As the real estate landscape continues to evolve, recent changes brought about by the National Association of REALTORS® (NAR) settlement are set to have a significant impact on both home buyers and sellers. On March 15, 2024, NAR reached an agreement with plaintiffs in a lawsuit concerning broker commissions, which, if approved by the court, introduce new practices aimed at increasing transparency and empowering consumers in real estate transactions. These changes go into effect on August 17, 2024 and include updates you should be aware of as you navigate the process of buying or selling a home.
What Is the NAR Settlement?
The NAR settlement addresses claims made on behalf of home sellers regarding broker commissions. As part of the settlement, real estate agents who use the Multiple Listing Service (MLS)—a tool that allows real estate professionals to share information about properties—must now enter into written agreements with buyers before showing them homes. These agreements are meant to increase transparency around the compensation agents receive, giving buyers and sellers a better understanding of their financial commitments.
Considerations for Home Buyers
If you are in the market to buy a home, the NAR settlement introduces new requirements that will affect your interactions with your real estate agent.
- Written Agreements: Before touring any home with your real estate agent in-person or virtually, you will need to sign a written agreement. The agreement outlines specific services your agent will provide and discloses the exact amount of rate of compensation they receive. You do not need a written agreement if you are just speaking to an agent at an open house or asking them about their services.
- Transparent Commission Rates: The settlement mandates that real estate agents clearly disclose their commission rates in these agreements. This transparency allows you to understand the costs involved and gives you the opportunity to negotiate the commission rate with your agent.
It’s important to be aware that there are exclusive and non-exclusive buyer agency contracts. Exclusive contracts are for periods of time with one agent while a non-exclusive contract is more property specific.
Considerations for Home Sellers
As a home seller, the NAR settlement introduces changes that impact how you work with real estate agents and structure your transaction.
- MLS Compensation Restrictions: Under the new rules, offers of compensation to buyer brokers can no longer be listed directly on the MLS. This change may affect how compensation is discussed during negotiations. You can still offer buyer concessions, such as covering closing costs, which can be listed on the MLS.
- Clarified Negotiation Rights: The settlement reinforces that commission rates are not set by law and can be negotiated.
Broker to broker compensation can be part of the listing contract and/or seller concessions to the buyer broker, an amount the seller pays a buyer broker. If you don’t offer any broker compensation, you may be limiting the number of showings as some agents will not want to show your home. If a client requests a showing, the potential buyer may not have the funds to pay the buyer agent as specified by their agreement.
Zuber Realty’s policy is to offer broker to broker compensation, but this is subject to seller agreement and approval.
Key Takeaway
The NAR settlement is poised to bring more transparency in the real estate industry. Whether you’re buying or selling a home, it’s important to understand these new requirements and how they impact your transaction. The key takeaway is that real estate agents are now required to explain with clarity their commission rates to clients, and both buyers and sellers have the right to negotiate those rates. If you have any questions, contact your Zuber real estate agent.