Navigating the NAR Settlement Proposal: A Guide for Realtors? and Consumers

by Jeffrey A. Smith, JASCO Companies

The details of the NAR lawsuit and proposed settlement have been confusing for everyone. It's important to remember that the recent settlement agreement proposal is just that—a proposal. Until it's accepted, nothing is set in stone. As agents and brokers, all we can do at this point is stay informed and keep abreast of the developments unfolding in the courts. With this article, I hope to help clarify the situation, as well as to try and calm the discussion.

At the end of the day, the task of Realtors? will remain unchanged no matter how the lawsuit shakes out. Our fiduciary responsibility is to the represented client. With that said, doing what’s best for all parties involved, outside of commissions, yields the most gain for the represented party; be it monetary or helping clients achieve personal goals to move forward in their lives.

While the terms of the proposed settlement are not yet finalized, they offer a glimpse of what the future might hold once an agreement is reached. Associations nationwide are diligently working to ensure the best interests of their members are represented. Now is the time for us to come together, share ideas, and advocate for solutions that benefit everyone in our industry.

Drawing from my extensive experience spanning over a decade in real estate, including all facets of the industry alongside founding and growing successful ventures, I've encountered a myriad of challenges. I founded JASCO, a full-service hybrid brokerage, and turned it into a multi-million dollar business in just two years. I even authored a book aimed at empowering real estate agents in their careers, “Believe It. Own It. Do It.: Your Real Estate Career Unlocked,” where I share everything I’ve learned along the way to help up-and-coming real estate professionals. And while the current landscape may seem daunting, I'm confident we'll weather this storm and emerge stronger.

My inbox has been inundated with people asking for help and guidance and for my opinion as to what to do. Here, I hope to address many of those concerns.???

Understanding the Changes

Traditionally, the agreement between listing agents and sellers involves setting a commission rate, often hovering around 6%, though there's no standardized requirement for this figure. Subsequently, the listing agent discloses the percentage they will offer to cooperating agents, all detailed within the listing agreement.

One of the most significant changes affecting buyer agent commissions is the modification in MLS rules regarding the publication of cooperative commissions. Previously, these commissions were openly displayed, but now, they will no longer be visible.

This alteration has sparked concerns and questions among both agents and consumers regarding its implications for negotiations and transaction costs. It's crucial to clarify that commissions are not being eliminated but, rather, negotiated in a different manner. Providing accurate information and education on commission structures can help dispel misconceptions and facilitate informed decision-making.

Addressing Possible Ramifications

I anticipate that due to media coverage and other factors, there may be some confusion or lack of proper education among agents and consumers, potentially inflating the significance of this issue to include buyers asking the sellers for concessions. I personally believe this would be counterproductive for all vested parties, as this could change lending terms, etc.

In short, sellers, sensing the shifting tides, may seek ways to avoid compensating a buyer’s agent. However, it's challenging to navigate this terrain, as buyers typically seek representation, irrespective of budget constraints. Again, proper education for agents and consumers is key to navigating this changing landscape effectively.

On the other side, buyers might seek concessions, impacting their financial requirements for closing costs, especially if these concessions are tied to assisting with buyer agent commissions. Currently, details about the possible settlement agreement remain sparse, but it's clear that cooperative commissions will no longer be displayed in the MLS, and the overall commission agreed upon by the seller won't specify how much will be paid to the cooperating broker.

This change may lead to various scenarios, potentially affecting offer prices or negotiations. The ripple effects could extend to other parties involved, such as lenders, prompting lobbying efforts to challenge the status quo even further.

Financial Considerations

Requesting seller concessions to cover buyer agent commissions may impact the financial requirements for closing, particularly regarding financing. Agents should work closely with lenders to ensure compliance with financing terms and help clients navigate any adjustments to their financial plans.

Expectations Regarding Commissions

Despite changes in how commissions are displayed, buyers will still expect representation from their agents. Sellers may attempt to shift the burden of buyer agent commissions onto buyers, but it's essential to emphasize the value of professional representation throughout the transaction process. Educating consumers on the role of buyer agents and the importance of their services can help mitigate any resistance to paying commissions.

Moving Ahead

As the real estate industry continues to evolve, proactive communication, education, and collaboration will be essential for adapting to changes effectively. Realtors? can ensure smooth transactions and positive outcomes for all parties involved by staying informed and guiding clients through these transitions.

While changes in buyer agent commissions may introduce challenges, they also present opportunities for agents to demonstrate their value and expertise in navigating complex transactions. By working together and staying proactive, we can successfully adapt to these changes and continue to thrive in the dynamic real estate market.

In Conclusion

Few people welcome disruption except the ones who profit from the disrupting. With all the drama and upset we’ve all been through over the last five years, there’s been a ton of disruption in many different industries. So now it looks like it’s our turn, as real estate professionals, to have our industry disrupted. Will things be better or worse after it all shakes out? It’s too soon to tell. But it’s not too soon to be stalwart.?

We need to stand firm in our joint commitment to serve that core function I mentioned in the beginning; to act in the interests of our clients. No matter what territory you’re working, what associations you’re a member of, I firmly believe that if we all uphold the tenets of the National Association of Realtors?, then we can each prosper in all the ways that matter. You can be respected as a professional, maximize profits and be fulfilled as a career Realtor?.

I hope you've found this article helpful. If you have any comments or questions, please don't hesitate to reach out.?

NAR NEWSROOM:

Correcting the Record: NAR Does NOT Set Commissions

NAR Reaches Agreement to Resolve Nationwide Claims

NAR Fact Sheet