House hunting in South Florida? Buyers expected to pay new cost starting this summer

Homebuyers in South Florida can expect the house-hunting process to get more expensive this summer following a change announced on Friday by the largest association of real estate agents.

Sellers and their listing agents are no longer beholden to covering commission fees starting in July, according to the National Association of Realtors. Listing agents often posted their commission fees on the Multiple Listing Service, or MLS, a portal where licensed agents can post and see what’s for sale.

Sellers and listings agents baked in the usual 6% commission fee into the price buyers and their representatives would see online. Now, buyers and sellers will have to negotiate how to split the commission fee.

In a community where affordability concerns remain high, this adds another cost for South Florida’s buyers to keep in mind.

The change comes on the heels of a settlement for $418 million where the association fought against concerns about fair buyer representation. Since the 1990s, sellers and their listing agents have set commission fees, but starting in 2019 a series of lawsuits from sellers across the country raised concerns about the practice.

“We knew this was going to happen. It was only a matter of time,” said Jack McCabe, owner of the Deerfield Beach-based real estate and economic research firm Jack McCabe Expert Services. “Sellers are going to say, ‘Why am I going to pay 6% commission?’ ”

The National Association of Realtors did not return a request for comment, and the Miami Association of Realtors declined to comment.

Going Dutch on real estate agent fee

Buyers and sellers will be expected to go Dutch on the commission fee, said Ilene McMenamin, a real estate agent with the Oakland Park-based real estate brokerage and property management firm McElliot Properties. If the commission fee is 6%, the buyer can expect to cover 3%.

What does that look like in today’s market? The median sales price on a house is $630,000 in Miami-Dade County. In that case, the buyer would pay $18,900, an extra 3% on top of the price and down payment.

“Put yourself in a position of buying a house. You never thought about the commission. Now you have to,” said Ilene McMenamin, a real estate agent with real estate brokerage firm McElliot Properties. “The buyer doesn’t have the money. They always went to the seller because they have the money. Who knows whether the buyer has an extra 3%. Maybe they’ll borrow their money in their loan. That’s what will probably happen.”

The change will likely most affect first-time homebuyers, veterans using a VA loan, or those counting on a Federal Housing Administration loan. Those buying at around or below the median sales price may be digging into their pockets and worrying the most about how to cover the new fee while cash buyers and those buying condos or houses with a $1 million price tag are likely to not worry as much.

“It will be more complicated for lower-income buyers,”said Ana Bozovic, the founder of Analytics Miami, which provides real estate data and analysis to consumers and developers. “If you’re rich, who cares? You have extra money. You’re used to having lawyers and work out agreements, but if you don’t have extra money and not used to working on these sorts of agreements, I don’t know.”

Buyers, down on luck

Buyers lose out with the change, McCabe said. When sellers have the upper hand due to low housing stock, sellers can place the full burden of a commission fee on the buyer or split halfway.

Although he expects commission fees to go as low as 4% with the change, McCabe said it’s still an extra amount of money buyers have to cough up. When conditions favor buyers due to perhaps an oversupply of inventory, buyers will now have to tread carefully.

“When things get tough that’s when sellers offer buyers’ agents more incentives,” McCabe said. “The problem is the agent will take buyers to whoever offers them the most and they’ll shy away from those who don’t offer anything. It’ll be a disservice to the buyer because they’re not aware.”

One thing’s for certain — no one expects South Florida’s market to cool due to this change. Although activity has slowed, corporate expansions and the wealth migration continues, both helping maintain existing conditions.