WORCESTER — Holly Hendricks has been a real estate agent for six years, a job she says can often be physically and emotionally exhausting.
Although she represents listings generally in Central Massachusetts working for Auburn-based brokerage company eXp Realty, it’s a Missouri federal court case that has been looming over the heads of Hendricks and other real estate agents since March 15, when a $418 million settlement was agreed upon by the National Association of Realtors.
The agreement came after a federal decision in October in which a jury found collusion between the association and several large brokerage firms to keep commission rates high, which plaintiffs in the case saying they were forced to pay fees as high as 6%, often deemed “excessive.”
Under an organization rule, that percentage is a commission fee paid by sellers using the Multiple Listing Service (MLS.com), one of the more popular websites for the industry, to both the agent representing the buyer and the seller’s agent.
As part of the settlement, the NAR also agreed to prohibit offers of broker compensation to be included in MLS, which could lead to buyers having to negotiate their own agent’s compensation.
Hendricks said that the commission fees in the area are usually about 4% to 5% and the change could make the search for a new home tougher especially for buyers, who under the ruling would have to negotiate a commission fee with real estate agents and make the process of buying a new home not only more stressful but also more costly.
As a result, this could push prospective buyers away from the option of hiring a real estate agent in their home search.
“I don’t think people realize how much work goes into being a buyer’s agent,” said Hendricks. “It’s more than just opening doors.
“There are so many moving pieces that all need to be held together from the time of submitting an offer to the time of closing.”
Cherie Benoit, the president of the Realtors Association of Central Massachusetts, echoed Hendricks, adding that the change could burden the buyer with more cost.
“Buyers could be hurt if they are finding it harder to afford representation,” said Benoit. “I do think that it’s critical that both homebuyers and sellers are represented by agents as we work in the best interest of both sellers and buyers.”
On the other hand, Brandon Oberdorfer, a real estate agent also based in Auburn, said that the change could benefit the buyer’s agents, as they will now have room to negotiate their commission with their clients.
“There are ways to leverage yourself within every market,” said Oberdorfer. “I think that if you’re a good agent, you maintain that fiduciary interest to your client and if you’re looking out for your client’s best interest, I think it’s only going to benefit.”
In recent years, the housing market has often been coined as a “seller’s market,” which is defined by an ever-shrinking inventory and higher prices that often pushes prospective buyers to often waive critical steps, such as safety inspections, in order to become more competitive in their search for a home.
This nationwide phenomenon has also been noticed locally; the median price for a single-family home in Worcester County was $415,000 for February, according to The Warren Group, which is 6.4% higher than February 2023 and even higher than the years before.
The same pattern is seen in Worcester, where the median price for a single-family home was $385,000 in February, a 4.3% increase when compared to the same month last year.
If approved, the NAR settlement is seen as a beneficial change for market prices, as sellers will not have to take the buyer’s agent commission into consideration when placing a tag on their home. This, in turn, could relax market prices.
Despite that, Benoit strongly disagreed that the settlement will have an effect on the market.
“Home prices are affected by market conditions, not by Realtor commissions,” Benoit said.
While the settlement is due to appear in court for approval, the changes will most likely be go into effect in July.
The NAR said in a statement that among the other changes, they have also agreed to enact a new rule that would require MLS participants working with buyers to enter into written agreements with their buyers.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” Nykia Wright, the interim CEO of NAR. “Ultimately, continuing to litigate would have hurt members and their small businesses.
“While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”