What to Know About the National Association of Realtors® Settlement and New Rules for Buyer Agent Commissions

What to Know About the National Association of Realtors® Settlement and New Rules for Buyer Agent Commissions

On March 15, 2024, the National Association of Realtors® (NAR) reached a $418 million settlement in an antitrust lawsuit that has significant implications for how buyer agents are compensated. The lawsuit alleged that Realtors® conspired to inflate commission rates by not being transparent about how buyer’s agents are paid. Here’s what you need to know about the settlement and the changes coming to the real estate industry.

The Current Compensation Model for Buyer’s Agents

Today, when a home is listed for sale, the listing agent negotiates their commission with the seller. This commission may include a portion offered to the broker representing the buyer. These commission details are negotiated and included in various agreements, such as the listing agreement, buyer’s agency agreement, or the purchase and sale agreement.

Traditionally, when a seller’s agent lists a property on a REALTOR®-owned Multiple Listing Service (MLS), they can include an offer of compensation to the buyer’s agent as part of the listing. However, this practice has led to a common misconception that the buyer’s agent’s commission is a fixed amount, when in fact, it’s negotiable.

What’s Changing?

If the court approves the NAR settlement, agents will no longer be able to advertise any buyer’s agent’s compensation when listing a home on an MLS. This change is designed to promote greater transparency, ensuring that both buyers and sellers are fully aware that commission rates are negotiable.

Additionally, this change will encourage more in-depth conversations between agents and their clients regarding compensation. As a result, buyers will now be required to sign buyer’s agency agreements. These agreements will clearly outline the buyer-broker relationship, the obligations between the broker and the client, and how the buyer’s agent is compensated.

Impact on Homebuyers: Are You Responsible for Your Agent’s Commission?

One of the biggest concerns for homebuyers is whether they will now be responsible for paying their agent’s commission. The answer is: not necessarily. Buyer’s agents can still be compensated by the seller, as outlined in the listing agreement or negotiated through a credit in the purchase agreement.

However, it’s important to note that sellers are not required to offer compensation to the buyer’s agent. If a seller chooses to offer 0% commission, the buyer may need to find alternative ways to compensate their agent if they wish to proceed with the purchase.

Why Sellers Should Consider Paying the Buyer’s Agent’s Commission

For sellers, paying the buyer’s agent’s commission often remains in their best interest. An experienced buyer’s agent on the other side of the transaction helps ensure that the deal closes smoothly and that the buyer’s rights are protected. If a buyer feels inadequately represented, there’s a greater likelihood of disputes or claims against the seller in the future.

Additionally, offering compensation to the buyer’s agent can make a property more attractive to buyers, potentially leading to quicker sales and better offers.

Final Thoughts

The NAR settlement marks a significant shift in the real estate industry, particularly in how buyer agents are compensated. These changes are expected to increase transparency and promote more informed decision-making among buyers and sellers.

At All City Homes, we’re committed to guiding you through these changes and helping you navigate the Sacramento real estate market with confidence. Whether you’re buying or selling, our experienced agents are here to provide the support and expertise you need to make the best decisions for your future.

If you have any questions about how these changes might affect your real estate transaction, don’t hesitate to contact us. We’re here to help!