The impact of the NAR commission settlement on home buyers and sellers

On August 17th, 2024, a few major changes were implemented that impact the way real estate agents work with their buyer and seller clients.  This happened as a result of a settlement agreement in a landmark class action case in which the National Association of REALTORS was a defendant. We hope to explain how these changes will impact the buying and selling public.

Impact on home buyers:

The effect on buyers is two-fold:

1. Buyers and their agents must now have a written agreement in place establishing a maximum fee that will be charged to the buyer upon completion of a successful transaction. That fee may be paid by the buyer separately, financed into the purchase amount of a property, paid by the seller, or some combination of these options.
2. Buyers and their agents must have the agreement in place before the agent may provide the buyer with “agent activities” such as giving professional advice or touring homes.  Notably, this does not apply to a listing agent answering questions about their property listing at an open house, but would apply to any questions about other properties or the real estate market in general.  

Buyers who have agreed to pay their own agents may still request that the seller pay their agent as one of the terms of the purchase contract, essentially binding the seller to pay both commissions as they have in the past. Under the updated versions of our real estate forms and MLS rules, sellers agree to pay their agents a listing commission/fee, and buyers - who have already negotiated their own agent’s fee — are able to use the terms of their purchase offer to negotiate who actually pays the fee.

Impact on home sellers:

It is important to note here that commissions have always been negotiable by law.  The prevalent historic practice, however, has been that the seller paid for their own agent’s commission as well as a “cooperating” commission to the buyer’s agent in their listing agreement.  As part of the NAR settlement, those payments are being decoupled so that buyers and sellers negotiate with their own agents regarding payment separately before entering into a purchase agreement together.

Under the terms of the settlement, sellers will now be free of pressure to pay a buyer’s agent’s fee before having the opportunity to weigh that request against the terms of that buyer’s offer. Sellers may (and very often do) signal that they are open to the possibility of paying the fee, but they are not obligated to do so.

How does this work in practice?

Sellers and their agents will continue to analyze all of the offers received on a property to determine which offer will net the seller the most money with the best terms, regardless of whether a request for buyer’s agent’s fees is included.

Since the changes were implemented, we have witnessed the overwhelming majority of sellers signal that they will agree to pay buyers’ agents’ fees as part of a purchase contract, assuming that the price and terms are otherwise favorable.  Since the focus is on the net proceeds to the seller, the question of whether there is a fee request included in an offer essentially becomes moot.  

In short, we are seeing no real change to the way that purchase transactions are working, with the important distinction that the buyers have now had the explicit opportunity to negotiate their agents’ fee beforehand, which was the crux of the underlying litigation in the first place.

At Abio Properties, we are dedicated to transparency in the process of buying and selling homes.  While these changes may take a bit of getting used to, we believe that they are good for our clients and for the industry in general.  If you have questions, please reach out to your agent for more information.

Author: Cameron Platt, Broker and Partner, Abio Properties