NAR Commission Settlement
You’ve probably heard the news that there may be changes coming in terms of how real estate commissions are paid.
This might sound exciting and like a potential game-changer for you as a home seller or buyer, with headlines proclaiming things like:
“Real estate commissions are being slashed!”
“Selling your house will now be less expensive!”
But you’re also probably not sure exactly what it all means, how it will work, or how these changes may impact you.
Unfortunately, even if you ask the most experienced agents, you probably won’t get many answers. It isn’t because we don’t want to answer your questions; it’s because we simply don’t know exactly how the changes are going to work, or if the settlement will be approved.
The settlement happened seemingly overnight. There was no advance warning or discussion with agents.
Most headlines are misleading because nobody knows exactly how things are going to play out. As with many things the government or court system touches, there’s always the possibility that it could create more issues than it solves.
As much as we would like to offer you specifics on how this will all play out, we simply can't. For starters, it’s a proposed settlement, not yet accepted by the courts, and if it’s approved, the changes won’t start until August.
In its simplest form:
The proposed settlement would eliminate the field showing the offered commission to buyer’s agents within the MLS. However, that doesn’t mean the seller isn’t allowed to pay the buyer’s agents commission; it will just no longer be published.
Buyers will now be required to sign a written agreement with an agent in order to see any homes, which includes the compensation the buyer agrees to pay the agent. That doesn’t necessarily mean the compensation has to be paid out of the buyers’ pocket; it could be an agreed upon amount that will be negotiated into the purchase price paid for through the proceeds of the sale.
How to prepare if you’re a seller:
Be prepared to negotiate the buyer’s agent fees. Consider how much you’re willing to pay a buyer’s agent, because they will likely ask for compensation in their purchase offer.
Re-think your pricing strategy. When looking at past sales, the buyers are aware of how those prices included agency fees for both sides; if you aren’t offering compensation to the buyer’s agent, buyers may expect a lower price.
If you’re comparing multiple offers, ask your agent for the estimate net proceeds from each offer; you may still be netting more even when paying the buyer’s agent’s fees, depending on the purchase price.
How to prepare if you’re a buyer:
You will now have to choose a buyer’s agent and sign an agreement with them prior to seeing any homes. This has always been an option, and it could be argued that it should always have been required, but most buyers’ agents didn’t want to seem too pushy or aggressive, so they never asked for one. Now you’ll need to sign a contract to work with them.
Don’t expect agents to be willing or able to work for a much lower commission than they’ve been working for in the past. As is the case in any industry, sometimes going with the lowest cost option ends up costing you more in the end.
While you may expect sellers to drop their price because they don’t have to pay a buyers’ agent, don’t be surprised if they dig in their heels and expect to get as much or more than similar houses have recently sold for. They will still be basing the market value of their house off of data that had buyer agent commissions factored in
