As many have seen or heard, the National Association of Realtors (NAR), a board representing Realtors across the nation, has come to a settlement agreement and some changes are happening in the real estate world. Some say that this settlement will change everything for real estate; some say it will be business as usual. We put together a post to help give understanding about some of the details and what to expect if you find yourself getting prepared to buy or sell.
A little backstory to catch you up:
This past March, NAR settled a major class action lawsuit concerning the fairness of traditional commission-sharing practices. This settlement introduces significant changes to the way homes are shown by agents as well as changes to how the negotiation processes will be handled. It’s crucial for you to understand these changes as they could affect your future real estate transactions.
As of August 17th, in order to avoid future massive class action lawsuits, every agent that is a member of or has access to the MLS will be required to have a signed contract that clearly states what commission rates will be paid to them by their buyer and this MUST happen BEFORE showing any property to their client. If agents violate this requirement they will be exposed to heavy fines and potentially a loss of the use of the MLS. Losing the ability to utilize that MLS would essentially put them out of business.
Like it or not, this is the way business will be done for the foreseeable future and if you are looking to buy a home you will need to prep for this. Knowing and understanding that you will need to choose your agent or team of agents before you start looking at homes is your best option to be fully prepared to buy a home.
Additionally, below are specific business practices that are included in the settlement agreement:
• Sellers and listing brokers are not required (and never have been required) to offer co-op compensation to a buyer’s agent. It has always been a choice.
• The MLS no longer has a designated field to offer compensation to buyer agents.
• NAR will not do anything to create an alternative to the MLS so that listing brokers may make offers of compensation to buyer agents.
• Buyers must have a signed agreement with their buyers agent that includes compensation terms before showing homes. A buyer’s agent may not be paid more than that amount.
What does this mean for you as a seller?
Do you save money by not paying a buyer’s agent?
What about the sale price of my house?
Traditional industry standard has meant that the seller would “pay” the buyer’s agent fee as the listing agent would split their fee with the other agent. Even with this new way of buying and selling homes, understand that most buyer’s agents will request in all offers that the seller agree to pay his/her compensation at the time of closing. This can be done as seller concessions at closing.
Many buyers will not be able to pay their agents out-of-pocket so a major point to consider here is that when you offer to compensate the buyer side agent, you are creating a larger buyer pool. Think back to when you bought your first home. Your loan amount might have been just enough to cover the cost of your home so without your buyer agent compensation coming from the seller side, you (and many other buyers!) would be left in a tough financial spot.
It’s possible you could save some money by not paying a buyer’s agent when selling your home, that part is true. However, in the eyes of a buyer, your home might not be worth as much as the neighbor’s home who is offering to pay the commission.
No matter how you shake it, having a larger pool of buyers, along with having an experienced agent on both sides of the transaction and working together, is invaluable.
As far as sale prices go, we will need to see how this pans out. Real estate transactions rarely go perfectly and often take a lot more time, money, knowledge, and expertise than the general public could ever imagine. This is why you need real estate experts on both sides to get a deal to the closing table.
If you have a home that is perfectly updated, perfectly priced, in the best location, and cannot be beat, you likely will have no problem selling the home. However, that is not the story for many transactions. Obstacles will surely come about. The most successful transactions have quality representation on both sides, working diligently to get both parties to the closing table and ensuring all parties are satisfied with the outcome.
We know it’s a lot to take in but who says you have to navigate this alone? Reach out to PREN and let’s have a conversation about this - your questions deserve to be answered. As always, we’re in the business of helping you find an agent who lives in your area, who possesses the expertise needed to negotiate for you and save you money.
