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Seattle Times business reporter

Starting Oct. 1, it could start getting cheaper to buy a home around Seattle and most of Washington.

That’s because the curtain will be pulled away from a secret long kept within the community of real-estate agents: how much the agent representing the buyer collects when a house is sold. Brokerages in the Seattle-Tacoma area will be among the first in the nation to start publishing those fees, long kept hush-hush, on their online listings.

And while home sellers have been required to offer some kind of compensation to buyers’ agents in order to list a home, starting Tuesday, sellers won’t need to offer anything.

The changes here, enacted by the Northwest Multiple Listing Service (NWMLS) — the membership group where brokers exchange information on homes they are selling in 23 Washington counties — come in the midst of two ongoing class-action lawsuits filed this year in Illinois and Minnesota against the National Association of Realtors and several nationwide brokerage firms. Those suits allege that brokers forced sellers to pay artificially high fees to buyer’s agents, by refusing to show homes to clients without the promise of a high commission.

The lawsuits have been called a “nuclear bomb on the industry,” an “Armageddon” and “forever industry changing” by real-estate commentators, who anticipate they will drive transaction costs down. The National Association of Realtors has moved to dismiss the case and said the lawsuits are “shaky” and the claims “manufactured.”

But the NWMLS’ push for stepped-up transparency hints that behind the scenes, brokers may be taking the implied threat of the lawsuits more seriously than they publicly admit.

The NWMLS said its changes aren’t in response to the allegations of price-fixing contained in the suits. Rather, the organization said in a statement, the litigation “afforded NWMLS brokers the opportunity to review NWMLS rules and improve them to allow brokers to continue to innovate.”

The new rules, the organization said, should help homebuyers better understand how their agent is compensated for helping to show them houses and close a deal. A recent Redfin survey found that roughly half of people buying homes don’t understand how their agents are paid — perhaps in part because buyer’s agents often describe their services as “free.”

Actually, the person going house to house with a would-be homebuyer gets their pay from splitting a commission with the agent representing the seller, who’s usually paid around 5%-6% of the total home price. But generally, a buyer doesn’t learn how much the seller is offering the buyer’s agent who helps bring home the deal — that figure is hammered out between the seller and the seller’s agent, and then published in the Multiple Listing Service’s database, which is only accessible by real-estate agents.

Starting immediately, the new rules will make it easier for homebuyers to figure out if their agent is only showing them houses offering a high buyer’s commission, said Greg Gans, a broker at Hardy Realty in Seattle who describes himself as “almost exclusively” a buyer’s agent.

“I know plenty of agents who see a 1% commission, and they’ll show the house, but they’ll say, ‘Oh, this is a problem, and you’re going to have to spend this amount of money on the kitchen,'” Gans said. “Brokers think of crafty ways to steer people away from homes where they’re not going to get the full commission. Or brokers may not put together the most competitive offer” on homes offering low commission.

While the new rules allow sellers to refuse to pay the commission of the buyer’s agent, it’s unlikely sellers will get off entirely scot-free, at least any time soon. For one, state law allows buyer’s agents not to show property if the seller doesn’t offer to pay commission. And buyers on the hook for hundreds of thousands of dollars may not have the liquidity to pay their agents themselves, unless mortgage rules change.

In the long term, though, the change could lead to a system where buyers and sellers each compensate their own agent, said Windermere broker Russ Cofano, instead of funneling commission through the seller’s agent. That could make it less expensive to sell a home.

And the greater transparency could increase downward pressure on buyer’s agent commissions — already heightened by firms like Seattle-based digital brokerage Redfin, which gives cash back to buyers in most states.

Buyers are already starting to demand more for their money from their agents, said John L. Scott vice president Jon Hunter. Greater transparency will give them more leverage to negotiate agents’ fees down.


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