The National Association of Realtors (NAR) class action settlement, commonly referred to as the Nar settlement, has garnered attention in recent media. This post aims to clarify misconceptions surrounding the settlement and its implications for buyers and sellers.
The settlement, yet to be ratified, proposes significant changes, with two key alterations drawing attention:
Firstly, buyer agent compensation in the MLS will no longer be listed, affecting how agents share this information and communicate it with buyers.
Secondly, buyers will be required to sign a buyer representation agreement before viewing homes with their buyer's agent, altering the "traditional" home-buying process. This agreement will outline upfront how the buyer's real state broker gets compensated.
For buyers, signing a representation agreement will clarify agent responsibilities and compensation arrangements. Sellers, on the other hand, will have different options regarding compensating buyer agents, each with its own implications for property exposure and potential impact on sale prices.
Addressing misconceptions, it's essential to note that realtor fees have always been negotiable, and there's no mandated fee structure. Sellers are not legally obligated to pay buyer agent fees, though it has been common practice. Speculations about declining home prices or significantly lower closing costs are questionable, with potential for increased buyer costs under the new rules.
Lastly, the notion of windfall compensation for past home sellers is dispelled, with projected payouts amounting to a modest sum per seller after legal fees.
While these proposed changes may reshape real estate transactions, it's emphasized that nothing is final, and further updates will be provided as the situation evolves. It will likely take months or years until we can look back and further understand the effects of this settlement. As of now, the changes are planned to go into effect mid-July 2024.
Fact List:
- The 2024 NAR (National Association of Realtors) settlement addressed antitrust concerns.
- It stemmed from a lawsuit alleging anti-competitive practices in the real estate industry.
- The settlement aimed to increase competition and transparency in the housing market.
- NAR agreed to make several changes to its rules and policies despite no wrong doing, pending court approval (settlement).
- NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS.The change will go into effect in late July 2024.
- After the new rule goes into effect, listing brokers and sellers could continue to offer compensation for buyer broker services, but such offers could not be communicated via the MLS.
- The settlement expressly provides that sellers may communicate seller concessions — such as buyer closing costs — via the MLS provided that such concessions are not conditioned on the use of or payment to a buyer broker.
- Realtors acting for buyers would be required to enter into written agreements with their buyers before touring a home.
- These agreements can help consumers understand exactly what services and value will be provided, and for how much.