Upcoming changes in real estate transactions are imminent following the resolution of significant class action lawsuits involving sellers and the National Association of REALTORS® along with numerous leading real estate firms nationwide. These changes will have implications for sellers, buyers, and agents alike.
There has been a lot of news coverage in the past few weeks but unfortunately, much of it has added to the confusion on how things will change rather than clarify it.
It was reported that since the seller will most likely be paying only their commission, the price of homes will come down. That is very unlikely to happen. The value of a home is not determined by whether a commission is paid nor the amount of it.
In the terms of the settlement, which is still to be approved by a court, the change will go into effect on August 17, 2024 but some companies will implement the changes earlier. The following excerpts are taken from the NAR Settlement Fact Sheet.
* MLS participants acting for buyers would be required to enter into written agreements with their buyers before touring a home.
* Compensation continues to be negotiable between agents and the consumers they serve.
* Selling brokers must clearly state compensation offers to buyers' brokers on each listing, which may vary and can even be zero. Compensation offers may not be communicated through the MLS.
* The types of compensation available for buyer brokers would continue to take multiple forms, depending on broker-consumer negotiations, including but not limited to:
** Fixed-fee commission paid directly by consumers
** Concession from the seller
** Portion of the listing broker's compensation
* The settlement expressly provides that sellers may communicate seller concessions (such as buyer closing costs) via the MLS provided that such concessions are not conditioned on the use of or payment to a buyer broker.
It is important for buyers to understand that in the many forms of buyer representation agreements that exist throughout the United States, there will be a provision stating the buyer's agent fee for the transaction. In the past, the most common way the fee was handled was through an agreement that the seller would pay a specific amount to the buyer's agent or that the listing fee would be shared with the buyer's agent.
The market will be in a state of uncertainty as to the different ways the buyer's agent will be compensated. The most common ways would be:
1. The seller will offer cooperative compensation.
a. If the fee was less than stated in the buyer rep agreement, the buyer will be responsible for the difference.
b. If the fee was more than stated in the buyer rep agreement, without exceptions addressing this specific condition, the buyer will have some options such as receiving it as a rebate at closing.
2. If the seller was not offering cooperative compensation, the buyer would cover it personally.
3. The buyer could direct their agent to only show houses whose seller is offering cooperative compensation.
4. Direct the buyer's agent to negotiate in the offer to purchase agreement that the seller pays the buyer's agent fee.
Consistently, almost 90% of homebuyers have chosen to collaborate with a real estate agent or broker, a trend expected to persist. Despite the rise of digital research and transactions, the obvious value provided by REALTORS® endures, with nine out of ten homebuyers expressing satisfaction and a willingness to recommend their agent to others.
National Association of REALTORS® members will remain steadfast partners for the countless Americans pursuing the dream of homeownership, providing reliable support and guidance along the way.
For more information and another viewpoint, see this Fortune.com article published April 3, 2024. Download a copy of 105 More Ways agents who are REALTORS® are worth every penny of their compensation.