Long Island real estate industry braces for major change in how agents get paid 

A significant change to how real estate agents are paid takes effect Thursday on Long Island following antitrust litigation against the National Association of Realtors that alleged agents conspired to inflate commissions.

But while it will alter the nature of relationships between buyers, sellers and real estate agents, experts said it’s hard to say how it will affect home prices.

OneKey MLS, the multiple listing service that includes Long Island, will prohibit listing agents from disclosing on its platform how much a homeowner is willing to pay a buyer’s agent in commission.

Traditionally, offers of compensation had been listed on the MLS and listing agents split commissions with agents who brought them a buyer.

"Sellers must understand they have the ability to negotiate commissions," said Doreen Spagnuolo, CEO of the Long Island Board of Realtors, noting sellers have always been able to negotiate. "These changes are about consumer empowerment."

"Sellers must understand they have the ability to negotiate commissions," said Doreen Spagnuolo, CEO of the Long Island Board of Realtors. Credit: Long Island Board of Realtors

The changes aim to address concerns put forward by a group of Missouri home sellers in litigation against the National Association of Realtors and large national real estate brokerages. The plaintiffs charged that the commission splitting among agents had artificially kept fees higher.

The National Association of Realtors pushed back, saying commissions already had been negotiable, but agreed in March to settle the lawsuit for $418 million and make changes to the way information about commissions is shared on multiple listing services. All Realtor-owned multiple listing services must put the changes into effect by Aug. 17.

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New rules for buyers' agents 

Agents who specialize in working with buyers will still seek payment. Under new rules for participating in OneKey MLS, those agents will be required to have a signed buyer representation agreement before taking clients to tour homes.

That agreement will include how much an agent expects to be paid, what services they will provide and whether they will seek payment from the buyer directly or negotiate their payment with the listing agent.

The change will require buyers’ agents to sell consumers on their services in a way they haven’t needed to before.

"It’s significant from the standpoint that it does represent change," said Richard Haggerty, CEO of OneKey MLS. “ … I personally feel those brokers who adapt quickly and convey [their] value proposition are going to thrive."

Buyers could choose to skip using an agent. In that case, a listing agent could handle both sides of the deal, and it’s possible they would accept a lower commission for doing so.

Consumers must understand that the listing agent has a fiduciary duty to help the seller get the best price in those situations, Spagnuolo said.

Requiring buyer-broker agreements will help consumers understand they have a right to pay for their own agent to represent their interest, she said. 

It’s unclear what effect the changes will have on home prices. Some sellers could stand to pay less if they opt not to pay the buyer’s agent’s commission, but that doesn’t mean they will lower their asking price.

Rob Hahn, a real estate industry consultant based in Las Vegas who grew up on Long Island, said he didn’t expect agent commissions to fall immediately but over time some buyers’ agents could start charging less, pushing costs down.

In a seller's market like Long Island's, in which home prices have set records this summer, homeowners likely would reap the savings. 

"I do think most of the economic benefit will be captured by the seller," he said.

Upheaval anticipated

Deirdre O’Connell, CEO of Daniel Gale Sotheby’s International Realty in Cold Spring Harbor, said she expects some upheaval in the days after the changes take effect, mostly because some agents won’t be as prepared as they should be.

But she has heard from agents at her brokerage that homeowners haven’t balked at continuing to cover commissions for buyers’ agents — at least so far.