How the NAR Settlement Brings us Back to Reality

NAR Settlement 2024

When I started in the real estate business, I did not think much about the fact that buyers didn’t have to pay their agent. The system was simplified and organized, the seller offers the buyer’s agent a commission, it makes for a smooth and seamless transaction. I personally became a fan of the Buyer Agency Agreement, which provides compensation from the buyer to my Broker if they purchased a house using me as their agent. This agreement can be for a specified time and includes the amount agreed upon. This was a game changer because in my market often commissions were lower because houses were under market value and distressed. As this pivotal moment in history occurs let us discuss what the NAR Settlement means for participants in the housing market.

Firstly, NAR decided to settle the case Sitzer vs. Burnett for 418 million which was filed because sellers believe brokers' commissions were excessive. This means agents were not operating ethically, they would charge the seller excessive fees with the reasoning that buyer's agents wouldn’t want to show their house unless they offered X in compensation. So, in turn part of the NAR Settlement Agreement states that compensation cannot be posted on the MLS but can be negotiated between parties. Let me give you an example, say I’m an agent and my buyer is deciding between house A or B. If house B offers higher compensation, I’m going to sway my buyer to house B even though house A might be the best option. This is why buyer's agents should be compensated by their client, so they avoid the need to survive off a commission and are simply paid for the services rendered by their client. I could be wrong, but I do not see why buyers would have a problem paying for a service. This opens the door to fair market competition which has been closed in many cities due to big brokers with bigger budgets who get the most clients but don’t know their name and cannot show them houses; they end up being a number on a spreadsheet. I just said you should see that the Real Estate profession is not about the consumer, it’s about making money. Yes, agents need money to survive but if you ask me there need not be so many agents. I bet you out of the 1/5th of agents that occupy the economic space most if not all of them got into the business because they thought they could make a lot of money. This industry is glamorized as being able to make so much money instead of doing what they teach you every year in your continuing education classes which is to be an advocate for the consumer. The number of agents has dropped or will drop when they realize this profession is about helping someone buy a home and not making the biggest commission.

Let us be clear on what this NAR Settlement means, 

1. 1. The Settlement covers NAR and nearly every member whose residential transaction volume in 2022 was 2 billion or below.

1. 2. Removes compensation and commission split information from the MLS to be negotiated between parties off the MLS.

1. 3. NAR also created a new rule to require buyer's agents to enter into agreements with their buyer prior to showing them a home.

Let us dissect number 3 for a moment. Asking a buyer to sign something before they see a house is not going to go over so well. This means that a relationship will need to be established ahead of time, putting this industry back where it belongs, it is about relationships. Which puts some accountability on buyers to stop wasting agent's time.

In conclusion this NAR Settlement is a good thing because it is going to require listing agents to put more effort into their roles and not get a free ride by just posting something on the MLS. Being a listing agent is a status symbol it means I list houses on the MLS, and I don’t have to do anything else “the Buyers will come” that’s the benefit of the MLS, you get a listing you’re getting paid, and you don’t have to do much so it’s fair that the Seller pay the buyer's agent because they’re the ones making the transaction happen. The NAR Settlement takes it off the record to what it should be, competent adult’s negotiating commissions. Lastly Buyers agents should be compensated by their client and clients should not have a problem signing something saying so, If I am making a commitment to be your agent you need to make a commitment to pay, it is called a bi-lateral agreement.

Feel free to chime in with your thoughts on this Settlement and your take on the business of real estate in general.

Key Takeaways

1. NAR is offering the ABR Designation for FREE for the rest of 2024 and the renewal fee is $110 Accredited Buyer's Representative (ABR®) Designation

1. Here is the link to NARs Response to the Settlement https://www.nar.realtor/magazine/real-estate-news/law-and-ethics/the-truth-about-the-nar-settlement-agreement