When it comes to buying and selling homes, new rules will soon come into effect, five months after the National Association of Realtors announced a Blockbuster settlement about how its 1.5 million agents in the US receive their commissions.

The settlement, which resolved litigation resulting from a grand jury’s finding that the real estate group artificially inflated Brokerage commissions – bringing comprehensive changes to the industry starting tomorrow.

The adjustments come as the outlook for the battered real estate market is brightening. Mortgage rates fell to their lowest levels earlier this month. lowest level since April 2023, offers hope for Home buyers who can no longer afford the prices Given the high cost of credit and real estate prices, which Record in June.

Still, the current rate on the 30-year fixed loan is about 6.5%, or more than double the sub-3% rates available in 2020 and 2021. The Federal Reserve is widely expected to cut its benchmark interest rate in September, a move that should bring currently high mortgage rates down enough to bring real estate market turnover close to 40-year lows.

In the meantime, real estate agents across the country must prepare for new changes that could potentially result in a reduction in the commission that home sellers must pay.

Many experts now expect real estate prices to fall because the high commissions charged for decades will no longer be included in the list price.

Here’s an overview of what this means for those looking to buy and sell homes in the future.

Buyer beware

Real estate agents will now have to have buyers sign a form before showing them a home. The agreements will specify exactly how much a buyer must pay an agent.

However, “the buyer hasn’t had a good chance to evaluate the agent at this point,” Steve Brobeck, senior fellow at the Consumer Federation of America, told CBS MoneyWatch. “When you tour houses with an agent, they’re doing a practice session for your job. You get to know the agent.”

Most buyers would be uncomfortable signing a contract with a financial commitment so early in the process, Brobeck added, noting that the new requirement came at the behest of industry and was not part of the NAR settlement.

Buyers shouldn’t sign a contract with a financial commitment until they’re ready to make an offer, Brobeck advises. “There are other ways to view a home,” he notes, including calling the agent or attending an open house.

Another option that is becoming more common is travel contracts, which cover time-limited contracts with no financial commitments, he said, noting that Zillow has developed such a contract. Many template contracts developed by the industry are difficult to read and understand and are otherwise problematic for consumers, Brobeck warns.

However, a buyer-broker agreement developed by real estate brokerage eXp Realty is “simple, customer-focused and meets most of our criteria,” he said. “They have made it available to the industry.”

Homebuyers should also consider offering a flat fee or paying their agent an hourly rate, the advocacy group advises.

“The dollar value of today’s percentage commissions is often underestimated by buyers. Moreover, buyer’s agents should not have a financial incentive to get paid more the higher the sales price,” Brobeck said in a report.

Are the sellers happy?

For people selling their homes, the changed situation may bring some brief relief, as their agents will no longer have to offer commission to buyers’ agents.

Nearly nine out of 10 home sales are handled by real estate agents who belong to the nation’s largest trade association, NAR, which requires home sellers to factor in a commission, typically six percent, before listing homes in its real estate database, known as the Multiple Listing Service, or MLS.

The commission paid by the home sellers was then split between the seller’s and buyer’s agents. Although on paper it was negotiable, the fee was the focus of the NAR lawsuit lost It was initiated by a group of home sellers who claimed that the trade group and others colluded to increase commissions.

In June, the median sales price of a home was $442,451, according to Redfin. Under previous practices, sellers would have had to pay $26,547 in commission. This common rate is no longer the standard.

Sellers must now expect that only one side of the commission will be deducted from them, i.e. an average of 2.5 to 3 percent.

“For the first time, buyers now have the opportunity to negotiate the buyer’s commission,” said CFA’s Brobeck. “We propose setting a target of 2% or less,” the proponent said. Combined with the buyer’s agent commission, this would mean the total commission would be closer to the buyer’s commission. To 4% instead of the current standard of 5% to 6%, he added.

In a separate but related development, nearly every American who has sold a home in the past five years is covered by the class action settlements with NAR and other brokerage firms. How much someone is entitled to depends in part on how many sellers file claims and other factors, including where you live and when you listed your home.

To see if you are eligible, check here.