Understanding the New NAR Commission Settlement: What It Means for Buyers and Sellers

The recent settlement by the National Association of Realtors (NAR) marks a significant shift in the real estate industry. With changes to how commissions are handled, both buyers and sellers need to understand what this means for their real estate transactions. Here’s a breakdown of the key points and their potential impact.

Key Changes from the Settlement

Elimination of Commission Offers on MLS:

• Previously, sellers would offer compensation to buyer agents via the Multiple Listing Service (MLS). This practice will be prohibited, requiring agents and clients to negotiate compensation directly.

• Offers of compensation can still be presented as seller concessions, similar to covering closing costs, but not through the MLS.

Mandatory Buyer Agency Agreements:

• Starting in July 2024, agents representing buyers must have written agreements in place before showing homes. This formalizes the relationship and clarifies expectations for both parties.

Settlement Payments:

• NAR will pay $418 million over four years to resolve these claims, with the first installment being the largest. This financial obligation aims to address the legal claims and provide a path forward for the industry.

Impact on Buyers

Increased Transparency and Negotiation:

• Buyers will have more transparency regarding how their agents are compensated. Instead of compensation being predetermined by the seller’s listing, buyers will negotiate directly with their agents. This change empowers buyers to better understand and control their costs.

Potential Upfront Costs:

• Since agents may not receive compensation through the MLS, buyers might need to pay their agents directly. This could mean higher upfront costs, but also more control over their budget and services received.

Clearer Agreements:

• The requirement for written agreements ensures that buyers and agents have a clear understanding of their relationship and expectations. This could lead to more personalized and effective representation.

Working with Me as Your Buyer’s Agent:

• I will inform you if and when a home does not offer a concession for the buyer’s agent. This transparency helps you understand the true cost of buying a particular home and make an appropriate offer.

• I will negotiate the buyer’s commission when it serves your best interest to get your offer accepted, while fulfilling my fiduciary responsibility to you.

Impact on Sellers

Flexibility in Negotiation:

• Sellers will need to negotiate agent commissions directly with potential buyers or their agents. This could provide more flexibility in structuring deals but may also require more involvement in the negotiation process.

Possible Cost Adjustments:

• Without the standard practice of offering buyer agent commissions through the MLS, sellers might adjust their pricing strategies. They could offer concessions or lower the home price to make it more attractive to buyers who must cover their agent’s fees.

Adapting to New Norms:

• As the industry adjusts, sellers will need to stay informed about new practices and strategies for marketing their homes. Working with knowledgeable real estate professionals will be crucial during this transition.

Maximizing Your Sale:

• You can still offer concessions, which may help you earn a higher selling price by encouraging buyers to view and make offers on your property. In a multiple offer scenario, offering a concession can make your property more attractive, potentially leading to a higher overall sale price that offsets the commission concession.

Moving Forward

The NAR settlement represents a move towards greater transparency and fairness in real estate transactions. Both buyers and sellers will need to adapt to these changes, but with the right knowledge and preparation, they can navigate this new landscape successfully.

For more detailed information on the settlement and its implications, you can visit the NAR's official FAQ and summary pages​ (www.nar.realtor)​​ (www.nar.realtor)​​ (RealEstateNews.com)​.

Conclusion

This settlement is a landmark moment in real estate, aiming to benefit consumers by making commission structures clearer and more negotiable. As the industry evolves, staying informed and working with experienced professionals will be key to making the most of these changes.