In March 2024, the NAR and major national brokerages entered into a billion-dollar settlement with the Sitzer/Burnett plaintiffs. The settlement went into effect on August 17, 2024.
Buyer agent commissions are now negotiable. According to Redfin, the typical buyer agent commission has already started declining – down from 2.61% in March to 2.55% in July.
Key Takeaways 🚨
- Settlement is Effective!: The settlement went into effect on Aug 17, and 30+ Realtor Associations and MLS’ have implemented the changes. MLS’ not affiliated with NAR have chosen to continue displaying the buyer agent commissions.
- Sellers Can Save Thousands in Commissions: Buyer agent commissions will be negotiated twice: Once when buyers engage Buyer Agents, and again when sellers review offer contracts. This means Buyer Agent Commissions will likely decrease.
- Seller Priority #1 will be Paperwork (to Mitigate Compliance & Litigation Risks): Buyer agents mitigate all types of risks. From seller disclosures, offer contracts, contingencies, inspections, repair requests, appraisal, and closing – Buyer agents keep the paperwork tight. Their state licensing authorities, Realtor associations, and MLS’ audit paperwork compliance. Without buyer agents, sellers will have to learn and adapt. Or risk expensive litigation.
- Negotiations Can Now Feel Like Haggling: Buyer agent commissions will now be part of offer contracts and buyer agency agreements. Buyers may ask sellers to include commissions in the form of seller concessions. That means home buyers and sellers alike will be negotiating commissions.
- Buyer Agent Commissions Can Be Offered Offline: Buyer agent commissions can still be offered outside of the MLS. They just cannot be advertised on the MLS.
While home sellers will likely save thousands in commission, they are also more susceptible to legal pitfalls. Buyer agents are licensed and maintain strict paperwork as part of compliance requirements aligned to their licensure. They play a key role in keeping a transaction compliant and legally sound.
No buyer agents mean an increased risk of non-compliance and litigation for both the home seller and the home buyer. So, what is the NAR settlement? And how does it impact sellers and buyers? Let’s find out.
NAR Settlement Summary
- On March 15th this year, NAR, the biggest trade association, agreed to pay $418 million to settle commission lawsuits.
- The settlement was announced to protect NAR members from further allegations and encourage consumers to have a choice of paying buyer agent commissions.
- The NAR commission lawsuit has resulted in the elimination of the requirement for commissions to be set by the seller’s agent.
- The NAR settlement agreement resolves claims against NAR, over one million NAR members, and all the other involved parties.
- NAR has implemented a new rule that forbids offers of compensation on the Multiple Listing Service (MLS).
- The NAR lawsuit settlement also mandates that the MLS participants enter into a written agreement with the buyers they work with.
Curious what the NAR lawsuit is about?
Check out our video to find out why NAR chose to settle and eliminate the buyer-broker compensation rule.
MLS Do’s and Don’ts
After the court’s verdict on NAR’s lawsuit, the displayable information on MLS’ related to buyer commissions changed.
✅ What Information Can Be Displayed on the MLS Listings?
- Property Details: This includes the location, photos, square footage, and the number of beds and baths. The HOA fees and property type will also be allowed.
- Seller Concessions: The sellers can advertise their willingness to offer concessions and cover closing costs or offer a buyer’s agent commission incentive.
❌ What Information Cannot Be Displayed on the MLS Listings?
- No MLS Commission Advertising: The seller or the listing agent cannot advertise the requirement of compensation from the buyer or their agent on the MLS.
- Removal of Compensation Info: The MLS’ are advised to eliminate all the fields and information related to agent compensation on the MLS.
- Use of MLS Data for Compensation Offers: Any entity using MLS data cannot offer compensation to buyers or their agents. Violation of this will result in termination of access to MLS data.
- Compensation Disclosure: The MLS must require the disclosure of all compensation information to all the sellers and buyers.
- Written Agreement With the Buyers: All MLS participants must enter into a written agreement with the buyer before touring a home.
This is a grand social experiment. None of us know what’s about to happen.
Leo Pareja, the CEO of exp Realty
How Does the NAR Settlement Affect Home Sellers?
- Sellers Will Continue to Pay Their Agents: NAR’s commission lawsuit neither prohibits sellers from paying commissions to their agents nor does it affect the compensation amount they pay.
