The recent $418 million settlement by the National Association of Realtors (NAR) has brought significant changes to the real estate industry, impacting both homebuyers and agents. This groundbreaking settlement aims to increase transparency and reduce costs for homebuyers, fundamentally altering how real estate transactions are conducted. Here’s what you need to know about the NAR settlement and how it affects you as a homebuyer.
Key Changes from the NAR Settlement - effective August 17, 2024
Written Agreements: Homebuyers must now sign a written agreement with their agent before touring any homes. This agreement should clearly outline the terms of compensation and services provided. Written agreements apply to both in-person and live virtual home tours. You do not need a written agreement if you are just speaking to an agent at an open house or asking them about their services.
Transparent Compensation: Agent fees and commissions are fully negotiable, giving homebuyers more control over their expenses. The agreement must disclose the exact amount or rate of compensation the agent will receive, ensuring transparency and preventing hidden fees. The buyer agreement must include (4) four components concerning compensation:
- A specific and conspicuous disclosure of the amount or rate of compensation the real estate agent will receive or how this amount will be determined.
- Compensation that is objective (e.g., $0, X flat fee, X percent, X hourly rate)—and not open-ended (e.g., cannot be “buyer broker compensation shall be whatever the amount the seller is offering to the buyer”).
- A term that prohibits the agent from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and,
- A conspicuous statement that broker fees and commissions are fully negotiable and not set by law.
Seller Concessions: Sellers can still offer, and you can accept concessions, such as covering closing costs, but these offers cannot be shared on Multiple Listing Services (MLS).
Benefits for Homebuyers
Cost Savings: The settlement is expected to drive down costs for homebuyers by promoting competition and transparency in agent fees.
Informed Decisions: With clear agreements and disclosed compensation, homebuyers can make more informed decisions about their real estate transactions.
Recommended Checklist for Homebuyers
To navigate these changes effectively, here are items to consider when buying a home:
- Understand the Agreement: Before signing, ensure you fully understand the terms of the written agreement with your agent.
- Negotiate Fees: Remember that agent fees are negotiable. Don’t hesitate to discuss and negotiate these terms.
- Ask Questions: Clarify any doubts about the services provided and the compensation structure.
- Review Seller Concessions: Discuss potential concessions with your agent and understand how they can benefit you.
To help you navigate the changes brought by the NAR settlement, download our comprehensive homebuyer checklist below.
