What was the lawsuit and settlement about?
On March 15, 2024, the National Association of Realtors® (NAR) announced a proposed settlement agreement to end litigation over home seller claims related to broker commissions. The settlement includes a release of liability for over a million NAR members and various other parties, requires MLS practice changes, and involves NAR paying $418 million. The settlement comes after several years of litigation, including class-action suits from home sellers and a legal battle with the U.S. Justice Department.
As part of the settlement, the NAR agreed to several practice changes including 2 major ones which are as follows.
- Offers of compensation to buyer’s agent will not be displayed on multiple listing services (MLS)
- A buyer will need to sign a written agreement with buyer’s agent before touring a home
These practice changes go into effect today August 17, 2024.
What it means for buyers
Written agreements are mandatory
The most impact of these changes will be for the buyers. Written agreements with their agents, a practice that existed but rarely used will now become mandatory. Before signing this agreement, buyers will be required to carefully consider the agent they will be working with. They will need to understand exactly what services and value will be provided, and for how much.
Carefully consider which agent to work with
Compensation offered to buyer agents will no longer be displayed on the Multiple Listing Service (MLS). The changes may prompt some sellers likely to not offer buyer agent comission, especially in competitive markets. In such situations buyer’s will be responsible for paying their agent. This could mean tens of thousands of $$ in the Bay area market.
Due to the sums of money involved, increased emphasis will be put on carefully evaluating the agent you work with. You should consider- what value does your agent bring? does your agent share your philosophy and concerns? how available they are- are they full time or doing it on the side?
What it means for home sellers
You wil have a choice to make
You still have the choice of offering compensation to buyer brokers. You may consider doing this as a way of marketing your home or making your listing more attractive to buyers. You as the seller can still offer buyer concessions on an MLS (for example, concessions for buyer closing costs)
A new way of displaying comissions
If you choose to approve an offer of compensation, there are changes to how this can happen.
You as the seller can still make an offer compensation, but your agent cannot include it on a Multiple Listing Service (MLS). Your agent can advertise your listing via off-MLS platforms such as social media, flyers and websites.
Conclusion
The real estate industry is going to go through a major change. The practice changes implemented by NAR will have most impact for the homebuyers. 1) Homebuyers will now be required to sign a buyer-broker agreement before they start working with an agent. And 2) seller’s offer of commission will not be included In MLS. If a sellers chooses to not offer commission for buyer’s agent, buyers will have to directly pay their agents. This means buyer will need to carefully consider who is their agent and the value they bring.
Comparatively, changes are not that significant on the seller side. In fact, the sellers may be able to save some money especially in competitive markets.
There will be a big transition period to adjust to these changes. Both buyers and sellers need to understand and implement these changes. If you need hep making sense of these changes feel free to reach out to me to discuss this.
