HOMEBUYERS: THE NAR SETTLEMENT AND WHAT YOU NEED TO KNOW
The commission lawsuits at the heart of the issue question how real estate commissions were structured and shared. Several lawsuits, primarily targeting the National Association of Realtors (NAR) and major real estate franchises, argued that the previous system unfairly inflated home selling costs. These cases challenge the practice where sellers paid not only their agent’s commission but also that of the buyer’s agent. This arrangement was said to maintain high commission rates industry-wide and limit competition, potentially violating antitrust laws. NAR has reached an agreement with plaintiffs to end the litigation. The new rules introduce more transparency regarding how buyer’s agents are compensated. These changes went into effect on August 17, 2024.
Here is what the change means for homebuyers:
- Before touring a home with a buyer’s agent, homebuyers will need a written agreement.
This agreement should outline the term of the agreement, services provided by the agent, and the amount and manner of the agent’s compensation.
FAQs
- What about open houses?
You do not need a written agreement to attend an open house. - What if I just want to speak to an agent?
You do not need a written agreement to speak with an agent. - What if I want representation but can’t afford the additional cost on top of my down payment and closing costs?
Home sellers are still allowed to offer compensation to the buyer’s agent. This should be negotiated and documented at the time of the offer. - Will home prices go down as a result?
Home prices are determined by supply and demand, not by commissions. - Are real estate fees now cheaper as a result?
Previously, sellers often paid a lump sum to their listing agent, which included compensation for the buyer’s agent. The settlement "de-couples" commissions, creating more transparency between the two, but does not necessarily reduce them. - Is it cheaper if I go directly to the listing agent?
Buyers (and sellers) have always had the option of choosing representation or not. While eliminating a buyer’s agent fee might lead to some potential savings, this is not guaranteed. The listing agent has a fiduciary responsibility to the seller and aims to secure the best price and terms. An experienced agent who understands market conditions and real estate nuances will have an advantage in negotiations over an unrepresented buyer. An unrepresented buyer may not be familiar with market norms, conditions, or transaction steps, which could create uncertainty and impact the desired sales price from the seller’s perspective. Furthermore, when only one agent is involved, that agent performs all the tasks typically done by both agents, which may result in the seller compensating their agent for the additional work, potentially eliminating any savings for the buyer. - Are fees now negotiable?
Yes, fees are negotiable, and they always were. There are no “standard” real estate fees. Brokerages and/or agents set their own fees. Buyers and sellers alike have the option to hire agents with varying levels of skill, experience, and service.