Buying a home in Florida just got more complicated thanks to new rules

The business of buying and selling a home in Florida could be turned on its head as new rules for how real estate agents get paid go into effect Saturday.

The changes were prompted by a series of antitrust lawsuits filed against the National Association of Realtors that claim it enforced practices that made it more expensive to sell a home. The industry group is also facing a $418 million settlement.

For decades, sellers have used money from the home sale to pay a commission fee that gets split between their agent and the buyer’s agent. Typically the fee is around 5-6%, though the National Association of Realtors says that number has always been negotiable.

This long-running practice could be wiped out by two new rules from the National Association of Realtors that set stricter standards for how commission is determined.

Some speculate this could lead to lower earnings for agents, sparking an exodus from the industry.

“This is really a revolutionary change,” said MaryDell Penney, a market manager for Redfin who oversees agents in Tampa and Orlando. “It’s going to require everyone to have a mindset shift.”

What will change?

Starting Aug. 17, listing agents will no longer be allowed to advertise commission when posting a home to the Multiple Listing Services, a collection of centralized databases that members of the National Association of Realtors use to find available properties.

Previously, agents were required to list compensation on the Multiple Listing Services. Plaintiffs who sued the National Association of Realtors argued that this practice drove up commission rates.

Buyers will also have to sign a written agreement with their agents outlining how much the agent will get paid. The contracts could normalize the practice of buyers paying their own agents.

What does it mean for buyers and sellers?

For some people, nothing will change. Sellers can still offer to cover the full commission fee like they always have.

But some will choose to have each party pay their own agent instead said Lei Wedge, a professor of finance at the University of South Florida’s Muma College of Business. Now, everything is up for negotiation.

“It’s not going to be as consistent as it was before,” she said. “Now you’re dealing with everyone’s individual preferences.”

Sellers could see more cash in their pocket at closing if they opt not to cover the buyer agent’s fee.

Buyers may be burdened with a new expense. Wedge suspects that many will take more time to shop around for an agent who offers a lower commission rate or flat fee. Some may forego using an agent altogether.

Buyers will also have to reach a written agreement with their agents. Adam Grenville, a Re/Max agent and president of Greater Tampa Realtor, warned this could be especially tricky, since there’s no universal blueprint for how these contracts should look yet.

“You need to make sure you understand what you’re signing,” he said. “Ask a lot of questions.”

What does it mean for the future of the industry?

The United States has some of the highest real estate commissions in the world. Wedge said these rules could bring us closer in line with other countries if more buyers and sellers start negotiating their agents down from the traditional 6% fee.

Since the settlement was announced in March, average buyer’s agent commissions have already seen a slight decline according to research from Redfin.

Facing a potential threat to their earnings, some agents may choose to leave the industry. One report from investment firm Keefe, Bruyette & Woods predicted that changes to the commission structure could eventually cause as many as 1 million agents to abandon the profession.

While there’s always going to be turnover after a major change in the market, Penney said there are steps agents can take to adapt.

At her brokerage, buyer’s agents are already being trained to ask for agent compensation as part of the deal when making an offer on a property.

“I think there are a lot of agents that came into the industry in crazy covid years when it was fairly easy,” she said. “Now it’s going to be tougher. They’re going have to have super sharp negotiation skills.”