MINNEAPOLIS — Imagine it's opening night at the theater, the actors take the stage, the music starts playing, and you get the rare opportunity to look behind the curtains and go behind the scenes of the show.
Realtors say come Aug. 17 this will happen in the real estate industry, with buyers and sellers getting the chance to look behind the curtains.
On Aug. 17, several changes will go into effect that were prompted by a lawsuit settlement with the National Association of Realtors. The association has agreed to pay $418 million to settle a handful of lawsuits. The agreement also includes several industry changes that will impact home buyers, sellers and realtors.
When the lawsuit was first announced many real estate experts were worried about the impact these changes would have on the profession.
Minneapolis Area Realtors President Jamar Hardy said the industry has had several months to process these changes and he believes the impact will not be as significant as many once believed.
"I think the impact is just going to be transparency for consumers," Hardy explained. "Really understanding what people are paying, separating those payments out to where they are just a little more visible and in people's faces so they understand it."
Hardy said consumers have always had the opportunity to negotiate real estate commissions and services, but very few people did. He said that's what this lawsuit settlement is all about, giving home buyers and sellers more opportunities to understand what their realtors are doing and how they're getting paid.
"I hope what they will see is more transparency, especially those who have done this before. I think those who have never bought or sold a house, they’re not going to notice a difference,” Hardy said.
Some experts believe a more transparent real estate industry could lead to lower commissions, which could save buyers and sellers money, and hurt realtors who rely on that money.
"I think really the full-time practitioners who have been in it long enough that focus on real estate, they're the ones that are really going to win out in the end on this, both on the buy side and the seller side, but I think those part time agents that were qualifying people in coffee shops, I think it's going to get a bit difficult for them because competition really will win out,” Hardy said.
Bryan VantHof with RE/MAX said the changes could also affect first-time homebuyers, because up until now the norm has been for the sellers to cover commissions on both sides.
"We believe it still will happen in about 80% to 90% of transactions,” VantHof said.
But in those cases where the seller doesn't cover the buyer's commission, that extra cost, which is likely $10,000 or more depending on the price of the home, could fall on the buyer.
"Sometimes a buyer doesn't have the extra cash to pay a buyer's agent commission. There is some concern about that. We have had some discussions,” VantHof said.
VantHof said buyers who have to cover the buyer’s agent commissions still have options to come up with that money.
Hardy agrees, buyers have access to various government programs, and they can also work with their realtors to find other creative solutions.
"I really think the buyers here in the state of Minnesota are going to find that pathway to still have representation, still be able to pay those fees. Maybe it's just rolled into their mortgage now,” Hardy explained.
In the end, the industry may be peeling back the curtain, but it's up to consumers to take a deeper look.
"Do your research. Make sure you are hiring a qualified, experienced realtor. There's over 22,000 realtors in the state of Minnesota. You have options,” Hardy said.