REAL ESTATE 2.0
Big changes have come to the Real Estate Industry. The start date, August 17, 2024 has come and gone and the way real estate is transacted has changed nation-wide. Let’s take a look at what has changed, what hasn’t and how those changes will impact your next real estate transaction. We’re calling it Real Estate 2.0 because of the sweeping changes to the industry.
March 2024 NAR, the National Association of Realtors, settled a nationwide class action lawsuit. The lawsuit alleged the practice of commission-sharing between a Listing Broker and Buyer Broker, did not give the Home Seller the opportunity to negotiate buyer broker compensation.
Commissions have always been negotiable; a Listing Broker would negotiate with the Home Seller the total amount of commissions that would be paid to the Listing Broker by the Home Seller. Upon the successful sale of their home, the Listing Broker would split the commissions paid with the Buyer Broker.
The NAR settlement agreement has de-coupled Listing Broker Compensation and Buyer Broker Compensation. Home Sellers will negotiate the fee they pay to their Listing Broker, and Home Buyers will negotiate the fee they pay to their Buyer Broker, each are separate agreements.
A Home Seller may still offer Buyer Broker Compensation as a way to make their home more attractive to Home Buyers, not unlike offering an interest rate buy-down, or Home Warranty for the Buyer. In this scenario, Buyer Agent compensation is negotiated through the purchase contract, the Buyer’s offer, and part of the negotiation between the Home Seller and Home Buyer.
The settlement has lead to multiple rule changes that are reshaping how millions of Home Buyers and Home Sellers conduct real estate transactions. The changes have created a lot of confusion for the public, and even among some Listing and Buyer Brokers.
We’re here to help make the pathway more clear; we have an outline of the changes below, and what you can expect going forward.
HERE’S WHAT THE SETTLEMENT MEANS FOR HOME BUYERS:
- Home Buyers will now sign a written agreement with their Buyer Broker before touring a home(s). This applies to both in person tours and live virtual home tours.
- The agreement will clearly outline services to be performed by the Buyer Broker, and the fee for those services.
- The agreement will include obligations and standards for both the Buyers’ Broker and the Home Buyer.
- The agreement must contain a clear statement that compensation is negotiable.
- The agreement must contain the amount or rate of compensation, and how the rate is determined,
such as % of sale price or flat fee based on a schedule of services. - The agreement will contain a statement that limits compensation from all sources to the agreed amount.
- Buyer Broker Compensation may still be paid by the Home Seller and negotiated as part of the offer from Buyer
- Buyers may still receive Seller concessions; such as closing costs
HERE’S WHAT THE SETTLEMENT MEANS FOR HOME SELLERS:
- You still have the choice to offer compensation to the Buyers Broker, making your home more attractive to Buyers. The Buyers offer is the vehicle for your compensation negotiation.
- Buyer Broker compensation information is no longer displayed on the MLS.
- As a Home Seller, you may still offer Buyer Concessions such as closing costs.
WHAT HAS NOT CHANGED IN THE SETTLMENT AGREEMENT
- Real Estate Professionals, who are REALTORS, are here to help you navigate the Home Buying and Home Selling Process. As Fiduciaries, we are ethically obligated to work in your best interest.
- Compensation remains negotiable. If your Agent is a REALTOR, they must abide by the REALTOR Code of Ethics and have clear discussions with you about representation and compensation.
- You have choices. Work with your Real Estate Professional to understand the full range of choices you have available to you when buying or selling a home. Knowing your options will help you make a well-informed decision that reflects the best choice for your needs.
If you would like to know more about our Home Selling and Home Buying Processes in this new environment, let’s talk; Email me Today – I’m on standby to help. We can discuss the changes in more detail and how they can work to your advantage in your home sale or purchase.
