Finance
What homebuyers and sellers need to know as seismic changes take hold
Big changes take effect this month that will mean seismic shifts in how most Americans buy or sell a home and could ultimately drive down residential real estate prices.
Starting on Aug. 17, agents who list homes for sellers on widely used realtor databases won’t be able to offer any payments to buyers’ agents.
That means the power to negotiate realtor commissions will shift away from agents in favor of buyers and sellers.
It also means sellers will no longer be on the hook to fund commissions for all realtors involved in the transaction — a fee that usually amounts to 5% to 6% of the home’s sales price. The seller’s agent commonly shared roughly half of that commission with the buyer’s agent.
Instead, buyers will be entitled to separately negotiate their own agent’s pay and get a signed contract formalizing the terms — all before touring any properties for sale.
“Under the old system, if you were a buyer and you had an agent, you didn’t get any say in what your agent got paid, unless your agent agreed to credit some of that to your purchase price,” said Venable LLP partner Jill Rowe, who represents real estate brokers and owners.
The new terms are far-reaching because they apply to properties listed on Multiple Listing Services (MLSs), databases controlled by the National Association of Realtors that host more than 90% of all US home sales.
These changes are designed to eliminate conflicts of interest in the real estate industry and make the process friendlier for consumers.
They could drive down real estate commissions and home prices, some said, while transitioning the business of real estate services to more of an à la carte industry.
The new rules came about as a result of a class-action lawsuit from home sellers who argued the old fee-splitting structure was unfair.
The core of their argument was that the old structure artificially fixed commission rates and influenced agents to steer clients to homes that paid higher commissions. That, in turn, inflated home prices.
The new rules were agreed to as part of a $418 million settlement with the National Association of Realtors and several large real estate firms last March, ending the first in a string of similar cases to go to trial.
Here is a closer look at what buyers and sellers now need to know:
‘What kind of commission am I paying?’
It will require some homework and patience to understand your rights and obligations under the new system and benefit from the new arrangement.
The “big change,” according to Rowe, is that agents who list homes for sellers on MLS databases won’t be able to offer any payments to buyer’s agents — as was the practice for decades.
The other significant change is that agents representing buyers will no longer be allowed to take a prospective client to tour any properties without first obtaining written consent about the fees and commissions that the client will have to pay.
All of these details can be negotiated by the buyer. The contract must explain if the agent’s compensation will be calculated as a flat fee, as a percentage of the home’s purchase price, as an hourly rate, or otherwise.
And under no circumstances can that agent’s commission be open-ended or dictated by a seller’s agent.
Plus, agents must disclose that their commissions are fully negotiable and not set by law.
“If I were a buyer or seller of a residential property right now, what I would say to my broker is: What kind of commission am I paying?” Rowe said. “What am I getting for that? And what would I get if I had a 1% lower commission, or a 2% lower commission?”
Jennifer Stevenson, a New York State Realtor and NAR regional vice president, said in the past agents could also use listings to offer compensation to other seller’s agents and to cooperating brokers.
“Now we’ll no longer be able to do that,” Stevenson said.
She noted that buyers and sellers were always permitted to negotiate commissions with agents and that under the new rules listing agents will still be allowed to negotiate commission splits, but only outside of the MLS.
A ‘different value proposition’
The ultimate effect on the residential real estate industry is not yet known, although some certainly expect commissions, and even home prices, to fall.
At minimum, it’s expected to place more power in the hands of clients, especially those already using residential real estate platforms like Zillow (Z), Redfin (RDFN), Realtor.com, and Trulia, to find homes and home details posted on MLS databases.
These platforms had already been disrupting the residential real estate industry by allowing sellers and buyers to efficiently search for information that only relators using MLSs once provided.
“You can just go online, and you can see everything that is available … what its price is, all of the different terms, look at the neighborhood, and see pictures of what it looks like,” Rowe said.
That technology has tremendously reduced the amount of time that agents, and particularly buyer’s agents, spend on behalf of their clients.
“Quite often, the buyers are finding something online and saying, ‘I want to take a look at that,’ and either going by themselves to the open house, or having their agents call the seller’s agent and arrange a look,” Rowe said.
“So it’s just a different value proposition.”
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.
Click here for real estate and housing market news, reports, and analysis to inform your investing decisions
This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
Throughout this earnings season, investors have been especially focused on Big Tech’s capital expenditures.
This spending is seen as a barometer for how bullish Microsoft, Amazon, Meta, and Alphabet are about what AI will do for them. Though, as Julie Hyman wrote Thursday, it’s a little more complicated than that, since they must go all in to even get a seat at the table.
