NAR Agreed to Settle an Anti-Trust Lawsuit
In March, 2024, the National Association of Realtors (NAR) reached a proposed settlement with a group of homebuyers who filed a class action, anti-trust lawsuit accusing the real estate industry for unfair commission practices. Rule changes will go into effect on August 17, 2024. The settlement is still subject to final court approval, to be held on November 26, 2024.
The media have speculated about the effects the settlement may have on future real estate transactions and, in particular, whether housing prices will drop. The reality is that it’s far too soon to know how the new rules will play out across the country or in Marin County. Here’s what we do and don’t know.
The Settlement Explained in Brief
The seller won’t be required to pay a commission to the buyer’s agent. Traditionally, sellers have paid the buyer’s agent commission by sharing the commission paid to the seller’s broker with the buyer’s broker, and listing this arrangement in the MLS. There will no longer be Broker to Broker compensation. This commission sharing was posted in the Multiple Listing Service (MLS). The plaintiffs argued that the cost of the buyer’s agent’s commission should be paid by the buyer who received the service, not by the seller, and that buyers should be able to negotiate the fee with their agent. As part of the proposed settlement, NAR agreed that sellers are no longer required to pay the buyer’s agent’s commission – but they may still wish to do so, as we discuss below.
Listing brokers cannot offer compensation (commission) to buyers’ agents in the MLS. However, compensation may be posted on listing Brokers’ websites, fliers, or non-MLS literature.
Buyers will have to sign an exclusivity agreement with an agent before the agent can show them a property listed on the MLS. The agreement must state a set compensation amount or rate that the agent will receive and explain how that amount will be determined. In essence, the buyer will have to guarantee to pay the commission if the seller does not.
Buyers and sellers must be notified in writing that commissions are not set by law and are negotiable. This has always been true.
Who will pay the buyer’s agent?
It may be the seller, the buyer or a combination of both. Various options are possible:
- A seller can pay the buyer’s broker directly through escrow.
- The buyer can pay their agent (broker) directly.
- Both buyer and seller can contribute.
Some commentators have speculated that some buyers, to avoid paying commissions, may forego agency representation altogether. As we discuss, this could be a very dangerous and potentially costly choice. Anyone spending millions of dollars for a home – as is the case in Marin – will want to have a dedicated and experienced Realtor looking out for their interests. Too many things can go wrong.
Options for sellers
Sellers will have these choices:
- Amount of commission paid to their agent at the close of the sale.
- Amount to pay the buyer’s agent at the close of the sale. This can be paid directly or by instructing payment of a portion allocated to the seller’s agent.
All of these amounts are negotiable but must be specified in a written contract.
The Current Situation in Marin County
So far in Marin County, we have not seen any significant changes in Realtor commissions or home pricing as a result of the NAR settlement. Supply and demand determine prices. The supply has decreased each year and demand remains high. This results in high prices. We do not see the new rules changing home prices in Marin.
What Has Not Changed
- Knowledgeable and experienced buyers’ agents assist sellers by bringing well-informed and qualified buyers to their properties. Compensating buyer’s agents for months or years of work pays off for both buyers and sellers.
- Buyers’ agents assist buyers to find, evaluate, and compete for houses that meet their needs. These complex services protect buyers’ investments, including carefully evaluating houses, matching houses to each buyer’s financial ability, negotiating offers, assuring effortless escrows, and avoiding regrets.
- Listing contracts in Marin (and California) have always stated that commissions are negotiable.
- Brokers will still still use the MLS (and the other websites that take information from the MLS, for example, Zillow) to market properties for sale.
- Madeline Schaider Real Estate is dedicated to obtaining the best results for our clients, whether buying or selling.
What Buyer’s Agents Contribute
Read this blog to learn about the valuable contributions a buyer’s agent can make to protect you in the purchase of your next home in Marin.