As we approach the implementation date of the changes resulting from the National Association of Realtors (NAR) settlement earlier this year, I wanted to take a moment to remind you of these updates and what they mean for you as a valued client.

You might recall there was significant media coverage when these changes were first announced, but the focus soon shifted to other news. Here’s a brief recap of the key changes effective from 8/17/24:

1. Seller’s Obligation to Pay Buyer Agent Compensation: Sellers are no longer obligated to pay the buyer's agent compensation. However, the majority of sellers might very well continue to offer buyer agent compensation to widen the pool of potential buyers and maximize their own net proceeds from the sale. As a seller, you are also not required to decide and advertise how a buyer agent might be compensated, leaving the options open.

2. Negotiability of Compensation: Compensation for real estate professionals has always been negotiable. The upcoming changes reinforce this fact, giving you more control and flexibility in your real estate transactions.

The Value of Buyer Agency

It's important to remember that buyer agency hasn't always been a given. Before the 1990s, buyers were often unrepresented in transactions, with realtors primarily working for the sellers. The introduction of buyer agency was a significant accomplishment, ensuring that buyers have advocates to help them achieve the American dream. Buyer agents provide critical services, including education, advocacy, and negotiations, and they are typically compensated only when a transaction is successfully closed.

A Global Perspective

Growing up in Germany, I’ve seen how real estate transactions differ across countries. In some countries often cited for lower real estate fees, such as those in Europe, buyer representation is not common. This lack of representation can make purchasing and owning a home much more challenging for buyers. Here in the U.S., the comprehensive support from buyer agents is a valuable aspect of our real estate market.

The Role of Cooperation Fees

While sellers were never legally obligated to pay a specific commission, NAR supported a system where seller agents and buyer agents cooperated to increase the pool of potential buyers for a home, which is of great benefit. A cooperation fee, which could be as minimal as $1, was required for homes listed on the Multiple Listing Service (MLS). This fee ensured that all agents could participate in selling the home, broadening market reach and competition.

The Financial Challenge for Buyers

Purchasing a home is a significant financial undertaking for many buyers. Home prices remain high due to a nationwide housing shortage and various local factors affecting supply and demand. Additionally, buyers face costs such as down payments, elevated interest rates, and potential renovations or updates to the home purchased. In most cases, buyers will greatly benefit from seeing the compensation of their buyer agent included in the purchase price of the home, as it has been over the past decades. This practice is likely to continue, but there is now more flexibility for both sellers and buyers.

The Value of Real Estate Agents

Understanding the comprehensive role of a buyer or seller agent can be challenging. Real estate agents operate on a success fee, which is different from hourly or project-based services. They provide invaluable support throughout the process, from market analysis and property searches to negotiations and closing deals. To ensure you work with the most qualified partner, it's important to consider their qualifications and experience, as these can vary greatly. You can find a detailed list of what to expect from a real estate agent here.

Embracing the Changes

One positive aspect of the upcoming changes is that consumers are reminded of their choices. These changes emphasize that the compensation of real estate professionals is negotiable. At Rimkus Real Estate ERA Powered, part of Anywhere Realty, we are confident that the complex process of selling and purchasing a home continues to benefit greatly from full-time real estate professionals with access to wide networks and extensive resources.

Reaffirming Trust in the System

Recent inaccuracies in media coverage have suggested that NAR requires a standard commission. This is not true. Commissions are negotiable and determined by the agreement between the client and the broker. NAR's policies ensure transparency and competition, prohibiting any fixed commission rates. You can read more about this clarification from NAR here.

Let’s Discuss Your Strategy

If we haven't yet had a chance to go over these upcoming changes and discuss what they mean for you, whether you’re planning to sell your home or looking for your next purchase, please reach out. Let’s set up a time to call or meet in person to strategize your next steps and ensure you’re well-prepared.