The future of commissions: How does the National Association of Realtors settlement impact Volusia/Flagler real estate industry?

Local realtors don't expect home prices to go down, but now buyers and sellers will have more avenues to negotiate.

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Last month, the National Association of Realtors announced a $418 million settlement in a litigation related to broker commissions, and it may upend the entire industry.

Or, it may not. As part of the settlement, which is subject to court approval and is slated to go into effect in July, real estate listing agents will no longer be able to communicate offers of compensation for buyer broker services on the Multiple Listing Service platform — but, local realtors said that doesn't mean such offers will go away entirely, and as such, the impacts of the settlement are still to be determined.

"In our area, [commissions] have always been negotiable," said Bill Navarra, broker and co-owner of Realty Pros Assured. "I don't know how much of an overall effect this is going to have because, even with the times that have changed and the influence of Zillow and all these different websites, the use of realtors has increased, and not decreased, over the years."

The settlement aims to make the commission negotiations more transparent, said John Adams, president of Adams, Cameron and Co. Realtors. The process, he said, likely won't change significantly.

"Things can continue essentially as status quo, so that buyer's agents are being compensated by sellers," Adams said. "But also, there will be a lot of instance where buyer's agents are being compensated by buyers, which is fine, as long as there's not financing involved."

New practice

Prior to the settlement, the standard practice for agents was this: The listing brokerage would pay a buyer's agent a percentage — commonly half of the 5% to 6% of the commission for every sale. Essentially, the seller would end up picking up the tab for both agents' commissions.

My hope is that this does not affect everybody from having great representation that they deserve because home ownership is the American dream."
— BILL NAVARRA, broker/co-owner Realty Pros Assured

Commissions in the United States are much higher than what home buyers and sellers pay in other countries. Americans now spend about $100 billion a year on commissions, Steve Brobeck, a retired executive director of the Consumer Federation of America, told the New York Times. With the settlement that could dip as low as $20 billion, he said.

Under the settlement, sellers’ agents will no longer be able to make offers of commission to buyers’ agents on the MLS platform, which could lower commissions, especially to buyers' agents. Sellers could still pay the buyer's agent, but they won't be required to. So the burden could fall on the buyer. 

Sam Perkovich, the broker-owner of ParkSide Realty Group in Palm Coast, said she is still trying to figure out how the changes will play out. 

"I'm sitting home today listening to a bunch of seminars to see if anybody else knows anything more. Most of them are just saying, we're going to have more answers in May when we resolve some of this," Perkovich said. "What we have found out is that we can still offer (buyers’ agents) compensation on our own individual websites and our own listings."

But buyers will be required now to enter into written agreements with their agents, and according to the NAR, these will "help consumers understand exactly what services and value will be provided, and for how much."

"What's changed is they want more clarity by having a contract with the buyer," Adams said. "... They want those things not to be in the Multiple Listing Service, which is neither here nor there. It does't mean that anything dramatic changes. It just means that it's not advertised in the same way it was."

Agents will have to see how the changes play out, he said. It'll likely make transactions a bit more difficult.

"It's going to be a little more complex for a home buyer or a home seller, but that's OK," Adams said. "We can get past all that."

While some sellers may be paying smaller commissions, Navarra said buyers may find themselves with less opportunities for "good representation."

"If they're paying for a buyer's agent, I definitely think they're going to be interviewing them, just like a seller interviews their agents," Navarra said.

Impact to veterans, first-time home buyers

Local agents do worry about negative consequences to two groups of buyers: Veterans and first-time home buyers. 

Veterans who rely on Veterans Affairs loans may find themselves in a tricky real estate position. The VA loans are prohibited to be used to pay any real estate commission fees. 

"It's already tough enough to find them a great property with the difficulty of their financing," Navarra said. "And now this element is going to make it even harder."

First-time home buyers who use a Federal Housing Administration loan also have a limit for commission fees.

Perkovich said first-time buyers in general will be most affected, because they usually have little left over in their budget.