But the nature of supply chain dynamics means that what gathers and melts in the mountains pours into the rivers and lakes.
And as our Chart of the Week shows, Big Tech is still making it rain. And Nvidia is the lake.
According to estimates from Bloomberg, coupled with quarterly reports, more than 40% of Nvidia’s revenue comes from some familiar names among the “Magnificent Seven” stocks — Microsoft, Meta, Alphabet, and Amazon.
The biggest transfer is from Microsoft, with spending from the world’s most valuable company accounting for 19% of Nvidia’s revenue. This makes the company its biggest customer by far, nearly doubling Meta’s spend and tripling that of Alphabet and Amazon.
And on the Microsoft side, Bloomberg’s data shows Nvidia accounts for 45% of its capital expenditures, whereas the chipmaker only gets 15% of Alphabet’s outlays, for example.
In the AI jungle, this data is a reminder that the chipmakers eat first, long before the hyperscalers can offer much more than hints to investors about when the AI investments will turn into AI revenue streams.
Still, this is one of the key charts that have helped power the market, especially through the tech earnings season.
For now, the lack of revenue isn’t too worrying to investors — though doubts are rising! — as it’s still hard to imagine the trillion-dollar Microsoft doesn’t know something they don’t about the opportunity.
Ethan Wolff-Mann is a Senior Editor at Yahoo Finance, running newsletters. Follow him on X @ewolffmann.
Click here for the latest technology news that will impact the stock market
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Nine federal financial regulatory agencies have proposed or will propose joint data standards that would apply to data submitted to the agencies.
As required by the Financial Data Transparency Act of 2022, the data standards for identifiers of legal entities and other common identifiers are meant to promote the interoperability of financial regulatory data across the agencies, the Consumer Financial Protection Bureau (CFPB) said in a Friday (Aug. 2) press release.
Along with the CFPB, the other agencies inviting public comment on the proposed rule concerning these standards include the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., the National Credit Union Administration, the Federal Housing Finance Agency, the Commodity Futures Trading Commission, the Securities and Exchange Commission (SEC) and the Department of the Treasury, according to the release and the proposed rule.
In the SEC’s own press release about the proposed joint data standards, SEC Chair Gary Gensler said: “This proposal will make financial data more accessible, uniform and useful to the public. Consistent data standards will make it easier for financial institutions to file reports across multiple agencies. They will also help regulators be more effective and efficient in carrying out our oversight functions.”
The Financial Data Transparency Act was passed as a provision of the National Defense Authorization Act in December 2022, according to a statement issued at the time by Sen. Mark Warner.
It aims to modernize data collection by the federal financial regulators by requiring them to develop common data formatting standards for the financial data they already collect from regulated institutions, making that data easier to process and use, the statement said.
In May, Warner, House Financial Services Committee Chairman Patrick McHenry, Ranking Member Maxine Waters and Sen. Mike Crapo sent a letter to the heads of eight of the federal financial regulatory agencies, urging them to implement the Financial Data Transparency Act.
The members of Congress said in the letter that implementing the law will make federal financial data more accessible, uniform and useful for the public; facilitate the use of artificial intelligence and other advanced technologies; and lead to greater transparency and market efficiencies.
Bloomberg News
The Federal Reserve Board on Friday joined eight other agencies in asking for public
The Federal Deposit Insurance Corp, Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, Treasury Department, Commodity Futures Trading Commission, Federal Housing Finance Agency, National Credit Union Administration and Securities and Exchange Commission proposed a joint rulemaking to promote the “interoperability of financial regulatory data,” as required by the Financial Data Transparency Act of 2022.
The act directs federal financial agencies to issue individual rules adopting joint data standards for the collection of certain information. The agencies also are required to consult with each and other departments and agencies.
Once the final standards are established, the agencies will each issue separate rules and adopt the data collection standards. The agencies include
The agencies are expected to work together on the adoption of the established joint standards and to monitor developments related to data standards.
“The field of data standards, data transmission, schemas and taxonomies is rich with well-established practices and is also rapidly evolving, including with proposals to extend existing standards beyond their existing use and with development of new standards,”
The Federal Data Transparency Act allows each agency to tailor data standards when the standards are adopted. Each agency in its rulemaking also must seek to “minimize disruptive changes” to small entities and may “reduce any unjustified burden on smaller entities affected by the regulations. The regulators also may adopt other data standards beyond the standard issued jointly. However, no new information collection requirements are required by the act.
Comments on the data standards proposal are due 60 days after the notices from each agency are published in the Federal Register.
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