The NAR Settlement: What It Means For Sellers and Buyers

If you’re thinking about buying or selling a home in Central Florida this year, chances are you’ve heard of a recent major legal settlement shaking up the real estate industry. Since it was announced in March, a settlement between home sellers and the National Association of Realtors (NAR) has proposed some upcoming changes in practices related to agent commissions.

Rules determined by the NAR have long since governed how homes are listed for sale on multiple listing services (MLS). At the same time, these rules decided how buyer’s agents were compensated. Though these practices have a long history, this landmark settlement reached with the U.S. Department of Justice will change things – with results that will impact both home sellers and buyers in Central Florida and beyond.

With this new transition approaching as soon as mid-August, the Loretta Maimone team wants you to understand exactly how these changes might impact your buying or selling journey this summer so we can help you navigate the process smoothly. In this article, we’ll discuss the key components surrounding the NAR settlement and explain how this will change the real estate landscape, so you’re well prepared if you’re planning to buy or sell a home with us in the coming months.

How Agent Fees Worked in the Past

If you’re wondering how significant this change is, understanding the difference starts with learning how agent compensation has traditionally functioned in the residential real estate market. When a home went up for sale in the past, a seller would agree to pay a commission to the listing agent. This was typically around 5-6% of the sale price. However, a portion of that percentage (2.5-3%) was used to cover the fee for the agent who brought the buyer to the transaction (or, a “buyer’s agent”).

Because of this, the seller was effectively paying commission fees for both their listing agent and the buyer’s agent – even if the buyer’s agent was there to represent the interests of the buyer only. This system provided an incentive for buyer's agents to show homes to their clients, as NAR’s rules allowed listing agents to make a blanket, upfront offer of compensation to buyer’s agents.

Terms of the NAR Settlement

So, what is changing? The March 2023 settlement eliminates this practice. Listings may no longer offer compensation to buyer's agents upfront through the MLS. Simply put, this means the compensation will no longer be noted within the MLS. However, sellers can negotiate and pay the listing agent and the buyer’s agent.

This change aims to address an issue raised by the Department of Justice regarding cooperative compensation, with concern that requiring sellers to pay buyer's agent fees could ultimately inflate costs for buyers.

Impact on Sellers Beginning Summer 2024

With all that information in mind, how should you approach selling your own home this summer? The Loretta Maimone team is here to help you understand the direct impacts of this settlement and changes to listing commissions:

• No More Upfront Buyer's Agent Offers - When listing your home for sale through the local MLS, you won’t need to specify what portion of the commission will be offered to compensate a buyer's agent. The Loretta Maimone team can help you ensure the MLS listing is compliant with any new rules.
• Potential for Lower Commissions – Sellers are not obligated to pay buyer's agent fees upfront. Because of this, some experts suggest that listing commission rates could drop for sellers.
• Renewed Commission Negotiations - Commissions and fees are negotiable. Our team is prepared to help you discuss the right options for your home sale – with the added flexibility in separating the buyer's agent compensation.
• How the Process Could Change - There’s potential for the negotiation process to become more complex while practices are evolving. For example, buyers could request that sellers contribute commission fees to compensate the buyer's agent at closing. The Loretta Maimone team is prepared to help you factor these concerns into prices and counteroffers as needed.
  
  

Impact on Buyers Beginning Summer 2024

On the reverse, if you’re looking to buy a home in Central Florida this summer, you’ll encounter some of these more wide-ranging impacts to your home buying process:

• Deciding Agent Compensation - Buyers will now be responsible for determining compensation for their real estate agent. This feel will no longer be paid by the home seller. After this change, you might instead pay a percentage of the purchase price. Alternatively, some buyers and agents may explore alternative fee structures, like flat rates.
• Signing Representation Agreements - To comply with the new rules, buyer's agents will likely begin asking home buyers to sign representation agreements. These can spell out the length of the working relationship, as well as how the buyer agrees to compensate them (through the purchase or directly).
• Negotiating Commissions into Pricing – When home sellers won't contribute to buyer's agent compensation at closing, that fee would need to be paid by the buyer directly. To resolve this, our team can help you adjust your initial home pricing considerations accordingly.
• More Pricing Transparency – After this settlement is finalized, we might see buyer’s agents altering fees or taking on innovative pricing models like hourly rates. As pricing becomes more transparent, buyers will have the power to assess these associated services provided by agents.
• Complex Negotiations Possible – Commission fees may be becoming a new element of purchase negotiations between buyers and sellers. This means, on both sides of the transaction, more intricate negotiations and deal-making might have to occur. While this extra complexity isn’t always great for buyers, our team is here to help you navigate the process for the best outcome.
  
  

Staying Ahead of the Curve for Buyers and Sellers

As one of the most significant overhauls to residential real estate transactions in decades, the NAR settlement might leave some buyers and sellers feeling uncertain about navigating any impending changes. It’s true that the exact ramifications of this decision remain to be seen – and the process of determining and paying out agent commissions will surely be reshaped beginning this summer.

At the end of the day, these changes aim to help buyers and sellers to untangle financial incentives involved with real estate transactions while helping keep prices transparent. But to help take advantage of this new market, guidance from an experienced team will be invaluable.

You can count on the Loretta Maimone team to ensure a seamless transition on your behalf, whether you’re buying or selling a Central Florida home during this complicated time. We’ll work to leverage our deep market expertise and tailored pricing and negotiation strategies to secure you the best possible outcomes within this new real estate landscape. If now is the right time for you to buy or sell, don’t hesitate to contact the Loretta Maimone team to discuss how the settlement changes could impact your specific situation.