New Real Estate Commission Rules Spark Uncertainty Among Chicago Homebuyers
Nic Van Horn’s family is searching for a new home in Chicago, a process complicated by recent changes to real estate agent commission rules. These changes, implemented in August by the National Association of Realtors (NAR) as part of a $418 million antitrust settlement, represent a significant shift in the homebuying landscape. Historically, sellers paid both the buyer’s and seller’s agent commissions, a system now being overturned.
The traditional model involved sellers paying a commission, typically 5% to 6%, which was then split between the seller’s and buyer’s agents. Buyers generally incurred no direct cost. The new rules allow buyers and sellers to negotiate commissions separately with their respective agents. While NAR claims commissions have always been negotiable, the change introduces uncertainty for buyers like Van Horn. He acknowledges awareness of the settlement but expresses concern about the implications for his family’s home purchase. The uncertainty centers around who will ultimately pay his buyer’s agent commission—his family, the seller, or a combination of both.
Despite the settlement’s implementation several months ago, many buyers remain unaware of the changes. Real estate agents express worry about the future of commissions, and while October data showed a slight dip in Illinois commissions, it’s too early to determine the long-term impact. Van Horn’s agent, Grigory Pekarsky of Vesta Preferred, anticipates it will take at least a year or two to fully understand the consequences of the settlement.
The lack of awareness varies among buyers, even at larger firms like Baird & Warner. Laura Ellis, the firm’s chief strategy officer, notes that while some buyers have inquired about the changes, the biggest fear among those who are aware is the potential for unexpectedly high costs. She assures that, in practice, the majority of buyers aren’t paying their agent’s fees directly. Realtors themselves have expressed concerns about potential job losses and lower commissions, but these fears haven’t yet materialized. Data from Clever indicates a slight decrease in the average Illinois commission from 5.35% in 2023 to 5.07% in August 2024; however, other factors may be at play. Agents interviewed for this story report no significant changes in their commission rates.
Tommy Choi, president of the Illinois Realtors association, also hasn’t observed a major shift in commissions, echoing the NAR’s stance that commissions have always been negotiable. While concerns existed about agents leaving the industry, particularly those selling only a few homes annually, this hasn’t occurred. The demand for agent expertise remains high, with consumers recognizing the importance of professional guidance in such a significant financial transaction.
Jerrold Bregman, a partner at BG Law, suggests that while the impact is still unfolding, increased bargaining power for buyers and sellers may ultimately lead to lower negotiated commission rates. The changes are anticipated to further stimulate the market once interest rates decrease.
Illinois will further amend its real estate laws in 2025, mandating signed buyer-broker agreements. While this is already common practice among NAR members due to the settlement, some buyers express hesitation, while others appreciate the increased transparency and trust it fosters. Agents like Sammy Lubeck of Baird & Warner view this as a positive development for the industry, solidifying the agent-client relationship. Pekarsky, however, cautions buyers to avoid contracts containing cancellation fees, emphasizing the importance of carefully selecting an agent and reviewing contracts. He and Lubeck both recommend interviewing several agents before committing to a contract.
Ultimately, despite the uncertainty surrounding the new commission rules, Van Horn values having a Realtor to navigate the complexities of the Chicago real estate market, demonstrating the ongoing significance of real estate agents even in this changing landscape.