NAR Settlement
Find out how eXp Realty is leading the way with the NAR settlement changes!
The National Association of Realtors (NAR), a nationwide organization for professionals in the real estate industry, entered into a settlement agreement in March 2024 for $418 Million. You can read more about the details in the provided FAQ document from NAR. The settlement includes two rule changes that went into effect August 17, 2024:
- Agents can’t include the buyer agent’s compensation when listing homes on the Multiple Listing Services (MLS) databases
- Buyers can negotiate their own agents’ pay and formalize it in a signed contract
Although it seems that two rule changes for a $418 Million settlement isn’t a lot, brokers no longer cooperating on commission has significant impacts on how buyers and sellers discuss and negotiate fees and compensation. It is important for agents, as well as buyers and sellers, to be aware of the new changes going into effect.
How Will the Settlement Affect Real Estate Agents?
Real estate agents play a crucial role in buying and selling homes. They help people find the right house, negotiate the best price, and handle all the paperwork. But the NAR settlement means that agents need to change some of the ways they work for commission.
One of the biggest changes is in how agents earn their compensation. Commissions are the money agents get paid for helping buy or sell a house. Before the settlement, it was common for the seller’s agent (the agent representing the person selling the house) to share their commission with the buyer’s agent (the agent representing the person buying the house). This sharing of commissions helped ensure that both agents were motivated to make the deal happen.
However, the settlement has changed this practice. Agents now need to be more transparent about how they earn their money and who pays them. Real estate agents should be providing buyers with the option of an exclusive or non-exclusive agency agreement – whatever best suits their client’s needs at the time.
For real estate agents, this means they need to be more careful in explaining their services and their fees to their clients. They also need to rethink how they negotiate their commissions to ensure they are still fairly compensated for their work.
What Does the Settlement Mean for Home Buyers?
If you’re thinking about buying a home, the NAR settlement brings changes that affect you directly. One of the goals of the settlement is to make the process of buying a home more transparent. But what does that mean for you?
In the past, buyers often didn’t have to worry about paying their agent directly because the seller’s agent would share their commission. But with the new rules, buyers may be asked to pay their agent’s fees directly. This makes the costs of buying a home more apparent from the start.
On the positive side, this change leads to more open conversations between you and your agent about what you’re paying for and why. Your agent will need to be clearer about the services they offer and how much those services cost. This transparency can help you make better decisions about which agent to work with and how to budget for buying a home.
It’s also possible that with these changes, more agents will offer different ways to pay for their services. For example, instead of a commission based on the home’s price, some agents might offer flat fees. This gives you more options to choose from when deciding how to pay your agent.
Lastly, agents are now required to have a buyer sign an agency agreement before showing a home. The agency agreement also includes compensation – this is important to discuss with your agent in great detail. It is critical that buyers understand they may have to pay out of pocket if the seller does not offer to pay the buyer’s agent through seller concenssions.
What Does the Settlement Mean for Home Sellers?
If you’re planning to sell your home, the NAR settlement brings changes that affect you. Traditionally, sellers paid the commission for both their agent and, all or most, of the buyer’s agent. This is still most likely going to be the case; however, now sellers can negotiate buyer’s agent commission at the time of an offer through seller concessions.
With the new rules, sellers are still responsible for paying their agent, but the way commissions are handled has changed. Sellers do not need to offer buyer agency commission up front when their house gets listed on the MLS. Instead, they can negotiate the buyer’s agent commission through seller concession for each offer. Previously, this was communicated directly in the MLS listing so everyone knew up front what the seller was willing to offer at the time the house was listed. Typically, 3% of each side was the usual rate, but that has always been negotiable and never was set by law. This meant that sellers often paid a significant portion of their home’s sale price in commissions.
This change leads to more flexibility in how you negotiate your agent’s fees. You might be able to find new ways to save money by only paying for the services you need. However, it also means that you’ll need to be more involved in understanding and negotiating these costs.
Selling a home is already a complex process, and these new rules might make it a bit more complicated. But with the right information and guidance, you can navigate these changes and still sell your home successfully.
What Should Agents, Buyers, and Sellers Do Now?
So, what should you do in response to these changes? Here are some simple steps for agents, buyers, and sellers:
For Agents: Stay informed about the new rules and how they will affect your business. Be prepared to explain your fees clearly to your clients and consider offering different payment options to meet their needs. Building trust through transparency will be more important than ever.
For Buyers: Start having open conversations with your agent about how they get paid and what services they provide. Don’t be afraid to ask questions and understand exactly what you’re paying for. This will help you make informed decisions and avoid any surprises during the home-buying process.
For Sellers: Be ready to negotiate and understand the new commission structures. Work closely with your agent to find the best way to handle fees and services. Being proactive in these discussions can help you save money and make the selling process smoother.
Conclusion
The NAR settlement is a big deal in the world of real estate, and it’s already changed how things are done. But these changes don’t have to be scary. By understanding what the settlement means and taking the right steps, real estate agents, buyers, and sellers can all navigate these new rules successfully. Whether you’re an agent adapting to new ways of working, a buyer looking for your dream home, or a seller ready to move on to the next chapter, staying informed and communicating openly will help you make the most of these changes.
The advice outlined may not necessarily reflect all broker’s practices across the country or be applicable for every situation. It is important to do your own research and follow any local laws, procedures, or policies.
At eXp Realty
eXp Realty understands that this is a major change to buyers and buyers agent’s relationship. They understand that at the end of the day, buyers, sellers, and homeownship needs come first. Therefore, eXp Realty has created non-copyright forms for agents at any broker to use to help sellers, buyers, buyer’s agents, and seller’s agents – even if you aren’t using any eXp Realty services.
