National Association of Realtors (NAR) Settlement – Blog 2

The Settlement Details

So, what are the details of the settlement.  The settlement which will take effect in the summer of 2024, we are anticipating a June or July timeframe, will require two changes going forward.

The first change will require cooperating compensation offered by a seller to be no longer advertised in the MLS.  The seller may offer full compensation going forward, a portion of compensation to the buyer’s agent or may offer no compensation at all.  When you see or hear in reports that commissions may drop by 25 to 50%, they are referring to the seller side of a transaction.  Sellers may opt to offer no commission to a buyer’s agent resulting in potentially a 50% savings or they could offer a reduced commission that could result in a 25% savings, or they could offer a full commission that would not result in any savings on the seller side.

The second requirement coming out of the settlement will require all buyers working with an agent to engage in a “listing” agreement with the agent at the outset of the relationship.  It has been a common practice that buyers would not officially engage their agent until a property was identified and under contract for purchase. This practice will end with the purpose moving forward of ensuring buyers are aware that the seller MAY pay all or a portion of the commission, but the buyer is obligated to pay the fee at closing.  It is also intended for the purpose of the buyer knowing up front what the fee is, since they may now be responsible for the payment.  In the past, even though the fee was disclosed, it was not a detail most buyers found relevant because they could acquire their representation in a real estate transaction without having to be concerned about how the fee was paid. In Colorado, we have had language in our buyer contracts (listing agreements) for decades that fully explained how the buyer agent was paid.  The language was there that the buyer could be on the hook for compensating their agent but rarely was it ever a case where a buyer would pay as sellers had paid.

Finally, there has been talk this settlement will result in housing prices falling.  Unfortunately, this is not the case.  Prices are determined by market conditions, supply and demand.  The commissions in a transaction have no bearing on the prices, so while there may be a period of time where the market determines how commissions are handled, it will have no bearing on prices.  As an example, as agents we do not present to our sellers or buyers what the market value of a home is with a factor in place for commissions.  Market value is determined solely by what previous buyers and sellers have transacted on similar homes ahead of the home in question.

We will look next at the specifics of the impacts of the settlement.

Realtors are still your best asset for protecting and preserving your real estate and the generated wealth creation coming from your home.

Share:

Recent Posts