In the class action case Sitzer/Burnett & Moerhl vs. NAR, plaintiffs accused the NAR of adopting illegal rules requiring home sellers to pay buyer broker fees in addition to commission to their own listing brokers. In October of 2023, The NAR settled for $418 million. To eliminate the possibility of agents steering their buyers only to properties based on compensation provided by sellers, the NAR also proposed a further settlement on March 15th. If approved, these changes will come into effect in July 2024.
NAR’s proposed further settlement ideas:
- While sellers can still compensate buyer’s brokers, the MLSs may no longer disclose the compensation they will receive. NOTE: Sellers were never required to offer commission to buyer brokers, but they do so because these professionals bring qualified buyers to their homes, play a valued role in the sales process, and sellers have always compensated them fairly for it.
- All fields on the MLS regarding buyer’s broker commissions will most likely be eliminated. Note: Buyer agents will not see compensation for their services laid out the way they used to on the MLS.
- The commissions being offered to buyer’s brokers may no longer be PUBLISHED in the MLS. NOTE: While buyer brokers will no longer be able to see the commission being offered to them by sellers in the MLS, this compensation can still be published on the listing broker’s website, on marketing materials, in advertising or they can call the listing agent. Listing agents will be allowed to add offers of sellers concessions in the “remarks” field in the MLS.
- Buyers must sign exclusive buyer agency agreements with their real estate agent prior to viewing homes, which outlines how their agent will be compensated. NOTE: 14 states in the U.S. already require exclusive buyer agent agreements and it’s a fabulous improvement to the way buyer agents do business. Buyer agents should not have to work for “free,” they have almost always been compensated by sellers. Now agents will have upfront conversations about the value of the services they provide, and sign agreements that indicate that in the rare case that a seller does not compensate the buyer broker, the buyer will. And they will agree upon this compensation before they look for properties. If a buyer does have to compensate their broker directly, it does not have to mean that they will end up paying any more in the total transaction than they would if the seller compensated their broker.
Will Sellers Continue to Offer Commissions to Buyer Brokers?
Home sellers have always seen the enormous value listing agents provide. That’s why most sellers do not choose to sell their own homes. According to the NAR, in 2023, 93% of home sellers opted to sell their homes with real estate agents, vs. only 7% who sell their homes as “For Sale by Owner.” And the statistics are grim about the prices FSBOs get vs. the prices real estate agents can procure, not to mention the difficulties they face selling their own home. Clearly, sellers value the knowledge, experience and service real estate agents provide.
Similarly, agents provide invaluable support to buyers. I shudder to think of buyers purchasing homes on their own without the knowledge, experience, guidance and advocacy of a real estate agent. Without an agent, a buyer is facing serious pitfalls in making the biggest purchase of their life unrepresented, and could be at a serious disadvantage going it alone if they are competing for a property against another buyer who is working with a skilled real estate agent.
What will the Effect be if the Changes are Approved?
If the proposed settlement from the NAR takes effect, the major change will be how buyer brokers see whether sellers are offering commission to buyer brokers or seller concessions to buyers. Savvy sellers will continue to work with listings agents in the daunting process of selling their homes, and are sure to see the value in continuing to compensate buyer brokers who offer an invaluable service of not only bringing qualified buyers to their homes, but participating in the sales process in a meaningful way that makes the transaction smoother for everyone involved.
Posted: 3/19/2024 by Linda Stamker