The NAR Settlement: What It Means for Home Buyers and Sellers

The real estate industry is entering an exciting new phase thanks to a recent settlement by the National Association of Realtors (NAR). This agreement follows a class-action lawsuit from home sellers in Missouri, who claimed that NAR's practices led to higher commissions for real estate agents. In October 2023, a jury ruled in favor of the sellers, resulting in a significant $1.8 billion verdict against NAR, which represents around 1.5 million real estate professionals.

Instead of dragging out a lengthy legal battle, NAR has agreed to pay $418 million to individuals who sold homes in recent years, and it has committed to making two important changes:

Clearer MLS Listings - Agents will no longer be able to include details about how much they will pay buyer agents when listing homes on the Multiple Listing Service (MLS). This means sellers won’t have to specify the commission they are willing to offer directly in their listings. 

Negotiation of Agent Compensation - Buyers will now have the chance to negotiate how much they will pay their agents and put this agreement in writing. It also encourages buyers to be more involved in the process, helping them make better decisions.

These changes are good for both buyers and sellers. They also open up new possibilities for real estate agents. By being open and flexible, agents can stand out by giving their clients excellent service and upscale in value. 

Now, let’s break down what the recent changes mean for both homebuyers and sellers to clear up any confusion around this important topic.

What the Settlement Means for Homebuyers

Buying a home is one of the biggest financial decisions most people will make in their lives. To navigate this important journey, you’ll need Realtors  who are trusted professionals ready to assist you every step of the way. They will guide you in making the best choices for your unique needs. Recently, the National Association of Realtors (NAR) reached a settlement that brings several changes designed to benefit homebuyers, and we want to explain them clearly.

1. Written Agreement - You will need to sign a written agreement with your agent before you tour any homes. Make sure this agreement reflects the terms you discussed with your agent. It should clearly outline the services you will receive and the costs involved.

2. Key Components of the Buyer Agreement - The agreement must include four important parts about compensation:

Clear Compensation. The agreement should state the compensation clearly, such as a specific dollar amount, a flat fee, a percentage, or an hourly rate. It cannot be vague, like saying the compensation will be whatever the seller offers.

Limit on Compensation. The agreement should prevent the agent from receiving more money from any source than what you agreed upon.

Negotiable Fees. There must be a clear statement that broker fees and commissions are negotiable and not set by law.

Specific Compensation Disclosure. The agreement should clearly show how much the real estate agent will earn or how that amount will be decided.

3. Applies to All Tours - Another key change is that buyers must sign a Buyer Representation Agreement before touring homes. This agreement outlines the specific services the agent will provide and discloses the compensation they will receive. It's important to note that this agreement is not needed if you're simply speaking with an agent at an open house or asking about their services.

4. Seller Compensation -  The seller may offer to pay your agent's compensation. However, this offer cannot be listed on the Multiple Listing Service (MLS), which is a local marketplace where agents share information about homes for sale.

5. Accepting Concessions - You can still accept concessions from the seller, such as help with your closing costs.

6. No Agreement Needed for Casual Inquiries - You do not need a written agreement if you are simply talking to an agent at an open house or asking questions about their services.

Will Buyers Need to Pay Their Agent’s Commission?

When buyers sign a contract, they will need to negotiate their agent's commission. This doesn’t automatically mean that buyers will have to pay the agent's fee themselves. The question of who pays the buyer’s agent can become another point of negotiation when the buyer makes an offer to the seller.

Here’s What the Settlement Means for Home Sellers

As a home seller, you have many options for listing your property. With the recent settlement from the National Association of Realtors (NAR), it's important to work with trusted real estate experts who can guide you through this process. Understanding how these changes can impact you is crucial. To clear up any confusion, let’s break down what these updates mean for you as a home seller.

1. Offering Buyer Concessions - You can still offer concessions to buyers, such as helping with their closing costs, and this can be listed on the MLS.

2. Advertising Listings - Your agent can promote your home through various platforms, including social media, flyers, and websites, in addition to the MLS.

3. Compensation Offers - You can still decide to offer compensation to the buyer's agent, but this information cannot be included on the MLS. The MLS is a local marketplace where agents share details about homes for sale.

4. Changes in Compensation Offers - If you agree to offer compensation to a buyer's agent, there are new rules about how this is communicated.

5. Written Disclosure - Before any payment is made, you must receive a written disclosure that specifies the amount or rate of the payment to the buyer's agent.

6. Agent Approval - Your agent must clearly inform you and get your approval for any payment they plan to make to another broker representing buyers.

7. Choice of Compensation - You still have the option to offer compensation to buyer brokers but this may be an outdated way of doing business at this point. 

Transparency and Flexibility

Agents can still discuss and promote their commissions, but they won’t be able to do this through the MLS, which is not typically viewed by buyers and sellers. Instead, compensation for the buyer’s broker can be shared on brokerage websites, individual agent sites, social media, and other advertising platforms used by the brokerage and their agents. If this is done, could it lead to steering as previously mentioned? 

So this will continue to evolve and perhaps the practice of sharing what it will be will be a thing of the past. We certainly hope that will be the case. That is what has been done in commercial real estate for as long as we can remember and it has worked well for them.

Sellers can continue to use the MLS to advertise incentives for buyers, such as assistance with closing costs. However, these offers cannot be contingent on the buyer working with or paying an agent.

What the Settlement Doesn’t Change

Realtors are still committed to helping you throughout the selling process and must work in your best interest. The compensation for your agent remains negotiable, and if your agent is a Realtor, they must follow the Realtor Code of Ethics, ensuring open and honest discussions about fees.

You have choices when it comes to selling your home. Work with your agent to fully understand your options, which will help you make the best decision for your needs. If you have any questions or need further information, don’t hesitate to reach out to your Realtor.

The Way Forward

At Luxe Omni, we proudly partner with eXp Realty, a leader in the real estate industry. eXp Realty helps us stay ahead of the changes brought by the recent National Association of Realtors (NAR) settlement, which aims to make real estate transactions clearer and fairer for everyone.

With these new rules in place, we are committed to keeping up with the latest guidelines. eXp Realty offers valuable resources and training to help us adapt smoothly to this new landscape. You can trust that we are ready to embrace these changes and simplify the process for you.

Understanding these changes is important for making smart choices when buying or selling a home. Knowing your rights and options will help you make the best decisions. 

If you have any questions or need assistance, reach out to our team at Luxe Omni. We're here to support you in your home buying or selling process.