The recent settlement between the National Association of Realtors (N.A.R.) and the Department of Justice has resulted in substantial changes affecting both buyers and sellers. This agreement, focused on enhancing transparency and competition in the industry, has brought about revised commission practices and increased disclosure requirements. Learning about these regulatory shifts is essential for consumers to make informed decisions.
Buying a home is one of the largest financial transactions most people will ever undertake. Agents who are REALTORS® are a trusted source of advice and stand ready to help you navigate your home buying journey and make the choices that work best for you. NAR’s recent settlement has led to several changes that impact home buyers, and we wanted to clearly lay them out for you.
Here is what the settlement means for home buyers:
- You will sign a written agreement with your agent before touring a home.
- Before signing this agreement, you should ensure it reflects the terms you have negotiated with your agent and that you understand exactly what services and value will be provided, and what the cost will be..
- The buyer agreement must include four components concerning compensation: 1. 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. 2. 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”). 3. A term that prohibits the agent from receiving compensation for from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and, 4. A statement that broker fees and commissions are fully negotiable and not set by law.
- 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.
- The seller may agree to offer compensation to your agent. This practice is permitted but the offer cannot be shared on a Multiple Listing Service (MLS)— MLSs are local marketplaces used by both buyer brokers and listing brokers to share information about properties for sale.
- You can still accept concessions from the seller, such as offers to pay your closing costs.
- These practice changes will go into effect August 17.
Here is what the settlement doesn’t change:
- Agents who are REALTORS® are here to help you navigate the home buying process and are ethically obligated to work in your best interest.
- Compensation for your agent remains fully negotiable, and if your agent is a REALTOR®, they must abide by the REALTOR® Code of Ethics and have clear and transparent discussions with you about compensation. When finding an agent to work with, ask questions about compensation and understand what services you are receiving.
- You have choices. Work with your agent to understand the full range of these choices when buying a home, which will help you make the best possible decision for your needs.
As a home seller, you have a wide range of choices when it comes to listing your home. NAR’s recent settlement has led to several changes related to broker commissions that benefit sellers, and we wanted to clearly lay them out for you.
Here is what the settlement means for home sellers:
- 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.
- Your agent must conspicuously disclose to you and obtain your approval for any payment or offer of payment that a listing broker will make to another broker acting for buyers.
- This disclosure must be made to you in writing in advance of any payment or agreement to pay another broker acting for buyers, and must specify the amount or rate of such payment.
- 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 of compensation, but your agent cannot include it on a Multiple Listing Service (MLS)—MLSs are local marketplaces used by both buyer brokers and listing brokers to share information about properties for sale.
- Your agent can advertise your listing via off-MLS platforms such as social media, flyers and websites.
- You as the seller can still offer buyer concessions on an MLS (for example, concessions for buyer closing costs).
- These settlement practice changes will go into effect August 17.
Here is what the settlement doesn’t change:
- Agents who are REALTORS® are here to help you navigate the process of selling your home and are ethically obligated to work in your best interest.
- Compensation for your agent remains fully negotiable, and if your agent is a REALTOR®, they must abide by the REALTOR® Code of Ethics and have clear and transparent discussions with you about compensation. When finding an agent to work with, ask questions about compensation and discuss what you would like to offer buyers.
- You have choices. Work with your agent to understand the full range of these choices when selling your home, which will help you make the best possible decision for your needs.
If you still have questions, please fill out the contact information below or download our free consumer guides here.
