The recent National Association of Realtors (NAR) settlement has stirred up quite a few questions and concerns among real estate professionals and homebuyers alike. Let’s break down what this settlement means, why it happened, and how it affects you.
Why Did NAR Enter Into This Settlement?
NAR entered into this settlement to address ongoing legal disputes and avoid the lengthy, uncertain process of litigation. The settlement allows NAR to resolve these issues more quickly and efficiently, providing clarity and stability to the real estate market. Enhanced disclosure requirements also ensure consumers understand the fees involved in real estate transactions.
The resulting policy changes proactively address concerns and improve transparency and fairness in the real estate market.
Key Changes
Real Estate Agent Commissions
Prior to the settlement ruling, all agent commissions were the responsibility of the home seller. This commission, typically 5% or 6%, was usually split between the buyer’s agent and seller’s agent.
Now, beginning August 17, 2024, sellers are not required to cover buyer’s agent commissions.
Buyer Agreements
Agents working with buyers will now need to have a written agreement in place before touring homes, clearly outlining compensation expectations. This provides transparency between the agent and homebuyer so there are no surprises throughout the process.
While NAR doesn’t dictate the specifics of these agreements, they’ve created some helpful resources to assist with implementation, like the "Written Buyer Agreements 101" guide, which offers tips on clarity and emphasizing consumer choice.
Compensation Listings on MLS
Also beginning August 17, 2024, offers of compensation can no longer be listed on multiple listing services (MLS); these are centralized databases used by real estate agents to share information about homes for sale.
Compensation can still be listed elsewhere or discussed directly with your real estate professional.
What Are My Options for Paying My Agent’s Commission?
As a homebuyer who now may be required to cover your buyer’s agent’s commission, you have a variety of options.
Cash
After negotiating and determining the commission amount, you may choose to pay your agent's commission in cash. This would be paid as an additional closing cost.
Reduce Your Down Payment Amount
To cover your agent’s commission, you could reduce your mortgage down payment amount.
For example, let’s say you were planning on putting 10% down on your home and you negotiate a 3% commission for your Realtor. You could put 7% down, and re-allocate that additional 3% toward the buyer’s agent commission.
Your loan originator can discuss different scenarios and ways to use your cash effectively.
Negotiate Partial or All Buyer’s Agent Commission
As part of your purchase offer, you could request that the seller pay all or part of the buyer’s agent commission. A partial agent commission, for example, could be for the seller to pay 1%. This reduces the amount of cash required at closing for you and transfers minimal cost onto the seller.
It's now more important than ever to partner with an experienced, knowledgeable real estate and mortgage professional. They can guide you through the new landscape, including the NAR changes, ensuring you understand your options and make informed decisions.
If you're in the market, start by finding an experienced loan originator who is committed to supporting you every step of the way.
