Ready for a new real estate landscape, Idaho? Changes in homebuying are coming fast

BOISE (Idaho Statesman) – A new future for buying and selling homes is emerging.

The National Association of Realtors — one of the most powerful trade organizations and political lobbyists in the country — will be enacting new rules Saturday after a nearly $420 million settlement over several lawsuits brought against the real estate giant over price-fixing and antitrust violations.

The complaints focused heavily on a lack of transparency surrounding broker compensation, which has always been negotiable but was often set at an industry standard 5% to 6% of a home’s sale price.

Generally, half of that commission went to the buyer’s agent and the other half went to the seller’s agent.

The median price of a home in Idaho was $460,300 in August, according to Zillow. At that price, the agents would keep almost $28,000 at a 6% commission. That does not include other fees or closing costs. In Boise, that number would be nearly $29,500.

A federal jury in Kansas City ordered in October that the association and several brokerages, such as Keller Williams Realty and RE/MAX, pay $1.8 billion for intentionally inflating real estate commissions.

Agents and brokers, along with many homebuyers and sellers, in Boise, Meridian, Eagle, Caldwell and Nampa have spent the last nine months wondering how the jury’s decision would affect the real estate industry. Those impacts are finally coming to life with new changes, including:

• Scrapping an industry-standard commission for real estate agents.
• New requirements that agents sign buyer-broker agreements.
• Banning brokers from using private databases of home listings, known as multiple listing services, to communicate compensation.

How rules could affect homebuyers

One of the most important new rules for a buyer is that you’ll need to sign a written agreement with your real estate agent before touring a home, even if you tour it virtually. You don’t need to sign anything if you’re just speaking to an agent at an open house or asking agents about their services.

The agreements also must include a statement that broker fees and commissions are fully negotiable and not set by law, according to the National Association of Realtors.

“Compensation can be paid by the buyer, seller or both,” Katrina Wehr, president of Idaho Realtors, the state association for real estate professionals, told the Idaho Statesman. “The exact amount and timing of payment is always negotiable between the buyer and their Realtor, and the seller and their Realtor.”

The contract must show the rate or amount of compensation and how you’ll compensate your agent, Wehr said.

“(Agents must) have clear and transparent discussions with you about compensation,” according to the National Association of Realtors. “When finding an agent to work with, ask questions about compensation and understand what services you are receiving.”

The new rules require these agreements to use objective language — such as a $5,000 flat fee or 3% fee — instead of open-ended language for compensation. The agreements also ban agents from receiving money for services that would exceed the amount listed in the agreement.

“Before signing this agreement, you should ensure it reflects the terms you have negotiated with your agent and that you understand exactly what services and value will be provided, and for how much,” according to the National Association of Realtors.

What changes are coming for Idaho home sellers?

The rule changes for sellers are much the same as for buyers, though sellers could have more command over the process.

“Sellers will need to explicitly agree to any compensation offered to a buyer’s Realtor,” Wehr said. “This change gives sellers more control and negotiation power regarding the fees they are willing to pay.”

As a seller, you can also still offer concessions like offering to pay closing costs, according to the association. Closing costs are fees that the buyer often pays such as application fees, costs for a home appraisal, or fees for a third-party escrow company that holds onto funds during the transaction process.

You can also still offer compensation to a buyer’s broker, which would reduce the seller’s cost. The National Association of Realtors says paying part or all of the buyer’s share can be “a way of marketing your home or making your listing more attractive to buyers.”

This compensation cannot be included on any multiple listing services, which are the Realtors’ private home-listing databases that agents use to market properties and that feed listings into popular sites like Zillow or Redfin. Putting compensation on multiple listing services was an easy way for agents to show what they’d like to receive but could give buyers and sellers the impression that the amounts were not negotiable.

Although compensation won’t be allowed any longer on multiple listing services, they can be included on outside platforms such as on other websites, social media and flyers, according to the association. Concessions, such as covering the buyer’s closing costs, can still be included on multiple listing services.

Your agent must disclose and get your approval for any payment, or offer of payment, the agent makes to a buyer’s agent. This disclosure must be made in writing in advance of any payment or agreement, and it must specify the amount or rate.

Idaho Realtors develop new form

Wehr said the changes may not affect Idaho as much as other places.

“Many of these new practice changes have already been standard practice in our state for years,” Wehr said by email. “Idaho has prioritized transparent representation agreements for some time, outlining who is getting paid and for how much.”

Idaho Realtors developed new and updated forms to comply with the changes, Wehr said.

“The practice changes are designed to address concerns regarding transparency in compensation,” she said. “The settlement agreement aims to ensure that homebuyers and sellers better understand the process and can negotiate the compensation paid to Realtors.”

Final court approval of the settlement is set for a hearing before the judge on Nov. 26, according to Wehr.