NAR Commission Settlement - What you Need To Know!
You may have noticed recent headlines discussing imminent shifts in the residential real estate landscape, particularly in light of a landmark case involving the National Association of Realtors (NAR) and other ongoing legal proceedings. Unfortunately, much of the media coverage has been misleading, and I want to ensure you have accurate information about these developments and their potential implications.
Traditionally, the commission for a Buyer’s Broker/Agent has been covered by the seller as part of their listing agreement, which was then shared on the Multiple Listing Service (MLS). This long-standing model facilitated easy listing sharing via a central “marketplace” and leveled the playing field for buyers, enabling them to finance their broker’s commission through the sale price rather than reducing their down payment funds.
However, recent lawsuits have questioned the fairness of the current system, where the buyer agent's fee comes from the seller's proceeds. As a result, the industry will see changes in how commissions are structured. Upcoming changes slated to take effect around mid-July pending approval may impact this arrangement:
• Seller Paid Buyer Broker Commission: Sellers may no longer unilaterally offer buyer broker commissions in the MLS. Sellers can still offer buyer concessions, such as closing cost assistance, as long as it is not directly tied to the Buyer-Broker Commission. Sellers are not obligated to offer any commission to the buyer’s broker
• Buyer Representation: Buyer brokers participating in the MLS will now be required to execute a Buyer-Broker Representation Agreement with each buyer, similar to the listing agreement with sellers, which covers their duties and compensation.
The lawsuit settlement is intended to bring clarity to the commission process and ensure that consumers are aware that commissions are, and always have been negotiablet. Each broker and agent can set their fees, similar to compensation for legal services, and buyers will now contract directly with their broker for transparency.
While we don’t anticipate significant changes on the listing side of the business, buyers will now formally engage the services of their agents under a compensation agreement, which will make them more inclined to select professionals of a higher caliber to represent them.
Is This Good For Buyers or Sellers?
That remains to be seen and as with everything there is no one size fits all. The advantage of the seller paying the entire commission is they will have exposure to the largest pool of buyers. The biggest struggle for many first time home buyers is coming up with sufficient funds for the down payment and closing costs, if they then have to factor in paying their agents commission it could limit the homes they could buy as they’d be forced to look at only listings that ARE offering compensation to the buyers agent.
Sellers of course could stand to benefit by saving on the total commission they pay. They will have more leverage to negotiate how much they pay their agent, and, if they want to offer any compensation to the buyer's agent at all.
There’s going to be a lot more negotiating between sellers and their agents, buyers and their agents and both agents in the tranasaction.
I believe these changes will underscore the invaluable role professional agents play in navigating the complexities of the home purchase process, which often represents the largest single investment for clients.
As a Broker, I will continue to serve your best interests amidst these evolving dynamics. Should you have any questions or concerns, please don’t hesitate to reach out via call, text, or email.
