The truth about the how the NAR settlement effects buyers

Recently the National Association of Realtors (NAR) announced a settlement in a law case that will take effect in July. There’s been A LOT of misinformation given and we want to clear it up.

As it’s always been real estate is a free market: buyers and sellers may choose to hire a real estate professional to represent them, or they may not. No one is forcing anyone to work with a realtor. But it’s the smart thing to do when making one of the biggest purchases of your life.

But like any expert in their field, a realtor will require compensation. Just like in any profession, there are fees associated with working with a professional, whether a doctor, attorney, insurance agent, etc. The commission just can’t be advertised in MLS after July 1. There will likely end up being different places where it can be determined how much commission is being offered to a buyers' agent. The amounts may vary, and buyers will either have it negotiated along with the purchase price or possibly some would be paid out of pocket at closing. In addition, buyers agents must use a buyer broker agreement (more on this later).

Let's break down the information for you.

The NAR settlement forces real estate agents to reduce their compensation

FALSE. The settlement in no way establishes a standard or limitation on realtors for what they may charge, nor services they elect to deliver. Those fees have always been negotiable. Those commission splits will just not be listed in the MLS after July 1. Real estate agents are 100% paid by commission and this will continue to be the case.

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The NAR settlement will allow sellers to no longer pay compensation for an agent bringing the buyer

FALSE. It’s been common practice that a seller pays the buyer agent commission. A past rule required this compensation to be displayed in MLS. That limitation was removed thus properties with an offer of buyer agent compensation can’t be displayed in MLS. Sellers may still elect to pay buyer agent compensation to set apart their properties. And if a seller doesn’t offer a buyer commission the buyers may write into any offer a contingency requiring the seller to cover that cost or other concessions at closing.

The settlement lowers transaction costs to the sellers

FALSE. Regardless of who pays, both seller and buyer agents will receive a commission, their payment for services provided. Again it will be who pays the fee. Buyers can have it written into offers that the seller will pay the buyer commission or they can offer a cash back at closing which will then allow the buyers to pay their agent the commission.

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Buyers and agents will now have a written agreement for services provided and commission paid

TRUE. A new rule will require MLS participants working with buyers to enter into written agreements with their buyers before the buyer tours a home. These written agreements will help consumers understand exactly what services and value buyers' agents provide, and for how much. The seller can still offer to pay the buyers' agent and/or the fee can be negotiated for the seller to pay in the offer.

The settlement will serve to lower prices and make homeownership affordable again

FALSE. Values in real estate are determined by supply and demand. Home values continue to increase and this shows no signs of slowing down. This settlement will have little to no impact on home prices. Selling and listing agents will still be paid just like the title company and mortgage company will still charge its fees. It’s basically just a new division of payment. Both seller and buyer agents will still make a commission it’s just who will pay and how that will be determined.

Think of it this way: When you go to the grocery store, Publix sells food that includes their costs of labor, transportation, supplies, etc. It is built into the price of your box of cereal. Now you could go to a low-cost grocer (Aldi) and bag your own groceries in bags you brought from home and pay to rent (and return) the cart to save the company labor costs. You reap the benefit with lower cost but it takes more work from you (bagging, returning cart).

The settlement is a fantastic win for buyers who may now be able to negotiate their fee for representation

QUESTIONABLE. For those who have used one of our amazing buyers agents to purchase a house, you were more than likely quite happy to have the seller compensate us so you didn't have to. But it wasn’t “free.” It was built into the sellers price. For buyers who had to scrape up enough money for the down payment and closing expenses, having the commission paid by the seller meant the fees were “built in” to the financed amount. This may change. However sellers will have to work that into the price whether they are paying the buyers agent or giving a discount so the buyers can pay their agent. Both seller and buyers agents will still get paid.

In fact some loans – including VA loans - expressly prohibit the buyer from paying any form of commission. So will our veterans be left without representation? No. Again, it will be negotiated in other ways.

And this is where an experienced agent comes into play. I have been working in real estate in Tampa Bay for more than 30 years. I have seen many changes in three decades. I have also witnessed countless situations where an agent has gone above and beyond to help buyers realize their dreams and sellers maximize their returns, often serving in ways far beyond their job description. This will still be the case. We are working to make your real estate dreams reality. It will just take more expertise and guidance from us, your trusted real estate advisors.

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