Historic Realtor Settlement May Change South Carolina’s Home Buying and Selling Landscape
Settlement Overview
The way people buy and sell homes in South Carolina is expected to change on the heels of a groundbreaking legal settlement announced last Friday. The $418 million agreement, reached by the National Association of Realtors (NAR), could dismantle the traditional 6% sales commission, potentially affecting who bears this cost in future transactions.
Some experts in the South Carolina housing industry suspect that this shift might complicate the home buying process. They forecast a potential decline in first-time homebuyers and minorities who can afford homes in the state due to these imminent changes.
NAR Lawsuit and Its Implications
The lawsuit revolves around NAR’s longstanding requirement for home sale listing brokers to provide an upfront compensation offer to a buyer’s agent, typically resulting in a 6% split between the seller’s broker and the buyer’s agent. Critics have likened this setup to a cartel.
Once the settlement gains final approval from a federal court, the customary 6% commission will become obsolete. Sellers will no longer be compelled to suggest compensation to potential buyers and their agents. In theory, this alteration could foster more negotiation and competition in certain markets.
The settlement also mandates homebuyers to formalize an agreement with a broker prior to initiating their collaboration, thereby offering a clear picture of the agent’s charges for their services from the get-go.
The rules resulting from this lawsuit, instigated by a group of Missouri home sellers, are anticipated to become operative around mid-July, subject to final approval.
Impact on South Carolina’s Housing Market
For Buyers
The impending changes could entail additional costs for buyers who will now need to consider how much they can allocate for representation if the seller does not offer remuneration. As a result, some buyers may need to contemplate homes in lower price ranges or even forgo certain properties if they cannot afford representation.
These changes may place first-time homebuyers and minority groups at a disadvantage, as they may find it challenging to finance both a down payment and agent’s fees. Additionally, without representation, they may lack the requisite knowledge regarding the home buying process.
For Sellers
Sellers who choose not to offer a buyer agent commission might risk alienating potential buyers who only consider properties where their agent’s fee is catered for, thereby reducing the pool of prospective buyers.
With the new changes, sellers should brace themselves for potentially lower offers from buyers who will now consider the cost of buyer agent representation in their budgeting.
For Real Estate Agents
Despite the landmark settlement, skilled agents who offer valuable representation, can expect to continue earning commissions. However, this conversation will now begin early, involving the buyer, seller, and broker to reach an agreement.
Additionally, the price hike within South Carolina’s housing market over the last two years means that the settlement is unlikely to result in a decrease in home sales prices due to increased competition and negotiation over commission, at least in the near future.
