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NAR Settlement
WHAT'S THE SCOOP ON THE NAR SETTLEMENT AND HOW WILL IT IMPACT SELLERS AND BUYERS
Since the 1990's, it has been a common practice for home sellers to pay both the seller's agent and the buyer's agent. Offers of compensation help make professional representation more accessible, decrease costs for home buyers, increase fair housing opportunities, and increase the potential buyer pool for sellers. At the time the property is listed for sale, the listing agent and home seller would negotiate the commission rate for both the listing agent and the buyer's agent. The rate being offered to the buyer's agent would appear on the MLS.
The lawsuit, filed on behalf of home sellers, accused Real Estate brokerages and The National Association of Realtors of conspiring to artificially inflate commissions by forcing sellers to pay the buyers agent. After years of litigation, a settlement has been agreed to which include the following terms:
- NAR would pay $418 million over approximately four years.
- New MLS rule prohibiting offers of compensation to buyers agent communicated on the MLS but they could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals
- Require MLS participants working with buyers to enter into written agreements with their buyers.
If approved by the court, these changes will go into effect in mid-July 2024. It is important to note that NAR does not admit any wrong doing but feels it is best for all parties to settle the lawsuit.
So what exactly does it all mean? How will it work? How will you benefit from the changes?
Unfortunately, even the most informed agents on the planet don't know exactly how the changes are going to work. On top of that, most of the headlines are misleading, because nobody knows exactly how things are going to play out. Any claims that the media makes that commissions will be cut in half, or any specific number of dollars will be saved by consumers, remains to be seen. The changes might reduce commissions. On the other hand, they could increase them. As with many things the government or court system touches, there's always the possibility that it could create more issues than it solves.
Here Are Some Things to Keep in Mind if You're Selling a House…
• It doesn't mean that you can't offer a commission to buyers' agents.
• Although you can't publish how much you're willing to offer or agree to on your listing, in most cases, it will still benefit sellers to offer and be willing to offer commissions to buyers' agents in order to get the most exposure for their home, and ultimately the best offers possible.
• There's a good chance that buyer agent commissions will likely still be paid through the proceeds of the sale, as they have been for many years. Most agents will incorporate their commission into the offer with the commission amount agreed to with the buyer.
• It could cause more risk and lawsuits that may directly involve you and your property. Dual agency, which is when an agent represents both the buyer and the seller, is one of the leading causes of lawsuits in the industry. This new way of doing business could create a lot more situations where consumers don't have their own independent representation, which could lead to either the buyer or seller feeling like their interests weren't entirely represented.
Here Are Some Things to Keep in Mind if You're Buying a House…
•You will now have to choose a buyer's agent and sign an agreement with them. This has always been an option, and it could be argued that it should always have been required, but most buyers' agents didn't want to seem too pushy or aggressive, so they never asked for one. Now you'll need to sign a contract to work with them.
• Don't expect agents to be willing or able to work for a much lower commission than they've been working for in the past. Will you be able to find an agent who will work for lower rates? Perhaps. But as is the case in any industry, sometimes going with the lowest cost option ends up costing you more in the end.
• While you may expect sellers to drop their price because they don't have to pay a buyers' agent, don't be surprised if they dig in their heels and expect to get as much or more than similar houses have recently sold for. They will still be basing the market value of their house off of data that had buyer agent commissions factored in.
While the headlines about changing real estate commission structures might sound exciting and like a potential game-changer for you as a home seller or buyer, they are misleading, because nobody knows exactly how things are going to play out. While it's true that commissions may shift, the details remain uncertain.
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