What really has changed with regard to Buyer Agent Commissions for Realtors?

NAR Settlement Clarification Negotiating Real Estate Commissions Explained1

Mike Mullen,  Surterre Properties in Newport Beach, California.

There has been a recent surge in media attention to an announced settlement regarding how a buyer’s agent may get compensated in a residential real estate transaction.  The National Association of Realtors, NAR, recently agreed to settlement of a class action suit brought against them and a few others via the Sitzer-Burnett lawsuit.  Below is an excerpt from NAR’s recent explanation of the results of the suit:

“There’s much the media has gotten wrong about NAR’s settlement, which would require the association to pay $418 million over four years. Some outlets have suggested that NAR previously set or guided commissions to a standard rate of 6%. Even President Joe Biden, in recent comments, misspoke in suggesting that the settlement makes commissions negotiable for the first time.

You know that is false. NAR does not set commissions, and commissions were negotiable long before this settlement. They are and will remain entirely negotiable between brokers and their clients. And housing prices are dictated by market forces beyond members’ control.

Getting the facts right is important, especially because the settlement agreement is complex. NAR is continuing to engage with media to correct inaccurate reporting about the settlement. Members are also encouraged to refer to official NAR sources, like facts realtor, for the most accurate and up-to-date information about the settlement and what it means for consumers.

The settlement achieves two important goals: protecting members to the greatest extent possible and preserving consumer choice. The proposed settlement:

Resolves claims against NAR and nearly every member; all state, territorial and local REALTOR® associations; all association-owned MLSs; and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below.

Preserves cooperative compensation as an option for consumers looking to buy or sell a home—as long as such offers of compensation occur off of the MLS.

NAR fought for a release that covered all industry players, but large settlements reached by other corporate defendants shaped the negotiations. Throughout the settlement process, NAR also engaged with a diverse range of members to consider their perspectives and interests.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” NAR Interim CEO Nykia Wright said in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one-fifth of the American economy, and NAR. For over a century, NAR has protected and advanced the right to real property ownership in this country, and we remain focused on delivering on that core mission.”

What Does this actually Mean to A Home Seller?

 Starting about mid-August when a homeowner wants to sell their property using a licensed Realtor they will no longer be required to list an offer of compensation to a buyer’s agent when the property is listed on any Multiple Listing Service, MLS.  The truth of the matter is they never were required to offer compensation in California.  As is mentioned above commissions always have been negotiable and never were fixed at 6% or any other percentage.  Upcoming in about Mid-August if a buyer wants to be represented by a Realtor the Realtor will require the buyer to sign some sort of compensation agreement for the buyer to be able to pay their agent for his time and expertise.  Sellers will still be ablet o offer compensation to a buyer’s agent they just cannot offer it on any MLS.  A wise seller will of course want to offer compensation to a buyer’s agent to attract a buyer’s agent to want to show their property to a potential buyer.  Buyer’s agent compensation can be offered via a flyer, or social media and other real estate websites.  It seems that the current buyer’s agent commissions are in the 2% to 2.5% range and not the 3% noted in the lawsuit.  Basically, the buyer’s agent situation will for the most part go on as it has in the past but the buyer’s agent will just have to do more documentation as to how he might get paid and that payment will be totally negotiable between the seller and the buyer as it always has been.

The settlement will not get final court approval until sometime towards the end of this year but as I mentioned the new forms and systems will go into effect in California in a couple of months.

The concept of this suit was that it would lower the price of homes that are being sold by the amount of the buyer’s agent compensation.  In fact, if a home is worth XXX value that is what the seller will want to price the property at regardless of how much a buyer’s agent will be paid.  So again, as happens so many times, the lawyers who brought the suit have received a massive financial score at the expense of complicating the process of selling your home and not really saving anyone any money, in my opinion…….

 

Voss Real Estate Advisors

June 24, 2024

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