On August 17th, new rules governing REALTOR compensation went into effect nationwide. These rules modify how REALTORs are paid from real estate transactions and affect how home buyers and sellers negotiate compensation with their REALTORS going forward.
What changed?
According to guidance provided by the National Assocation of REALTORs (NAR), the main changes are as follows:
While the changes represent a shift to prior regulations, there are two important aspects that have not changed:
Recognizing that home buyers may have questions, below we've compiled additional information gathered from yahoo!finance and U.S News & World Report to provide some additional context about the changes.
What are the impacts to the home buying process?
The most immediate impact is that home buyers must now sign a formal agreement to engage a REALTOR's services. However, there's some flexibility on the structure and length of the agreement. For example, an agreement could only include one house tour, which would not obligate the buyer to utilize the same agent throughout the home buying process. In this case, the buyer would sign a separate agreement with their selected agent if they move forward with a home purchase.
How will these changes affect REALTOR compensation?
Real estate experts agree that these changes could lead to more negotiations between buyers, sellers and their respective agents. While some agents may opt to continue charging a percentage of the home price as compensation, others may choose to charge a flat fee or offer a la carte pricing for their services. This could potentially create savings for both buyers and sellers.
Furthermore, because buyers will need to sign their own agreement(s) with their agent, they may need to pay out of pocket if their agent's services are not covered by the seller. However, it is likely that many sellers will still agree to pay for the buyer agent's services because it makes the home more attractive to buyers.
Will this affect home prices?
Ultimately, it's too soon to determine how the new regulations will impact home prices. More negotiations could mean lower transaction costs, which should have a positive effect on home prices. However, many experts agree that potential cost savings will be fairly modest, as housing supply and interest rates are much larger drivers of housing affordability. It is also possible that cost savings will be more pronounced with higher priced homes, particularly with flat fee or a la carte pricing, since many costs will be similar regardless of the home price.
Questions?
If you are interesting in buying or selling a home, a licensed REALTOR will be your best resource to help you understand the new regulations, the required paperwork, and their pricing structure. You can find a REALTOR familiar with TSAHC's programs using our Find A REALTOR tool.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.
Hello Aijaz,
In Texas, a buyer may terminate a realtor relationship, but it depends on the terms of the buyer representation agreement that was signed. Buyers should review the agreement carefully for any termination provisions, notice requirements, or protection periods before ending the relationship. It is best to notify the realtor and/or broker directly — preferably in writing — so there is clear documentation of the request. Many brokers will agree to release a client if the relationship is not working.
Hi, we’re selling our home and we signed an agent. The agent is telling us we have to pay buyer and sellers commissions and that the commissions are set by Texas and cannot be negotiated. Is it true that we have to pay full commission for the buyers agent and our agent? Is there no option to let the buyer pay their own agent commission? I’m not from here and this would be a big help. Thanks so much
can I terminate a buyer/agent contract prematurely if I’m not happy with the agents performance
Aijaz Huq
Mr./Ms. Hornbuckle,
Thank you for writing in. Please keep in mind that when you list your home with a realtor, your property is marketed by many agents through the MLS (Multiple Listing Service). But, If the agent is not doing the job they promised? You can give them notice, in writing, cancel your agreement and find another agent.
What can be done when the Agent does not show the house to anyone? We signed an Agent , to sell our home in mid-February. He, nor the Agency he works with, has brought anyone to view the home.
Can we get a different Agent and a different Agency to get our house sold?
Hello Sasha,
If you do not have an active contract to purchase a home, you may switch Realtors as often as you feel necessary. However, once an offer is made and accepted, there may be costs associated with changing your Realtor. Please reach out to your Realtor’s Brokerage to inquire about costs related to changing Realtors when you have a home under contract.
I had worked with 2 real estate agents 2 months ago to see different properties and made offer but none of them got accepted and for some reason , I am not happy with both of them to buy my second home. Because of this I resorted back to my realtor who helped me buy my first home. within a span of 4 months I have changed 2 realtor and working with 3rd one. Do I have to wait certain time period before consulting with new agent or is it like offer on a house with the particular agent is fine? please let me know about it.
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Hello Billy,
In Texas, commissions are not set by law and are always negotiable. A seller is not automatically required to pay both the listing agent and the buyer’s agent. What is paid is determined by the listing agreement the seller signs with their own agent.
In many transactions, sellers may choose to offer compensation to a buyer’s agent, but that is a negotiable term, not a requirement. If a seller does not offer to pay the buyer’s agent, a buyer may need to cover their own agent’s compensation, depending on the agreement they have with their agent.
You should review your listing agreement carefully and discuss your options with your broker.