layman Properties offers several listing options for you as a home seller. I would be happy to help you avoid those inflated six percent commissions while selling your North Texas home.