By Frank Szivos

The way real estate agents are compensated is changing after litigation over the issue was settled recently, and although the immediate impact on the Westport and national markets is uncertain, local professionals are not overly concerned.

In March, the National Association of Realtors reached an agreement to resolve a series of class-action lawsuits initiated by home sellers, which has changed compensation rules for realty agents. As part of the settlement, NAR paid $418 million to people who sold homes over the last four years.

As of Aug. 17, the new rules agreed to by the NAR allow home sellers and buyers to negotiate fees paid to respective agents.

Some Westport agents doubt the changes in compensation regulations will significantly reshape the real estate landscape any time soon — or at all.

Rick Higgins, CEO and founder of the Higgins Group Real Estate, thinks the NAR settlement has stirred up more confusion among property sellers and buyers than benefiting either.

“All this has caused a lot of confusion,” Higgins said. “I don’t see it changing much. We’ve had a system that has worked well for years. In six months, I believe this will settle down with little or no change.”

At the very least, the changes will create more paperwork for both agents, and especially buyers, according to Higgins.

Susan Seath, of KMS Team at Compass Westport, notes that laws requiring more transparent fee negotiations for buyer/seller agents is nothing new.

“Buyers and sellers were always able to negotiate fees,” Seath said. “We’ll be doing business just a little differently. Agents have to be paid for their services. That still remains the same.”

Bo Meng, professor of finance at Sacred Heart University, foresees no major shift in the immediate future of how real estate transactions take place. 

He notes that one required change is that before buyers can view houses with agents, the buyers must sign an agreement, specifically spelling out the agent’s negotiated fee.

As an example, Meng sold his house in Virginia in 2023 before relocating to this area. He took the traditional route, offering 5-6 percent commission because it looked more appealing to buyer agents.

“My agent explained to me that if I didn’t offer the traditional commission, my listing would look weak compared to others,” he explained.

The bottom line is that if sellers and buyers offer low commissions, it could work against them. Consider that an agent for a property buyer is more likely to show a listing when the negotiated commission falls in the customary ballpark of 2-2.5 percent for the buyer agent’s cut. 

Traditionally, a seller paid the 5-6 percent commission to their agent who, in turn, split it with the buyer’s agent. Meng said the new fee negotiations still require buyers and sellers to pay commissions — the difference now is the fees are negotiated.

Meng believes that as the confusion evaporates, the market will settle down within six months as buyers and sellers become used to the new normal.

The fee negotiations, however, are expected to have no effect on home prices. 

As Seath sees it, the inventory of homes remains scarce. This means asking prices will remain high because inventory in the Westport market remains low.

In a report published by Rocket Homes, average prices of Westport homes have grown by $25,000 (a 1.4 percent rise) since 2023. In fact, the number of homes for sale dipped from 175 to 164 between June and July of this year. 

Despite the change ushered in by the NAR agreement, agents advise that buyers should expect to pay at least the asking price or more. 

The median price for Westport homes continues to hover at $1.8 million. Of the 36 homes sold in July 2024, 55.6 percent (20 homes) of those sold above the asking price, according to Rocket Homes.

Leslie Clarke, of the Leslie Clarke Team at Compass in Westport, points out that sellers and buyers should benefit from negotiating acceptable commission fees to remain competitive in the market.

“Fees are dictated by the market,” Clarke said. “They have always been negotiable. Little has changed. Fair compensation makes the process smoother. Agents on both ends of the transaction must be compensated.”

Meng said agents are worth their fees in helping to shepherd every deal to completion. In the sale of his house, he chose an experienced agent who helped smooth the challenges that arise in every sale.

For instance, agents often invest months and sometimes years before finding the right match for a property. But they earn a living on commission, paid only after a sale is closed. 

Before reaching that point, they offer varied services for property buyers and sellers. These include:

• Overseeing property inspections.
• Recommending professionals to complete a sale, such as lawyers, inspectors and finance options.
• Managing completion of the sale and filing necessary forms.

“Agents earn their fees. They offer a long list of services,” Meng said. “We need agents in the middle to get sales done.”

Higgins contends that Westport agents rank among the best in the nation, which benefits buyers and sellers.

“Agents have to be good in this market,” Higgins said. “Consumers are sophisticated, and agents have to be up on their game.”’

As buyers and sellers negotiate fees, they will be more transparent. But little change is expected in how real estate sales are carried out in the immediate future.

“There will be more transparency [about fees], and we’re all for that,” Higgins said. “It’s good for consumer confidence in the process.”

Frank Szivos is a freelance writer.