NAR Settlement Impact (as of 8/23/2024)

What Happened

Earlier this year the National Association of Realtors began implementing business practice changes that they agreed to as part of a lawsuit settlement. The organization and their members had been sued for conspiring to keep real estate commissions high, a violation of antitrust laws.

What Changes are Being Made

The more significant changes in business practices include:

Multiple Listing Services, Boards of Realtors, and the NAR will eliminate the requirement that listing brokers or sellers make offers of compensation to buyers
Realtor MLS participants and other real estate agents are prohibited from making an offer of compensation VIA MLS to buyer brokers. Note: Neither of these changes prohibits Sellers or Listing Agents from making offers of compensation to buyer brokers, they just may not disclose this fact in MLS. Offers of compensation can be communicated on the brokers website, in social media accounts, through emails/text messages, or over the phone (anywhere other than MLS).
All commission agreements between real estate agents and their customers must state that real estate commissions are not set by law and are fully negotiable. (This statement has always been true)
Buyer brokers must have a written brokerage agreement with their buyers before showing them any properties in person (or via a live video call).
The buyer brokerage agreement must include the following items:

1. A specific and conspicuous disclosure of the amount or rate of compensation the Participant will receive or how this amount will be determined, to the extent that the Participant will receive compensation from any source.
2. The amount of compensation in a manner that is objectively ascertainable and not open-ended.
3. A statement that prohibits the Buyer’s Broker from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and
4. A conspicuous statement that broker fees and commissions are not set by law and are fully negotiable.

Implementation

I dated the title of this post because things are still changing. Additionally, there are over 7000 real estate agents in the Sarasota/Manatee County area. All are going to have varying degrees of education/understanding about the changes and various methods of interpreting and implementing them. Don’t be surprised if there is some stumbling around for the next few months until everyone gets on the same page.

Implications for Home Sellers

Prior to this change, sellers most often negotiated a single commission rate and with the listing agent disclosing on the listing agreement the portion of that commission to be shared with the buyer’s broker.

Under the new listing agreements, sellers will negotiate a commission rate/amount for the services of the listing agent. The seller will also be offered an opportunity to compensate the buyer’s broker some specific amount/rate of their choosing. It is not mandatory that the seller compensate the buyer’s broker at all.

While you (as a seller) may think it is only reasonable for the buyer to pay for the services of his broker, there are some practical reasons why this is not necessarily true. The reason that the seller has historically paid all of the commission is because they are the party ending up with the money and the buyer is the one providing all of the money (in cash or loan). Asking the buyer to pay part of the commission reduces the amount of cash available for the home purchase (buyer broker fees in most current cases, cannot be rolled into a conventional mortgage loan). This would not only depress sales prices but reduce the pool of potential buyers as well.

Also note that, for at least the next 6 months, commissions paid to the buyer’s broker by the seller are baked into the selling price of comparable home sales used to determine the listing/sales price of your home. By asking the buyer to pay their brokers’ commission, you are essentially overstating the value of your home by the amount the buyer brokers commission (2%-3% range) – a fact that will likely be pointed out by the buyer’s agent.

Implications for Home Buyers

The first change you discover is that, shortly after speaking with an agent about buying a home, you will be asked to sign a Buyers Broker Agreement (BBA).

In addition to the items discussed above, the BBA will obligate you to pay some or all of the Buyers Broker Commission, should the seller and the listing agent not contribute the full amount of commission you and your agent have negotiated.