Many questions regarding the real estate business loom following a recent massive, $418 million settlement, which will make it easier to negotiate commissions for real-estate agents and brokers.
The settlement was reached betweenthe National Association of Realtors and a group of home sellers frustrated with the association's pricing rules, and it could cause significant changes in the business when it goes into effect this summer.
Even with those concerns, Amber Parish, the CEO of the Billings Realtors Association, an affiliate of the national association, said the changes will create opportunities for both real estate agents and their customers.
"I think it's just going to be different," Parish said Tuesday morning. "The negotiation portion is what is changing, but we just really don't know at this point what this is going to mean for the industry."
The settlement will change the protocol that has been in place for decades. For years, Americans have paid a standard commission of around 5 to 6 percent when selling a home, which is split between agents.
Those commissions can be quite costly. A person selling a $500,000 home would expect to pay at least $25,000 toward commissions.
The Justice Department said multiple listings have been prohibited by NAR rules from disclosing to prospective buyers the commission an agent will earn if the buyer purchases a home listed on the MLS, or multiple listing service.
The NAR has contended that agent commissions are negotiable and competitive, a claim the Justice Department has disputed in legal filings.
While the settlement has been signed off by both parties, it still requires approval from a federal judge before taking effect. That's expected to take place in July. It would require that realtors enter into written agreements with buyers providing more transparency about commission fees and the ability to negotiate. Housing experts believe this will force down the overall cost of buying a home and speculate that realtor commissions will shrink.
Parish said it's too early to tell if housing prices and agent commissions will drop, but admitted there are uncertainties going forward.
"That's kind of the prediction that's out there, but that's more of a media prediction," Parish said. "If this is accepted through the courts it's going to be a change, for sure. We just don't know what yet."
Housing experts say they expect the new system will lead to increased competition among agents, which could force many to lower commissions. Parish said this could emphasize the importance of brokers and agents being more transparent with clients.
The settlement will likely create challenges for those hoping to enter into real estate. If the commissions shrink, experts predict, the volume needed to make a full-time income will force many to pursue other careers.
Parish said the housing market in the Billings area is always active with properties to sell.
"There's always buying and selling going on," Parish said. "So, we just adapt as an industry and make changes when we need to. We'll address the issues as they come along."
