What Home Buyers and Sellers Need to Know About the Recent National Association of REALTORS® Settlement

The National Association of REALTORS® (NAR) recently reached a significant agreement with plaintiffs to end litigation related to broker commissions. This agreement, pending court approval, promises to bring clarity and transparency to real estate transactions while preserving consumer choices in real estate services. Here is what you need to know about how this will impact the home buying and selling process.

New Practices Effective August 17, 2024

Starting August 17, 2024, real estate agents listing properties on a Multiple Listing Service (MLS) must follow new guidelines designed to enhance transparency and trust in the home-buying process. Here’s what you need to know about the new practices:

Written Agreements with Buyers:

• Before touring a home, agents must enter into written agreements with buyers.
• These agreements will clearly disclose the amount or rate of the agent’s compensation or how this amount will be determined.
• Compensation will be objective (e.g., a specific dollar amount, flat fee, percentage, or hourly rate) and cannot be open-ended.
• The agreement will include a term that prohibits agents from receiving compensation beyond the agreed amount.
• A clear statement that broker fees and commissions are fully negotiable and not set by law.

Buyer Agency Agreements: A Growing Trend

As of December 2023, 18 states already require written buyer agency agreements, including Washington, Arkansas, Alaska, and others. These agreements are becoming more common and provide a structured way for buyers and agents to outline their working relationship.

Typically, these agreements specify a 3% fee for buyer agent services, with the agent making efforts to have the seller cover this cost. While this may initially seem like an additional expense for buyers, sellers will most likely agree to pay a portion, or all, of the buyer agent fees to facilitate the sale and stay competitive in the market.

What Buyers and Sellers Can Expect

When the new rules take effect, there might be some initial confusion. However, having a BrightWork agent on your side will help you navigate the new real estate market smoothly. Here’s what to keep in mind:

• Buyers: Pay attention to the costs outlined in your buyer agency agreement. While the agreement may note a specific fee owed, your agent can negotiate with the seller to cover some or all of this expense, mitigating having to come up with extra cash at closing. This is especially important for first-time homebuyers who may not have the cash to cover a down payment and agent fees.
• Sellers: You'll have the flexibility to offer compensation to buyer agents, just not on the MLS. You can advertise this compensation through broker sites or direct communication. Sellers will likely have to continue to cover all or most of the buyer agent fees to remain competitive in the market. Offering reasonable compensation will help attract buyers and their agents, facilitating a smoother and faster sale.

Embracing Change for a Transparent Future

These new practices mark a positive step towards greater transparency and trust in real estate transactions. Buyers will clearly understand costs from the outset, and sellers will continue to have the flexibility to attract buyers by covering agent fees.

Real estate transactions are evolving, and while these changes aim to create a more straightforward and fair process for everyone involved, they can be confusing to navigate. Now more than ever, having a BrightWork real estate agent to help navigate these updates is crucial to ensuring a successful home buying or selling experience. Give us a call 925-200-6000 or contact us here today!