By Rob Wile -
NBC News
The home buying process has never been easier: search for a home on a listing website like Zillow, Redfin or Trulia, contact the real estate agent, visit the home and make an offer.
But, according to experts, for years consumers have not been fully aware of the final cost - and potential conflicts of interest - of searching for a home.
Now, a historic agreement with the National Association of Realtors (NAR) is about to change this model.
According to consumer advocates and even some real estate agents, it's a win for buyers and sellers.
"Price transparency is a positive, as is increased competition, and this will increase both," says Mariya Letdin, associate professor at Florida State University's College of Business.
"I really support this change."
Nowadays, when someone goes house hunting, in most cases they are intercepted by an agent who has access to certain listings and who will work with the buyer at no upfront cost to help them get into a home.
But therein lies a very common mistake, according to experts interviewed by NBC News.
Although the owner of a home who puts it up for sale must hire professionals to market it, he usually includes that cost in the final price paid by the buyer.
[The Association of Realtors will eliminate the 6% commission on the sale of houses, which can reduce the price of housing]
"The buyer puts the entire purchase price on the table," explains Letdin.
"And the seller is left with a little more after this ruling."
As part of the new agreement, the buyer must now be fully informed in advance about the possible fees or commissions that will ultimately have to be paid.
This is because the agreement requires the buyer to sign a formal contract with the agent specifying the services they will receive and the amount thereof.
Another possibility is that the buyer decides not to hire an agent and allocate the search costs to a real estate attorney, an appraiser or another person with knowledge of the real estate market, according to experts.
And a seller might even offer to cover the cost of the buyer's equipment as an incentive to attract more buyers.
Of course, for a property that is attracting a lot of attention, these incentives are unlikely to be offered.
[Inflation rises to 3.2% due to gasoline and income, in a sign of resistance that may complicate Biden's reelection]
And in the months after reopening following the COVID-19 pandemic, the most attractive U.S. housing markets tilted sharply in favor of sellers.
But now, with housing price growth stabilizing, the playing field is also leveling, experts say.
"Now you can hire a lawyer for $1,500, instead of paying a $50,000 fee," says Doug Miller, a Minnesota-based real estate attorney who helped launch the actions that led to the NAR settlement.
The NAR agreement prohibits the seller from advertising on the multiple listing service a commission for the buyer's representatives, regardless of who they choose as a representative in the home buying process.
For its part, the association has maintained that the free market has always set commission levels and that they have always been negotiable, and even useful.
"Compensation offers help make professional representation more accessible, lower the costs for home buyers to secure these services, increase fair housing opportunities, and increase the pool of potential buyers for sellers," the NAR said. in its March 15 statement announcing the agreement.
But in most cases, there was little difference in the amount offered for those commissions in a given market for fees of around 3%.
[For home buyers, 7% mortgages become the "new normal"]
This is because any attempt to offer a lower commission to a buyer's agent would likely result in the agent recommending their client to another property.
Miller called that behavior inappropriate and said buyers, in many cases, would not have been aware of it.
"The future is that buyers will now have more control," Miller said.
"Instead of that [commission] money going to your agent... now it can go directly to the buyer. It's the same amount of money, but now the buyer gets the money instead of an agent, and they can decide what do with it."
What's more, increased competition for customers is likely to translate into overall lower costs, according to Ryan Tomasello, a real estate analyst at financial firm Keefe, Bruyette & Woods.
"When you introduce a ton of transparency into a market that has historically lacked it, any economist will tell you that it reduces friction costs, meaning fees, and those are some of the highest in the world," Tomasello said.
"So the cost of buying and selling a home is going to go down."
Many experts, including other real estate professionals, agree that the deal will effectively reduce the ranks of makeshift agents acting as middlemen, a phenomenon that skyrocketed during the pandemic-era real estate boom.
“A lot of people parachuted in during 2020-2021 to try to make extra easy money by becoming a buyer's agent and taking 3%,” said Phil Crescenzo Jr, vice president of Nation One Mortgage Corp.'s southeast division.
[Product prices remain very high, so consumers and producers assume changes]
"But they didn't contribute 3% of the value, not even close."
Crescenzo compared it to the moonlighting mortgage brokers who helped fuel the housing bubble of the mid- and late-2000s.
"When compensation rules changed, the dominant professionals rose to the top, those at the bottom disappeared and the industry improved," Crescenzo said.