In March 2024, in response to a pending lawsuit judgment against them, the National Association of Realtors® released a set of proposed policy and practice changes that will reframe the relationship between real estate professionals and buyers. To be clear, the industry’s fiduciary commitment to the best interests of clients hasn’t changed, but the way agents and buyer clients formalize professional relationships will.
As a homebuyer, this proposed settlement means there will be some changes to your real estate experience:
As a homebuyer, these changes will require new, important conversations between you and your real estate professional. A buyer service agreement will formalize your agent’s fiduciary responsibility to you, further protecting your interests. It will allow the opportunity for real, transparent communication with your agent around compensation, offering you a clear understanding of the cost of services and how those services benefit you.
These conversations will ultimately set buyers up for greater success in their transactions. More buyers will start the home search process with a clear understanding of their strategy, how their agent will support them, and what it will take to get to the closing table.
Two major changes: First, compensation offers to buyer’s agents will no longer be displayed on the MLS, and the MLS won’t be allowed to facilitate commission cooperation between the buy and sell sides of transactions. Second, all buyers will be required to sign a buyer agreement with their agent outlining service terms, including commission requirements.
Yes. Luxury Presence has created a strategy guide for agents seeking advice on negotiating buy-side compensation. Get your copy of The Future of Buy-Side Compensation here.
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The recent settlement involving the National Association of Realtors (NAR) has sparked significant changes in the way real estate transactions are handled, particularly concerning buyer agency. These changes are set to create a more transparent and consumer-friendly environment, shifting how real estate professionals and clients interact. Here is an overview of the critical changes brought about by the settlement and what they mean for buyers, sellers, and real estate agents.
It is important to clarify that commissions have always been negotiable and were never set by NAR or any other organization. Real estate commissions have traditionally been a matter of agreement between the parties involved, allowing for flexibility based on the specific circumstances of each transaction.
Under the new rules, it is no longer a requirement for sellers to offer compensation to a buyer agent in the sale of a home. This represents a significant shift in traditional practices, where it was common for sellers to offer a portion of the commission to the buyer’s agent as part of the MLS listing. Now, sellers have the option to decide whether they wish to offer such
compensation, adding a new level of flexibility in how transactions are structured.
The compensation offered to a buyer agent will no longer be disclosed in the Multiple Listing Service (MLS). However, the seller retains the right to instruct their listing agent to offer compensation to a buyer agent outside of the MLS. This means that the details of any such compensation will be handled privately and directly between the parties involved, rather than being part of the public listing information.
A significant change is the requirement that all buyers must enter into a written Buyer Agency Agreement before viewing any properties. This agreement must clearly outline the terms of the buyer-agent relationship, including the duration of the agreement and the specifics of the
compensation arrangement.
Under the new rules, all compensation must be explicitly written as part of the Buyer Agency Agreement, with the buyer being 100% responsible for their agent’s commission. This means that buyers must agree in writing to the terms of their agent's compensation and understand that they are responsible for covering this cost, which may be factored into their overall home-buying budget.
The time frame for the Buyer Agency Agreement will be determined by the buyer and the agent and can be any length of time mandated by the brokerage firm. This allows for flexibility in the arrangement, ensuring that both the buyer and the agent are comfortable with the terms and duration of their working relationship.
One of the most critical aspects of the new regulations is the emphasis on the fiduciary duty of real estate agents to put the buyer's needs first. This aligns with the ethical standards of the profession and ensures that agents work in their client's best interests, regardless of how
compensation is structured or sourced.
If the seller chooses to offer compensation to a buyer agent, the commission must be paid directly by the seller at closing. This is a change from previous practices where the listing agent might split their commission with the buyer agent. Now, any compensation must come directly from the seller to the buyer agent, making the financial arrangements clearer and more straightforward.
Increased Transparency and Clarity: These changes are designed to promote greater transparency in real estate transactions, particularly regarding compensation. Buyers and sellers will have a clearer understanding of who is responsible for paying commissions and how those payments are structured.
Empowerment for Buyers and Sellers: By making commissions fully negotiable and allowing for flexibility in compensation agreements, both buyers and sellers are empowered to negotiate terms that work best for their unique circumstances. This fosters a more competitive market and potentially more favorable terms for all parties involved.
Shift in Market Dynamics: With the removal of the requirement for sellers to offer compensation to buyer agents and the end of commission splitting, the market may see a shift in how agents and clients negotiate services and fees. Agents may develop new strategies or offer alternative service packages to meet the needs of their clients under these new rules.