DES MOINES, Iowa — Last week, the National Association of Realtors agreed to a landmark settlement after facing lawsuits claiming they had conspired to raise commission rates.
The organization agreed to pay $418 million dollars in settlement costs, but it has not yet been approved by a federal judge.
The move could change how real estate agents get paid, but according to Iowa real estate experts, there needs to be some clarification around these industry changes.
It was widely believed that the NAR would no longer charge buyers and sellers a 6% combined commission rate as a result of the settlement. However, the Iowa Association of Realtors said that detail is misconstrued.
“It's really important to know that compensation has always been negotiable, and it will always be a negotiable," spokesperson Ashlee Kieler told Local 5. "It is a decision that is made between a buyer, a seller and their agent.”
This means that there has never been a “standard” commission rate. That number can vary based on the complexity of the transaction, according to longtime Des Moines realtor Erika Hansen.
“Everybody's always had a choice of who they're working with and what they're paying, so that it was never fixed," Hansen said.
One rule that will change as a result of the settlement deals with real estate agent's business practices.
The NAR can no longer require commission rates be listed Multiple Listing Service, a private database that lists property information entered by agents and utilized by a seller. A broker advertising a home for sale on MLS also cannot offer any upfront compensation to a buyer’s agent, per the settlement.
Hansen has been a REMAX agent in the Des Moines metro for 15 years. She said these changes will make home buying more transparent, both for buyers and their agents.
"The biggest piece is really going to be the the transparency factor of it," Hansen said. "Buyers will know what their agent is doing for them, because they're going to know what they're having to pay them."
There are two groups in particular that could feel an extra impact: first-time or lower-income buyers, as paying the upfront costs associated with homebuying may be more difficult.
Both Kieler and Hansen told Local 5 that the Iowa Association of Realtors is working to determine how agents will work with buyers who don't have the ability to pay compensation rates.