A new change in homebuying just took effect. Now, homebuyers must enter into an agreement with their realtor before purchasing a home. This is part of the the National Association of Realtors (NAR) landmark, $418 million settlement from March of this year. The settlement arrived after years of legal battles the NAR has faced with sellers and with the U.S. Justice Department, according to U.S. News and World Report. The settlement, which is subject to court approval, would require the NAR to pay the settlement over a four year period.

Making Deals

Much discussed is the rule requiring realtors to “enter into written agreements with their buyers,” – a practice the NAR already encouraged, according to their statement. These agreements would theoretically eliminate the supposed industry standard of six percent sales commission; however, some realtors think that 6 percent is a number from a bygone era. Wendy Wilmowski, an agent based in Audubon, Pennsylvania, told Drew Mariani that most agents haven’t seen six percent in many years. Wilmowski said that “for the services that I’m going to provide, I need to be paid at least two and a half percent.”

Effect on the Industry

What effect will the ruling have on the industry? Wilmoski thinks that it will “tighten up the industry in a good way.” Agreements, she thinks, will provide opportunities for agents to educate buyers on the process of purchasing a house. “They just can’t call up any agent and…say, ‘hey come meet me at 123 Main Street.’” Instead, questions of compensation will now arise before an agent shows a house.

A Loss for Homebuyers?

Some critics argue that these new agreements will be bad for buyers. Lei Wedge, a professor at the University of South Florida told Yahoo Finance that “Buyers will [probably] end up paying more money for the home because now they have to come up with a commission to pay their buyer agent because this is a seller’s market.” This commission, of course, is on top of the large home mortgages buyers take out. For now, the effect on buyers, sellers, and home prices overall remains to be seen.

To catch the conversation, click here.