- Sellers Can Offer Concessions: Although sellers or their agents don’t have to pay buyer agent commissions, they can still offer them in the form of “concessions”.
- Other Ways to Pay Buyer Agent Commissions: Listing agents cannot offer buyer agent commissions through MLS. However, the agents can still pay them through their websites or in cash outside of the MLS commission module.
What Does the NAR Settlement Mean for Buyers?
- Buyers Have to Pay Their Agents: After NAR’s class-action lawsuit, buyers now have to pay the commission to their agents, unlike before when sellers paid for it.
- Buyers Can Negotiate the Commission Amount: Since buyers themselves will pay their agents, they have room for negotiations. They can choose a flat fee MLS listing service or hourly agent rates.
- Homebuyers Can Ask for Seller Concessions: Buyers can avoid paying buyer agent commissions out of their pocket by requesting the seller to pay them as part of seller concessions.
Buyer agents not only help buyers with showings or present new listings, but they also provide assistance in offers and negotiations. If a buyer does not opt for an agent, they will be responsible for handling tasks such as home inspection, home appraisal, etc.
Do You Qualify for the Seller’s Fund?
If you have sold your home in the last four years, you automatically qualify for a portion of the $418 million settlement.
Listing agents will be released from all liable claims due to the settlement if they become/are a part of NAR before the date of class notice. Which will be sent on or after August 17, 2024.
How to Claim the Seller’s Fund for Past Transactions?
If you are eligible, follow these steps to claim the seller’s fund for past transactions.
- Provide Documents: Gather all necessary documents that verify your home sale within the eligible period. This includes sales contracts, closing statements, and any correspondence with your real estate agent.
- File a Claim: Check the NAR settlement administrators’ official communication or website for instructions on submitting your claim, including the necessary forms.
- Submit Your Claim: Fill out the required forms and submit them along with your supporting documentation within the stipulated time.
- Take a Follow-up: After submission, keep track of your claim status. You may receive updates via email or through the settlement website.
Which MLS’ and Associations Have Opted In?
Bottom Line
The NAR settlement introduces new dynamics to the home buying and selling process. Buyers have control over how they compensate their agents. Sellers are likely to save money on agent commissions. The increased flexibility and transparency in real estate transactions will benefit both sides.
However, the long-term implications of this shift are complex. Reduced commissions may impact the quality of service and competition in the industry. Additionally, the ability to negotiate fees could lead to price disparities and potential consumer confusion. These changes may cause problems for first-time homebuyers and those in lower-priced housing markets.
Organizations like the Department of Justice and several veteran real estate agents are optimistic. NAR, MLSs, and real estate companies have also started to develop systems to ease the transition. The long-term impact will depend on the industry’s ability to accept and adapt to these changes.
Frequently Asked Questions
Who sued the National Association of Realtors?
Rhonda Burnett was the lead plaintiff in the lawsuit against NAR related to buyer agents' commissions. The lawsuit later became a class action when 500,000 home sellers from Missouri joined the suit. NAR settled the lawsuit for a payment of $418 million.
Who gets the NAR settlement money?
Any person who has sold their home in the last four years is entitled to get a pie of the $418 million NAR settlement.
When does the NAR settlement take effect?
The NAR settlement will take effect from August 17, 2024. NAR will issue a class notice outlining the revised policies.
How will the NAR settlement affect Realtors?
Buyer agents will have to enter into a written agreement with the buyers before they proceed with showings or offers.
Can I offer Buyer Agent Compensation/Commission in the MLS?
No. Buyer Agent Compensation or Commission cannot be offered via the MLS. This includes the BAC fields, public remarks, and private remarks fields.
How can I offer a commission or compensation to the buyer agent if I am a home seller?
You can use phone, text, email, and in-person communication when you or your agent engage with the buyer agent. Make sure the compensation communication is outside of the MLS.
Are There Any Increased Risks for Home Sellers?
Yes. Compliance risks and litigation risks have significantly increased. Buyer agents mitigate all types of risks from disclosures, offer contracts to inspections and closing. Without buyer agents, sellers will have to ensure their paperwork is pristine. If sellers do not, they risk expensive litigation.
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