If you pay any attention to real estate in the news, you’ve probably heard about the NAR settlement that was reached on March 15 this year and was later granted preliminary approval on April 24th of this year, in 2024. While the settlement is still subject to final court approval, you might be wondering what it means for you as a buyer or seller once the new procedures go into effect later this summer. If so, read on…
One of my clients messaged me right after the settlement news hit and he said “Can you please explain this NAR settlement to me like I’m five.” I obviously gave him an emphatic “Yes!” and continued to do my diligence, read the settlement, sit through multiple meetings and zooms led by the nation’s top real estate professionals and eventually put together some high level points about the changes about to take place. I hope these are helpful to you as you seek to understand the industry changes that are happening and what they really mean for everyone involved in real estate transactions as buyers, sellers, agents and everything in between.
Without further ado, here’s my take:
⁃ Lots of things have been assumed in the Real Estate Industry for a long time.
⁃ Over time, those assumptions led Sellers agents to become accustomed to telling sellers that “Industry Standard” is that they must pay the Buyer broker commission and they don’t really have a choice (and many said this led to inflated home prices since the commission has been listed on the MLS and included in the asking prices).
⁃ The NAR settlement and new resulting procedures hope to bring back choice and transparency to the consumer.
⁃ Sellers can and will still offer to pay some or all of the Buyer Broker commission; However, they can’t advertise it on the MLS. Keep in mind that we agents can advertise the commissions that our Sellers are offering to cooperating Buyers agents on our own websites and on any marketing outside of the MLS itself including social media, verbal and written confirmation, etc. It simply cannot be listed on the MLS.
⁃ Buyers Agents will have to have a signed buyer representation agreement before showing homes to our clients. Even if it is just for one home and isn’t a long term commitment to working together, a buyer representation agreement (there are multiple degrees of commitment- more on that in another post) will have to be signed prior to agents showing homes to buyers. The thought here is that Buyers agents should be able to articulate their value to buyers just like listing agents have to articulate their value and secure the job of representing a home/getting a listing.
⁃ Again, in an attempt to rid the industry of so many assumptions on both the listing and selling side of real estate transactions, Buyers agents essentially have to apply for the job of representing clients on the buy side and articulate their value enough that that buyer is willing to enter into a short or long term agreement in order to see a particular home or homes. The alternative, which has become the norm, is that the Buyer’s agent assumes a Buyer is their client if they are showing them homes, whether a formal working relationship and Agency Agreement is in place or not.
Conclusion:
Regardless of the industry or medium, change is always a bit daunting. We humans are, more often than not, creatures of habit and comfort. This is not the first time the real estate industry has experienced procedural changes, nor will it be the last. I’m of the mindset that more choice and more transparency for the consumer will lead to the best agents continuing to serve their clients and probably gain even more market share in the not so distant future. Buyers agents and Buyer Broker commissions are not going away. However, the way that they are offered and disclosed is changing; the way that buyers and their agents enter into a working relationship is also changing.
As much resistance as there has been to these industry changes, I would argue that more transparency is a wonderful thing for both the agent and the consumer. Change is inevitable. How we respond to it is up to us. I, for one, welcome it and I look forward to your questions and comments as we navigate the waters of change together.
xo,
Tara
