NAR president discusses settlement, changes for homebuyers and sellers
The NAR settlement comes with changes for both homebuyers and sellers. Here’s what you need to know.
The National Association of Realtors (NAR) announced a court settlement in March that would bring major changes to home sales – and potential savings to buyers and sellers nationwide.
The massive real estate settlement that changes the way homes are bought and sold goes into effect on Saturday, August 17.
The NAR settlement is supposed to make home buying more transparent, but can add complication and confusion to an already-tight housing market.
“This is definitely changing our industry forever,” Daniel de la Vega, president of One Sotheby’s International Realty told FOX Television Stations Thursday. “We’re going to adjust accordingly like most major brokerages across the country. But our job right now is to arm our agents with the most amount of information that we have that can help them through this process.”
What’s changing about selling a house
According to Kevin Sears, the president of the NAR, there will be a couple of rules and changes implemented that will impact real estate professionals, along with both buyers and sellers.
He said selling agents who list a home for sale on a Multiple Listing Service, known as MLS, will no longer be allowed to use the service to offer to pay a commission to agents that represent potential homebuyers.
“The selling consumer still is able to offer cooperating compensation or commission to the buyers represented by the buyer’s broker as they have in the past, but it just cannot be communicated via the MLS,” Sears explained. “So, now the seller and their agent are going to have to figure out how to effectively communicate what, and if any, the offers of compensation and commission are going to be.”
NAR settlement: Changes for buying, selling a home
Daniel de la Vega, the president of One Sotheby’s International Realty, discusses the NAR settlement and what this means going forward for homebuyers and sellers.
Ultimately, experts say the rule change leaves it open for individual home sellers to negotiate such offers outside of the MLS platforms.
“So the ultimate issue here is that now we are not allowed to offer compensation to cooperating brokers on the MLS,” De la Vega said. “But that does not mean that an offer of compensation cannot be met, and there’s a lot of different vehicles for that.”
FILE – A for sale sign displayed in front of a home on February 22, 2023 in Miami, Florida. (Credit: Joe Raedle/Getty Images)
He added: “I think the seller’s broker has to do a good job of explaining to the seller why it’s in their best interest to offer compensation to a cooperating broker.”
What is changing about buying a house
Sears noted that any buying consumer who is interested in viewing homes with an intention of buying one, will need to have a meeting with a real estate professional in advance of touring any home and negotiate how much money the buyer’s agent will earn.
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At this point in the process, the buyer will be presented with a written agreement that will clearly spell out the services that will be provided to them by their real estate professional and the fee that the buyer’s agent will be looking to get paid. Sears said the agent will need to clearly articulate their value and the expertise that they will bring to the transaction.
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While commissions have always been negotiable, experts say this new ruling will ultimately lead to more transparency with the discussion about the fees upfront.
“On the buyer side, absolutely this is going to open up the door for negotiations between the buying consumer and the real estate professional because in the past there wasn’t necessarily a negotiation on the commission because of what was being offered by the seller through the multiple listing service,” Sears said. “It has to be a meeting of the minds and the consumer gets to decide what services that they want to have provided to them. And what they’re willing to pay for it.”
Sears said the buying consumer also needs to know that if the seller is not offering any compensation or commission for the buyer broker, the buyer may need to come out of pocket to pay for that fee. Otherwise, the buyer’s broker can negotiate that as part of an offer to purchase the property and a commission would be a part of the purchase contract.
Real estate commission changes 2024
For example, a homeowner selling a $300,000 home currently pays about 6% in commissions, or $18,000. Typically, the home seller pays their listing agent, who then splits this with the buyer’s agent, according to NAR rules. That works out to a 6% commission split roughly evenly between the buyer’s and seller’s agents – about $9,000 each.
Now, the settlement mandates that any fields showing broker compensation be removed from MLS databases. This means a seller is only required to pay for the seller’s broker (half, whatever is agreed upon, or about 3% based on the above example).
This means the remaining 3%, based on the above example, would be negotiated between the buyer and buyer’s broker, including what percentage is agreed upon and who they would like to pay it.
Could the NAR settlement lower costs?
Of course, no agent is going to work for free, but the new rules will make it easier for buyers and sellers to negotiate commissions, potentially leading to a reduction in costs.
However, Realtor Doug Rudnick pointed out that the 6% commission has always been negotiable and warned that sellers may find, “you get what you pay for.”
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“Does the seller really want to reduce their price for that $10,000, $15,000, $20,000 that would have impacted it before? Human nature is usually not. But this is going to be a slow, educational process on both sides to make sense for everybody,” he told LiveNOW from FOX.
De la Vega added: “I frankly hope that everyone benefits… I’ve been in the industry for 20 plus years of negotiations. I’ve always been negotiable, but if this helps create more transparency for the transaction, for the buyer, listen, we’re we’re going to abide by the laws, abide by the rules and embrace it and hope that it’s better for them.”
NAR settlement explained
Last November, a Missouri jury found the NAR and several residential brokerage companies guilty of conspiring to keep commissions for home sales high.
The class-action lawsuit was filed in 2019 on behalf of 500,000 home sellers in Missouri and some border towns. The verdict stated that the defendants “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
EARLIER: Realtors agree to axe 6% commissions in NAR lawsuit settlement
The jury ruled that the companies owed a collective $1.78 billion in damages, but the realtors appealed and reached a settlement in March.
The NAR agreed to a $418 million settlement and rule changes to answer a class-action suit alleging a fee conspiracy to inflate broker commissions.
The trade group, which has long set the standard for real estate practices, agreed to settle numerous lawsuits by paying the money in damages and getting rid of its rules on commissions.
