Here’s what Realtors agreement to slash commissions means to Fort Worth housing market

Finally, homebuyers in the U.S., including those in Texas, are catching a break. In certain transactions, it could be big.

The National Association of Realtors, a powerful trade group, agreed a week ago to settle an array of lawsuits by paying $418 million in damages and to eliminate its rules on commissions. The agreement, which will be filed in the coming weeks, still needs approval from a federal court. It would bring to a close claims from home sellers that the association’s rules forced them to pay exorbitant fees.

“NAR exists to serve our members and American consumers, and while the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” NAR President Kevin Sears said in a press release.

Americans pay roughly $100 billion in real estate commissions annually, and real estate agents in the United States have some of the highest standard commissions in the world, according to a report in the New York Times.

The 6% commission, a staple of real estate transactions for years, may end by the summer. This could mean lower prices listed for homes as real estate agent commissions drop by as much as 30%, economists estimate.

“REALTORS® have always adapted to the ever-changing real estate environment, and this is no different,” the Greater Fort Worth Realtors Association told the Star-Telegram. “Our members’ dedication to serving their clients with the highest ethical standards will remain unchanged.”

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What exactly is the 6% commission we pay real estate agents?

In the U.S., most agents ask for a 5% to 6% commission on the sale of a listing to be paid for by the seller. The agent may share half of that commission to the buyer’s agent. Raising the listing price for a property on the market was often how sellers passed on the cost of the commission.

Now, the national realtor trade group is forced to rethink the size of commissions.

“Decoupling will allow commissions to be removed and negotiated down, lowering both housing prices and overall consumer costs,” said Steve Brobeck, retired executive director of the Consumer Federation of America.

To put the 6% commission rate in perspective, if a homeowner was selling a home for $1 million, the agents would be owed $60,000 in commission. The selling agent would receive $30,000 while the buying agent would receive the other $30,000.

This is a large chunk of change going to agents. After the agreement goes into effect, agent commissions could be slashed by as much as a third, Brobeck said.

What will the real estate agreement mean for homebuyers?

Real estate agents using the MLS (Multiple Listing Service) databases to market their listings have previously had to specify clearly how much commission is being paid to the buying agent. This practice will now be eliminated, aiding in dissolving the motive of real estate agents steering their client towards buying a more expensive home, thus getting a larger commission check.

This can be be a beneficial turnaround for future home buyers. From now on, homeowners should make themselves clear on how agents will be compensated before going through the buying process.

For those buying a home in Fort Worth, the local Realtors group told the Star Telegram that consumers should understand what exactly a real estate agent is there for.