As we enter a new era in real estate following the National Association of Realtors (NAR) legal settlement, it’s essential to understand the implications these changes have for both buyers and sellers.
For Home Buyers: What the NAR Settlement Means for You
Written Buyer Agreements: You will now sign a written agreement with your agent before touring a home. Before signing this agreement, ensure it reflects the terms you have negotiated with your agent and that you understand exactly what services and value will be provided, and for how much.
Compensation Transparency: When you sign a buyer agreement with your agent, it must clearly explain how their payment works. Here are the key points:
- Clear Payment Information: The agreement should state exactly how much your agent will be paid or explain how that amount is calculated.
- Fixed Payment Amounts: The payment must be a specific amount, like a flat fee or a percentage, rather than an unclear or open-ended figure.
- No Extra Payments: The agreement should say that your agent cannot receive more money from any source beyond what you agreed upon.
- Negotiable Fees: It should be clearly stated that you can negotiate the fees and commissions; they are not set in stone by law.
Agreement Applicability: Written agreements apply to both in-person and live virtual home tours. You do not need a written agreement if you are just speaking to an agent at an open house or inquiring about their services.
Seller Compensation Offers: The seller may agree to offer compensation to your agent, but this offer cannot be shared on a Multiple Listing Service (MLS). MLSs are local marketplaces used by both buyer brokers and listing brokers to share information about properties for sale.
Concessions: You can still accept concessions from the seller, such as offers to pay your closing costs.
For Home Sellers: What the NAR Settlement Means for You
As a home seller, you have a wide range of choices when it comes to listing your home. Agents who are REALTORS® are a trusted source of advice and stand ready to help you navigate this complex process and make the choices that work best for you. NAR’s recent settlement has led to several changes related to broker commissions that benefit sellers, and we wanted to clearly lay them out for you. Here is what the settlement means for home sellers:
Compensation Choices: You still have the choice of offering compensation to buyer brokers, which can be a marketing strategy to attract buyers.
Disclosure Requirements: Your agent must disclose to you and obtain your approval for any payment made to another broker acting for buyers. This disclosure must be made in writing and specify the payment amount or rate.
Communication of Compensation: If you approve compensation, it can’t be included on an MLS but can be communicated via off-MLS platforms like social media and flyers. You can still offer buyer concessions on an MLS (e.g., concessions for closing costs).
Negotiable Compensation: Compensation for your agent remains fully negotiable and is not set by law.
These changes will help empower you with additional choices and transparency when selling your home.
What the Settlement Doesn’t Change
While the settlement introduces changes to broker compensation, several key aspects remain the same for both buyers and sellers:
Consumer Choice: As a buyer or seller, you still have a wide range of choices when it comes to how you handle real estate transactions. You can decide whether or not to offer compensation, and you can work with your agent to explore the best options for your needs.
Negotiable Commissions: Compensation for both buyer and seller agents remains fully negotiable. There are no set fees, so you and your agent can discuss and agree on terms that work best for your situation.
REALTOR® Commitment and Ethics: REALTORS® are still committed to acting in your best interest. They are ethically obligated to protect and promote your interests, treat all parties fairly, and maintain transparent communication, including discussions about compensation.
FAQs for Buyers and Sellers
For Home Sellers
- What practice changes impact home sellers?
The settlement empowers sellers with more choices and transparency in broker compensation. As a seller, you still have the option to offer compensation to buyer agents, which can help market your home or make your listing more attractive. However, offers of compensation can no longer be shared on the MLS; they must be communicated through off-MLS channels like social media or flyers. Your agent is required to disclose any payment offers to buyer agents in writing and obtain your approval. - Why would a seller choose to offer compensation to a buyer agent?
Offering compensation helps increase the pool of potential buyers for your home, making it more appealing and potentially leading to a better offer. For many homebuyers, especially first-time buyers or those from underserved communities, compensation from the seller reduces up-front costs and increases access to professional representation. - How do the changes affect agent compensation transparency?
Even though compensation offers won’t appear on the MLS anymore, you can still negotiate compensation with your agent. Sellers can offer buyer concessions (e.g., closing costs) on the MLS, and all compensation agreements must be fully transparent and disclosed in writing.
For Home Buyers
- What practice changes impact home buyers?
As a buyer, written agreements with your agent are now required before you can tour homes. These agreements must outline how your agent will be compensated. While seller offers of compensation can no longer appear on the MLS, buyers can still negotiate compensation directly with their agents or explore options like seller concessions. - Will buyer agents be working for free?
No, buyer agents will still be paid. Compensation is negotiable between buyers and their agents and can take forms such as a fixed fee, a portion of the listing agent’s commission, or a seller concession. It’s essential to discuss and negotiate these terms upfront with your agent. - What happens to offers of compensation that were on MLS before August 17, 2024?
If a sales contract was executed before August 17, 2024, buyer agents can rely on the compensation offered at that time, even if the closing happens after the change. For contracts not executed before this date, compensation will need to be addressed directly between buyers, their agents, and sellers.
In short, the settlement changes how broker compensation is handled, giving both buyers and sellers more choice and transparency. While some processes, like offering compensation on MLS, have shifted, you still have the flexibility to negotiate with your agent.
Our team of licensed real estate agents, members of the local board and NAR, are here to guide you through these changes and ensure a smooth, informed experience every step of the way.