The recent settlement between the National Association of Realtors (NAR) and home sellers, represented by plaintiffs like Sitzer and Burnette, regarding real estate commissions. Starting in July 2024 (pending federal court approval), home sellers no longer will be responsible for paying both their own agent and the buyer’s agent. Instead, homebuyers who want representation will have to pay their own agents separately. Read below where we highlight the significant implications.
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Financial Compensation: NAR agreed to pay $418 million in damages to settle the lawsuits, indicating acknowledgment of potential wrongdoing. This compensation could serve as a deterrent against similar practices in the future, signaling a shift towards fairer business practices.
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Scrutiny of Brokerage Practices: The lawsuits alleged anticompetitive practices related to broker commissions, suggesting a potential overhaul of traditional brokerage models. This scrutiny might lead to increased transparency in commission structures and real estate transactions, benefitting both buyers and sellers.
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Impact on Home Sellers:
- Increased Awareness: Sellers may gain more insight into commission structures and brokerage practices, empowering them to make informed decisions when choosing real estate agents.
- Potential Market Shifts: Changes in commission structures and the removal of advertising them on The MLS could influence pricing strategies and market dynamics, affecting the overall selling experience.
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Impact on Home Buyers:
- Price Considerations: Buyers might experience changes in property prices or negotiations as a result of shifts in commission structures. Understanding these changes could help them navigate the real estate market more effectively.
- Increased Out of Pocket Costs: Traditionally, the seller had paid for the buyer's agents commission, but now the buyers will have to account for any buyer's agent fees, should they choose to be represented.
- Property Viewings: Buyers will not have to sign a "Buyer's Representation Agreement" with their agent in order to be granted access to a property under the terms of NAR's proposed settlement.
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Future Real Estate Transactions: If approved by the courts, this settlement could pave the way for reforms in the real estate industry, promoting fairness, transparency, and accountability in transactions.
Technically, real estate commissions always have been negotiable, but the settlement now sets the stage for buyer agents to aggressively market their fees and create a more competitive marketplace. Additionally, if the settlement gets approved, the days of window shopping and easily getting access into a home without representation will be gone!
Stephen Brobeck, senior fellow at the Consumer Federation of America states, “Over time, more agents will feel free to offer different types of compensation, and more consumers will comparison shop and negotiate commissions in a more transparent marketplace,” he said. A new era of competition among buyer agents is coming soon, says Garg. “In the best-case scenario, consumers are going to shop around for buy-side agents in the same way they shop around for mortgage lenders,” he said.
If you're thinking of buying there still is still to take advantage of the current model before everything changes in July!
