Uncategorized March 23, 2024

NAR Settlement: Implications for Buyers and Sellers

There have been recent developments regarding the National Association of Realtors (NAR) settlement and there are implications for buyers and sellers. Let’s try to clarify widespread misinformation surrounding the settlement, emphasizing its impact on real estate transactions.

Traditionally, a listing agent negotiates a commission with the seller, which is then split with the buyer’s agent. This commission is advertised on the Multiple Listing Service (MLS) along with the property. However, the NAR settlement introduces significant changes: the co-broker commission will no longer be advertised on the MLS, and buyers’ agents must secure written agreements from buyers, specifying representation and commission expectations.

For sellers, the process remains largely unchanged; they negotiate a commission with their listing agent, who then shares it with the buyer’s agent.  The commission has always been, and remains, negotiable.

From a buyer’s perspective, the changes are more pronounced. Buyers must now formally agree to pay their agents a specified commission, which could be a percentage of the purchase price. This agreement must be negotiated before viewing homes. If a buyer’s agent has agreed to a lower commission than what the seller offers, the excess could be returned to the buyer or seller, not the agent.

The settlement does not prevent sellers from contributing to the buyer’s agent commission, it does require clear agreements and transparency. This could affect buyers, particularly those without sufficient cash reserves, as they might need to cover additional costs beyond down payments and closing fees.

The settlement may not drastically change the traditional commission structure, it emphasizes the need for clear, upfront agreements between all parties involved. Sellers might still need to incentivize buyers’ agents and assist buyers with their fees to ensure a smooth sale.