NAR Rule Changes in Full Effect

[Noah Bacon]

Now that August 17th has passed, and the new NAR Settlement is in effect, big changes for consumers on both sides of real estate transactions are being felt across the nation. If you haven't bought or sold any real estate recently, the new rules in play may leave you wondering how this may impact your financial responsibility in the transaction. 

The two biggest changes that went into effect over the weekend are:

1. Buyers must now enter into a contract with an agent before that agent can show them any properties

This change may or may not impact you at all, as roughly 20 states already had in place a requirement to have a signed buyer representation agreement with an agent before showing any homes. Even in the 30ish states that did not require an agreement, it is still common practice for many agents to have a buyers agreement in place before showing homes. Not a major shift, but still worth highlighting. The bigger change is around commission.

2. Listings with advertised offers of compensation are no longer allowed in an MLS

Prior to this weekend, NAR members who listed properties included offers of shared commissions within their local MLS. Historically, the exact amount of shared commission varied, but this led to most sellers paying about 6% of the home's sales price, with 3% going to their agent and 3% to the buyer's agent. Boiling it down even further, having the seller pay both agents commissions was common practice until this weekend.

Now, sellers and their listing agents can still offer to pay a buyer’s agent's fee, BUT that must happen via outside negotiations. This means that in some transactions, sellers pay nothing to the buyer’s agent fee at all, putting the financial burden fully on the buyer instead. Buyers could then negotiate and pay the buyer agent’s fee out of pocket or go without an agent, managing their transaction on their own. So what can buyers, sellers, and agents expect with the changes? 

Buyers

Focusing on the changes around showing properties, t is more crucial than ever to vet your list of agents up front before even considering touring a home now that you are required in every state to sign a buyer representation agreement. Developing a relationship and understanding the skillset your agent will bring to the table is vital upfront and puts even more responsibility on the buyer to have selected an agent that will get them to the finish line. 

With the new commission laws in place, some buyers going directly to the listing agent in lieu of having their own buyers agent because they’ve heard that they will need to pay their agent directly out of pocket and they just don’t have the extra funds, with high interest rates and home prices in todays market. Buyers agents may start to get more creative on the payment of their services by offering a la carte pricing, flat fees, and hourly services to better fit their buyers budgets. 

Sellers

With the changes, sellers will technically now have the choice whether they want to offer any compensation to the buyer's agent...or none at all. This does not mean that sellers have just magically been gifted all of the power over negotiating the buyers agent commission, and will net more after the sale of their home. Seller should not be surprised if buyers will now make lower offers than what is listed on the MLS, factoring in the cost of paying for their buyer agent's commission. Seller should also expect a smaller pool of buyers to their listing if they are unwilling to pay a portion of the buyer's agent fee. If you are a seller willing to pay portion or all of a buyer's commission, make sure your listing agent knows that and is aware of how much. Your listing agent can let other agents know off the MLS that you're open to negotiating and can increase the pool of buyers willing to negotiate.

This change has already caused a lot of buyer hesitancy, seller's with inflated expectations, and a whole lot of agents wondering how this will impact their transaction volume. 

Have you already seen big changes in your market over the weekend with the new NAR rules in effect?