How the New Real Estate Commission Laws Could Affect US Home Prices
Kelly Robinson
Kelly Robinson
How the New Real Estate Commission Laws Could Affect US Home Prices
Recent changes in real estate commission laws following the NAR lawsuits suggest that consumers would benefit from more transparency and flexibility in commission payments. However, these changes often do not bring the intended consumer protection. In New York City, sellers still cover the buyer’s broker fees approximately 99% of the time. This customary practice persists because sellers prefer to incentivize more buyers by covering both agents’ fees, making properties more attractive in a competitive market.
Moreover, these new rules do not necessarily reduce costs for buyers. Although buyers can theoretically negotiate or pay their broker’s fees themselves, the expenses are still embedded in the overall transaction. Thus, the consumer still indirectly covers these costs.
For our buyers, we always confirm upfront whether the seller is paying the commission, and in cases where they initially are not, we have had a 100% success rate in negotiating that the seller covers the buy-side fees. This ensures that our clients receive full representation without unexpected costs, even within this evolving legal landscape.
Changes in real estate commission laws could very well lead to varying effects on buyer and seller behavior, potentially influencing transaction costs and price negotiations. The chart below includes how commission practices might impact residential property prices based upon two factors:
1. Seller’s Commission Responsibility:
Reflects the percentage of sellers who continue to
pay buyer’s brokerfees, which influences the
market attractiveness and competition.
2. Buyer‘s Direct Commission Payment:
Illustrates the impact on prices if buyers
increasingly pay for their own representation,
possibly leading to price adjustments.
Sellers Pay 99% if the time (as is the case currently in Manhattan): No change in prices, as sellers continue to incentivize buyers by covering both agents’ fees.
Buyers Pay Fees: A potential 2%-3% decrease in prices, as buyers might push for lower prices to compensate for their added costs.
Mixed Model: A possible 1% decrease, reflecting moderate price adjustments as the market adapts to a blend of commission arrangements.
This projection assumes that changes in who pays commission fees could indirectly influence real estate prices as buyer and seller behaviors shift in response to the evolving legal landscape.
Here is a chart showing the projected impact on U.S. residential real estate prices under different commission payment scenarios.
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