There is a lot of talk about the settlement between the National Association of Realtors (NAR) and the plaintiffs who brought a class action lawsuit against them. The dust is still settling on this one, and other similar suits are still pending, so there is a potential for more changes. However, since I love transparency and open communication, I wanted to talk about how the current settlement might affect you in the future.
If you are a seller:
Until recently, if a seller decided to sell their home with the help of an agent, they would negotiate the commission paid to their agent, who would then give a portion (usually half) of that total commission to the buyer's agent. And the commission offered to the buyer's agent would be disclosed in the MLS (multiple listing service) when the house was listed.
Moving forward, the listing agent will no longer be allowed to list that commission in the MLS. It can be disclosed elsewhere but not in the MLS.
Sellers may also decide to pay only their listing agent's commission and not the buyer's agent. So there are going to be more conversations between sellers and their agent about the pros and cons of offering to pay the buyer agent commission.
An important thing to remember is that commissions have always been negotiable and will remain negotiable going forward.
If you are a buyer:
While buyer broker agreements have existed for years, many buyers and their agents work on a handshake agreement. However, starting in July, buyers must sign a buyer broker agreement before they can tour a home for sale.
A buyer broker agreement is simply a document specifying the parameters of your working relationship and how much your agent will be paid for their services once you successfully close on a property.
A more significant change is that buyers will also have to think (maybe for the first time) about how they will pay their agent.
Suppose a seller is not offering a commission to the buyer's agent. In that case, the buyer may have to choose between writing it into the contract so it is folded into the home's purchase price, asking the seller for a concession, or paying the agent directly out of pocket.
Or will a buyer choose to try to buy a home without an agent to avoid paying this commission, weighing whether the savings are worth the risk of not having an experienced agent advising and looking out for them?
There's a lot to digest, and everyone is still trying to figure out how it all will work going forward. There are probably more changes still to come.
In my next few newsletters, I'll unpack how this might play out and what it may or may not do to home prices.
If you have any questions about the lawsuit, the settlement, or how it may impact you in more detail, please don't hesitate to reach out.