Do You Know?

Do you know about the NAR settlement and how it may affect buyers and sellers going forward?

On March 15, 2024, the National Association of Realtors (NAR) announced a nationwide settlement, agreeing to end last year’s landmark antitrust lawsuit regarding commission structures.

Traditionally, sellers and listing agents have set the commission structure paid to both the listing and selling agents once the house was sold. Per this settlement, commissions can be negotiated. Sellers can still offer a commission to a buyer’s agent; however, this commission would no longer be a condition of using the Multiple Listing Service (MLS).

What changes should buyers, sellers, and real estate agents expect? Not as many as you may think!

Commissions paid to buyer’s agents will continue, however no longer communicated on MLS. They will be subject to negotiations (rather than a set fee disclosed on MLS). The commission to a buyer’s agent can be negotiated into the offer, can be paid by the seller, a portion of the listing agent’s compensation, or can be paid by the buyer directly. If paid by the buyer, the commission can be paid out of pocket or possibly via a seller’s concession.

Not surprisingly, the media in general has shown a huge lack of understanding and has done a horrible job explaining this settlement. According to Gina Padro, top-selling agent at Keller Williams Greater Nassau in Garden City, NY, “The fact that they think a buyer’s agent’s commission was the root cause of inflated home prices is ridiculous!” Home price appreciation is strictly a factor of supply and demand. There are still significantly more buyers fighting over a limited inventory of homes for sale. “Also, we keep hearing (from this lawsuit and settlement) 6% commissions! Other areas of the country may see 6% commissions; however, we haven’t seen 6% in NY for over 20 years,” added Gina Padro.

The duties and value performed by buyer’s agents will be put under the microscope. The buyer’s agents will have to prove their value if they want to get paid. “Many agents will leave the industry because they bring no value to the table,” said Andrew Ragusa, President of REMI Realty in Smithtown, NY. “If a seller is unwilling to pay a buyer’s agent, it will discourage buyer’s agents from showing their home.”

Despite the claims seen in the press, it is unlikely we will see reductions in the costs of buying or selling homes. These fees will simply be paid differently.

Will sellers be more flexible since they are potentially paying less commission? Probably not. In fact, if buyers are responsible for paying the buyer’s agent, this new commission structure has the potential to INCREASE costs for buyers!

Past years brought changes to how commissions were paid to stockbrokers and mortgage originators. Now we are seeing it with real estate commissions. Unfortunately, the lesson still not learned is that these new regulations only make commissions more complex, less transparent, and ultimately MORE expensive to consumers.

_______

Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.