NAR changes reduced to it's simplest form.

NAR Settlement Changes

As of August 17, 2024, there are two key changes everyone involved in buying, selling, or renting real estate needs to know. These changes help ensure that the process is clear for everyone.

For Buyers

The first change is that buyers must sign a “buyer’s representation agreement” before you show them any property, whether it’s in person or online. The only exception is if they come to an open house for a home you are already selling – in that case, you can show them that house without an agreement. But if they want to see another house, you’ll need the agreement signed first. It’s important to use the correct forms, like the ones provided by your State commission or provided by your State Association of Realtors. These forms are legally safe, and if you try to make your own forms, you could accidentally break the law. So, it’s best to stick with the approved documents.

For Sellers

For sellers, not much has changed. The main difference is that you can’t list your commission anywhere in the MLS (the system used to show homes for sale). You can’t put it in the description, remarks, pictures, or documents. You can still share your commission on a flyer, your website, or through phone, text, or other ways. Just make sure to mention that the commission is negotiable and could change at any time.

Best Practices

To stay in line with the new rules and ensure you get paid as a buyer’s agent, always have the buyer sign a representation agreement that clearly states how much you’ll be paid. Even if the seller isn’t offering commission, show the homes that fit the buyer’s needs. When making an offer, ask the seller to cover certain costs, which could include your commission. This is similar to what has been done before, but now you’re adding the buyer’s agent cost to the deal. If you’re unsure about whether lenders will allow this, you can leave out specific details about what the money is for and just ask for a general amount of seller concessions.

Lending Changes

Currently, the VA (Veterans Administration) and FHA (Federal Housing Authority) are temporarily allowing buyers to pay their agents directly or through seller concessions. They will likely make these temporary changes permanent. Most other lenders are following this rule, but some might not have adopted it yet. Check with your preferred lender to make sure.

Listing Agents

We don’t think listing agents should sign agreements to pay buyer’s agents. If you do, and later the seller reduces the commission, it could create a conflict over who is responsible for paying the difference. It’s better to negotiate commissions as part of the purchase agreement, so everything is clear, and the seller knows what they are responsible for paying. Likewise sellers should not sign buyer agent compensation agreements think about this. That would confuse the seller making them think you are working for them and that document could be considered a sort of listing agreement or create an implied agency with the seller.

Should Commission Be in the Purchase Agreement?

No, because the purchase agreement is between the buyer and seller. Adding a commission agreement would make it a three-way contract, which could cause problems. For example, if the seller isn’t happy with the buyer’s agent, they might not want to pay the commission. This could cause issues at closing. Instead, handle the commission separately and clearly.

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