"They're just saving diligently so they can buy a house as a rule," she said. "I mean, that's not across the board, but it's going to be a tough go for them."

Toby Tobin, a Palm Coast real estate agent and publisher of the real estate website,, said agents may offer more ala carte pricing in the future, replacing straight commissions.

"That will be a trend that we will see over time," he said. "Even on the seller's side. I will say, 'OK, I'll list your house but I won't charge you 3% for my half of 6. What I will do is I'll charge you $350 to put your listing up, I’ll charge $50 to put a sign in your yard. You want an open house, that's $200. For food and beverages at the open house, that's another $125.' So, it will be more of a pay as you go."

Perkovich and Tobin said more buyers are trying to do their house shopping online through sites like or Zillow.

"One agent I spoke with said, 'I can see myself saying, pick your house. For a fee I will help you negotiate contracts and pricing,'" Tobin said. "Because real estate agents generally are going to be more equipped to do that for the buyer or seller."

Buyers who decide to forgo an agent will have no representatives other than the listing agent, Perkovich said 

"If it's a good listing agent, they’re probably in good hands," she said. "But there's a better chance that they might not be in good hands with every listing agent. So now we've got to have an inspection. Well, who do we call for that?  Oh, there's something wrong with the inspection. How do we negotiate that? Is that seller's agent negotiating in our best interest?"

Tobin expects more buyers and sellers to hire real estate attorneys.

"I think lawyers will become part of more transactions which will take some of the load or revenue away from agents and title companies," he said. "There are several states, New York State is one of them, that requires a lawyer represent the buyer and the seller."

Property values still high

Will home prices go down as a result of the commissions change? 

Navarra said no.

"The market bears what the market bears," he said. "... Even though the cost to sell might be reduced, still the value of the property and demand for the property, is still very high right now."

Tobin agreed.

I've read reports that this is going to reduce home prices. I don't see that happening. The price of the home is market driven."
TOBY TOBIN, Palm Coast real estate agent

"I've read reports that this is going to reduce home prices. I don't see that happening. The price of the home is market driven," Tobin said.

Adams said that a seller who opts not to pay a commission to the buyers' agents may be limiting their pool of prospective buyers to the very wealthy, investors or those who are buying homes in cash.

"They're eliminating a lot of potential buyers that would be good buyers if they're not working through the system," Adams said. "So they could take that price off, but they're also taking away their earnings."

As for real estate agents, anytime there is a change in the industry, there will be people who leave, whether it be because they're unwilling to learn a new system or are reluctant to change, Adams said.

"Do I think that they're going to get out over fees or how they make their money? I mean, only if they really don't have the training and they don't have the guidance to show them how to succeed in a changing environment," he said.

Tobin said there will likely be fewer part-time agents.

"I think the number of real estate agents who seem to exist for one or two deals a year is probably going to drop, so the number of agents will drop," he said.

'A period of opportunity'

Real estate, Navarra said, has never been more complicated than it is today. He said he could see a decline in the number of agents as a result of the upcoming changes to the process. On the other had, he does feel there will be stronger agents left in the industry.

"My hope is that this does not affect everybody from having great representation that they deserve because home ownership is the American dream," Navarra said.

Perkovich said realtors will survive, but she is concerned about the buyers and sellers.

"Realtors are professionals and overall very organized and we'll get through this," she said. "But education for the public to me is going to take way longer than July."

Adams said he believes the settlement will bring a "period of opportunity" for agents. 

"Those that understand this, and those that work within the changing guidelines are going to excel," Adams said. "And I think that those that don't aren't going to continue practice, and that just spells opportunity for people to be successful in the business."

While the business may change, Tobin said, in the end, the high commissions Americans pay might not go down a bit.

"When you add up all the pieces, ala carte, paying lawyers in some cases, I think you’ll look back five years from now and say, 'well we're paying different people, maybe at different points of time through the transaction, but in the end we’re still probably spending 5 or 6%.


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