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NAR Settlement- Are Commissions Gone Forever?!

The National Association of Realtors (NAR) has recently reached a settlement agreement aimed at resolving litigation regarding claims on broker commissions brought forth on behalf of home sellers. This agreement addresses all claims against over one million NAR members, NAR itself, state and local REALTOR associations, Multiple Listing Services (MLSs), and brokerages with a NAR member as the principal, engaged in residential transactions with a volume of $2 billion or less in 2022. It is important to note that the settlement is pending court approval, a process that may span several months to finalize.

The settlement was reached by NAR as an entity and not individual agents. The association firmly believes that this decision serves its best interests financially and for its long-term sustainability. Importantly, NAR and its members have not admitted to any wrongdoing or fault as part of the settlement agreement.

The proposed settlement agreement, spanning 108 pages, holds intricate implications for how agents conduct transactions. To simplify the key changes, below is a quick overview of the potential impact on the future of real estate:

  • Buyer Compensation Offers Prohibited from MLS Listings- Buyer broker compensation offers are currently documented in every MLS listing to ensure transparency and prevent misunderstandings. As of mid-July 2024, all MLS associations will enforce a prohibition on the disclosure of compensation offers within the MLS.
    • Sellers will maintain the ability to offer buyer broker commissions; however, these arrangements will now be negotiated outside the MLS, in many cases most likely verbally between the listing agent and buyer’s agent.
      • This shift may introduce potential disputes if not properly documented and managed between the two parties
      • Despite the fake news, this does not mean the cost to list your home will automatically go from 6% to 3%. Commission rates have always been and will always be negotiable, with brokers and brokerages retaining the authority to establish minimum thresholds
      • While the prospect of eliminating a cooperative commission might initially appeal to sellers, sellers' agents must engage in comprehensive discussions with their clients regarding the potential repercussions on their home's marketability, value, and time on the market
      • Buyers' agents must also proactively address scenarios with their clients where they might be responsible for paying their agent's commission, potentially limiting some buyers' ability to compete if they are unable to cover expenses such as down payments, inspection fees, appraisal fees, closing costs, and agent commissions


  • Written Agreements/Contracts for MLS Participants Representing Buyers- mandates written contracts for agents who are MLS participants and representing buyers. Agents must establish these agreements before showing any potential properties to clients. The agreements will outline who is responsible for paying the agent’s commission, and the duties owed to the buyer for the agent's compensation
    • This modification will streamline the process for agents. Previously, some agents have offered 1-2 showings without a formal right-to-buy contract, as a courtesy. However, the revised practice mandating the completion of fully executed agreements before any showings will make it easier for agents to get their contracts signed, giving them exclusive rights to represent those buyers who have signed
    • This change offers written clarity to consumers regarding the services, value, and associated costs
    • Yet, this shift may be perceived as a drawback for the public, as they are now required to engage with an agent through a contract upfront, potentially before meeting in person. For agents who prioritize buyer consultations before property viewings, the post-meeting contract requirement could introduce delays, posing challenges in competitive market scenarios


  • What About Sellers? For sellers, the impact of these changes is minimal. It is important not to be misled by claims that this will immediately halve the cost of listing a home from 6% to 3%. It is crucial to understand that commissions have always been and will continue to be negotiable. Collaboration with your listing agent is key to determining a mutually acceptable commission rate. The agreed upon commission %, and how it will be split between the listing agent and buyers agent is clearly disclosed in section seven of the Colorado Exclusive Right to Sell which will not change. 

    • Sellers still maintain the right to offer:
      • Concession to buyers in the MLS as long as it is not used towards agent commission. Must pay closing costs, inspection items, etc, and stay within contribution limits
      • Off MLS cooperative commission be negotiated by the listing agent and buyer agent
      • Increase in list price to cover a portion or all of buyers' responsibilities to close, if appraisal value allows


  • Settlement Payment- The National Association of Realtors (NAR) has committed to a payment of $418 million spread over an estimated four-year period.


  • NAR Denies Any Wrongdoing- Despite the settlement, The National Association of Realtors (NAR) and its members maintain their position regarding existing practices that prove advantageous for both property buyers and sellers. They promote access to home ownership and are particularly beneficial for individuals in the low to middle-income bracket and first-time homebuyers, who often face challenges in accumulating funds for a down payment. Despite the cooperative commission disclosure change, sellers can still offer cooperative commissions, allowing NAR and its members to confidently sustain this practice and safeguard affordable homeownership while ensuring representation for all parties involved.
    • Throughout legal proceedings, the industry has maintained that the current practices have not led to increased costs for buyers or sellers. The resolution of this matter preserves consumers' freedom to choose the real estate services and compensation options that best suit their needs.


For the complete press release, click here.


As always If you have any more questions, don't hesitate to reach out!

-Brandi Wright, The Real Estate Shark 


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