Buying and selling homes in SC may change forever after historic realtor settlement. Here’s how

How folks buy and sell homes in South Carolina may soon change because of a historic lawsuit settlement announced Friday.

The $418 million settlement, announced by the National Association of Realtors, effectively ends the standard 6% sales commission — possibly changing who must pay any such commission as well. Some South Carolina housing market industry experts say the changes from the settlement could lead to a more complex home buying process. There may also be fewer first-time homebuyers and minorities able to purchase the kind of home they want or who can afford any at all in South Carolina because of the changes, they say.

NAR lawsuit

NAR has long required home sale listing brokers to detail an offer of compensation upfront to a buyer’s listing agent. That typically ends up as a 6% split between a seller’s broker and a buyer’s agent. Some critics however have compared this setup to that of a cartel, NBC news reports.

The new settlement, if it gets final approval from a federal court, would negate the standard 6% commission. Sellers would no longer be required to propose compensation to potential buyers and their agents, which, in theory, could encourage more negotiation and competition in some markets.

Another rule change from the settlement would require homebuyers to sign a deal with a broker before they start working with one. Doing so is to make sure homebuyers know what their agent will charge for services at the start.

The new rules from the court battle, initiated by a group of Missouri home sellers, are expected to kick in around mid-July if final approval is given.

SC housing market impact

Let’s begin with the part of the settlement that is expected to not impact South Carolina at all — the contract deal requirement.

Nick Kremydas, CEO of South Carolina Realtors, said the Palmetto State has a decades-long legacy of being pro-consumer in the real estate space. As such, South Carolina already has a law similar to the proposed settlement rule change regarding contracts.

“When representing clients in a real estate transaction, South Carolina is one of only 18 states that require the use of written seller and buyer agency agreements,” Kremydas said. “These written agreements provide clarity and transparency for consumers.”

Impact for SC buyers

Karen Yip, broker and owner of Yip Premier Real Estate in Columbia, said that some buyers in the state may be impacted by the end to the practice of requiring a seller to list proposed compensation for a buyer’s agent.

“Now, with these upcoming changes buyers will potentially have to consider how much compensation they’ll need for representation if the seller is not going to offer payment,” Yip said. “That’s an additional cost to the equation.”

Yip said a buyer may have to consider looking at homes in smaller price ranges because of that added cost.

“Or they may need to decide to pursue or not certain houses, depending on if they can afford representation or not,” she said. “It changes the calculus for the buyer, particularly in regard to the loan type they have to consider.”

Jill Moylan, broker and owner of Home Advantage Realty in Columbia, said she’s concerned the change may put more minorities and young, first-time homebuyers at a disadvantage.

“It’s going to be really hard for a first-time homebuyer to come up with the funds for a small down payment of 3-5% and money to pay a buyer agent,” Jill Moylan said. “What’s going to happen, I’m afraid, is they’re going to go without representation and they’re not going to have the education they need about the process.”

Moylan added that she doesn’t believe the settlement will lead to a drop in South Carolina home sales prices through added negotiations and competition over commission, at least for the foreseeable future. South Carolina has had a steady rise in prices the last two years, due in part to insufficient inventory.

“That’s going to have to change before we see any impact in pricing,” she said.

Impact for SC sellers

Some sellers may lose out on some buyers if they don’t list a buyer agent commission, said Morris Lyles, broker in charge of the Northeast Columbia office for ERA Wilder Realty Inc.

“Sellers that choose to not offer a buyer agent commission may be restricting those buyer agents and their buyer clients from pursuing making an offer on their property with buyer agent representation, therefore cutting out potential buyers that will make offers,” Lyles said.

Lyles warns that sellers should prepare for getting possibly lower offers after the changes begin.

“… so buyers will potentially offer less since they are having to come up with another amount for the buyer agent representation,” he said.

Impact for SC real estate agents

As far as Moylan is concerned, the sky is not falling because of the settlement. Skilled and well-educated agents will still get their commissions.

“All commissions are negotiable, but that does not mean I work for free,” Moylan said with a laugh.

Yip agreed that commissions are staying despite the settlement and doubts they’ll drop much in South Carolina either.

“If anything else, this will require buyers and sellers to approach things differently, but people are still going to want representation,” Yip said. “People who offer competent representation will still be compensated. It’s now just going to be an outside discussion between the buyer, seller and broker.”