Exactly one month ago, the national real estate industry experienced a shift as a new set of rules went into effect for the National Association of Realtors. The result of several years of litigation and an eventual settlement, the rules are meant to improve transparency between the relationships homebuyers and sellers have with their respective agents – and how those agents are compensated.

What does that mean for our community and local housing market? Some local real estate professionals say, despite the headlines, not much.

Homebuyers have typically paid a commission fee through the sellers, who would pay a portion to the buyer’s agent – and that fee was often factored into the total price of the home. A feature in the databases used by agencies – called Multiple Listing Services, or MLSs – would specify what that commission could be. The 2019 class-action lawsuit from Missouri homebuyers that led to the NAR’s settlement, though, alleged some commissions were inflated and agents would steer clients toward properties that would give them higher payment. While the NAR denies any wrongdoing, it agreed to a $418 million settlement with sellers and established new rules meant to help clarify agency relationships.

Now, instead of the compensation being listed in this internal service for real estate agents and used as guidance, the rates must be decided individually between principals and agents. And, according to the NAR, homebuyers are required to contract with agents toward the beginning of their searches about rates instead of in the middle or at the end of a purchase.

North Carolina is one of 18 states in the U.S. that formally practices buyer’s agency, which helps those seeking to buy a home maintain certain rights and representation through an agent separately from the realtors working with the selling principal of a property. With that, a framework for the changes happening at the national level is largely already in place.

“In general, the finite minutia is shifting a little bit,” says Kristine Holm, the president-elect of the Orange-Chatham Association of Realtors. “Practicality wise, it’s not [an adjustment.] We’re still giving the same care, due diligence, fiduciary responsibility to our clients as we’ve always designated in our contracts. It is really just a matter of adjusting mindset a little bit – more so, paperwork has adjusted.”

Holm says all rates were negotiable before, but these changes will help provide more transparency to buyers and sellers about what their commissions and rates are. One way is the required written buyer-broker agreement that will be established before an agent can begin to show houses to clients.

“In order to cross a threshold in a home, in North Carolina or anywhere in the country,” says Holm, “you have to have buyer agency to cross that threshold. It’s just a sooner conversation – it just means you’re having to build client trust sooner, and show value sooner, because we are all professionals.

“We have to explain,” she concludes, “there is not an essence that has changed in how we represent our clients and how we conduct our business – it’s just a timing that has changed in North Carolina.”

Looking locally, Holm says these changes are only causing a “little ripple” to the housing market itself. Home inventory is still low, she says, which keeps in line with recent market trends and favors sellers. Because of that, the role a buyer’s agent can play for their clients is emphasized even more – and is now emphasized further by the new NAR guidelines.

For some established Realtors operating in an in-demand market like the Triangle, they may argue their day-to-day operations and strategies with clients will change very little.

Desiree Goldman is a broker associate with BOLD Real Estate and the leader of the Desiree Goldman group. Having operated in the market for 25 years, she maintains that her relationships with clients are already transparent: about housing prospects, realistic amenities for the market, and – yes – her rates.

“I get to make up what I say are my practices, what my fees are,” Goldman says, “and that’s the truth for everyone. Everything is negotiable – it always has been.”

Sammy Martin is the broker in charge and owns Franklin Street Realty in Chapel Hill. He says his group has been at the forefront of protecting buyers’ interests by not allowing agents to represent both a seller and a buyer, as well as stressing to clients where their commission comes from.

Martin says he thinks the rights established in buyer’s agency make “perfect sense,” and while it’s good the rest of the U.S. will now have it, the changes mandated by the NAR are relatively trivial to Franklin Street Realty.

“It would help buyers in the other 32 states that don’t have buyer’s agency,” says Martin. “But what outrages me – and this is just my own personal bone to pick – is I’ve been doing it this way for 30 years. All of a sudden, it comes up as this big national news story that this [change] is shaking real estate to the foundation. Well, it certainly isn’t shaking our foundation here, because we operate on a different ethical level, obviously, than these other states do.”

Beyond more transparency for the buyer and principal, the likelihood these national changes drive down home prices is unlikely, says Martin. With the commission for buyer’s agents now removed from listings, he says he doubts those selling will be willing to drop their asking price to reflect the lack of those rates.

“As long as they won’t allow that buyer commission to be rolled in and added to the price of the house, it is really going to hurt first-time homebuyers,” says Martin. “Unless sellers agree, ‘nothing was really broken in North Carolina, so there’s no real reason to change anything here.’ The only thing that’s changed is when I look in the MLS, there’s no longer a number there that says what one of my agents or I might be paid.”

Goldman describes the NAR updates still as a “work in progress,” as clarifications were sent regularly through this first month. In a tough market like Chapel Hill and Carrboro, she recommends an approach that both fits with these new guidelines and may be more helpful in someone’s hunt for a new home.

“Find your buyer’s agent first and then do your search,” says Goldman. “Because they’re going to add the context [of the community and region.]”

 

Editor’s Note: Bold Real Estate is owned by one of the co-owners of the Chapel Hill Media Group and is an advertiser. Additionally, Franklin Street Realty is an advertiser with 97.9 The Hill. None of the participants’ inclusion in the story were part of an advertising agreement.


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