Maryland real estate agents, homebuyers navigate changes under new rules

Under a change to longstanding real estate practice that took effect Saturday, home buyers have to agree upfront to pay their agents, instead of being paid by the seller. It's rattled the industry. Photo by Spencer Platt/Getty Images

For more than a century, when someone wanted to buy a home all they had to do was walk into a real estate office and ask the agent to start showing them properties. That agent was typically paid by the seller if a deal ever went through.

All that changed Saturday.

As part of the settlement of an antitrust lawsuit brought by home sellers, the National Association of Realtors (NAR) agreed that sellers’ agents can no longer include an upfront offer of compensation to the buyer’s agent in order to list a property on the Multiple Listing Service.

As a result, buyers may find themselves having to strike a deal with their agents to pay them for work that used to be covered automatically by the seller, negotiating a price with their agent before even looking at a property.

It’s a change that agents said they have spent months preparing for. But that doesn’t mean they’re crazy about it.

“The buyer and the tenant are the ones at … risk of losing the most, due to the fact that they may not be able to obtain or afford proper representation,” said Gregory Gray, a real estate agent based in Howard County. “It tilts the scale in favor of the seller.”

But the change was defended by NAR President Kevin Sears, who said in a written statement last week that the changes “help to further empower consumers with clarity and choice when buying and selling a home.”

“As the August 17 practice change implementation date approaches, I am confident in our members’ abilities to prepare for and embrace this evolution of our industry,” his statement said.

The lawsuit against NAR claimed that its previous rules were anticompetitive. Under those rules, sellers had to include an offer of compensation for buyers’ agents if they wanted their home to show up in the MLS, the association’s listing of properties for sale.

Under the settlement announced in March, NAR now prohibits such offers in an MLS listing. While buyers and sellers could later negotiate some payment, it’s not set in advance, leaving buyers to pay their agents’ fee.

The shift could be less painful in Maryland, which has required written buyer agreements since 2016, said Maryland Association of Realtors CEO Chuck Kasky. But the new written agreements must disclose the amount or rate of compensation of a buyer agent, Kasky said in a resource video explaining the change.

“Real estate licensees will be required to enter into written agreements with buyers before touring a home. This applies to houses listed on a multiple listing service,” Kasky explained.

Judith Egbarin, the owner of Blue Ribbon Realty, said that under the new arrangement will hit buyers the hardest.

“They want the buyers to pay commission to their own agents, so who’s going to lose out the most?” Egbarin asked. She answered her own question by noting that “the buyer now has to come out of pocket even more.”

She said this will add to the fees that the buyer traditionally has to pay, like down payments and closing costs.

Jennifer Young, from Jennifer Young Realty, agreed with Egbarin. Young said the new settlement would most negatively affect first-time home buyers.

“I don’t think it’s a good thing. So I think it’s going to hurt buyers who are no-money-down, low-money-down buyers, first-time buyers, grant program buyers,” Young said. “So there’s potentially more cost to have proper representation.”

But none of the agents felt defeated by the settlement and, in fact, all were looking ahead. Young said her firm had been preparing its agents for months before Saturday’s shift and Gray said that the settlement will leave a competitive landscape for buyers’ agents.

“It’s going to be very competitive, and they’re going to have to show their value if they want to obtain the commission,” Gray said. “They’re not getting it from the seller or the landlord, they’re going to have to get it from their client, and they’re going to have to be able to negotiate.”

Egbarin said that real estate will just have to adapt and adjust.

“It’s just, we need to get used to it. And we will adjust,” she said. “I’m not frustrated yet, I am very optimistic, I want to see what happens.”

– This story was updated on Monday, Aug. 19, to correct Chuck Kasky’s title in the 10th paragraph and to clarify the effect of the NAR settlement throughout.