NAR Settlement May Effect Home Sales in America

The landmark National Association of REALTORS® settlement comes at a critical time, amid widespread discussion about real estate commissions. This discussion has been further fueled by the NAR's agreement to a settlement to end a lawsuit concerning how broker commissions are determined. This lawsuit has injected a significant amount of uncertainty into a market already struggling with fluctuating inventory levels and rising interest rates.
 
There's a lot of confusion and misinformation circulating about the settlement, especially the claim that NAR had fixed commission rates at 6%. It's crucial to understand that NAR has never set commission rates. They have always been negotiable. In my experience as a licensed real estate sales associate, the broker's compensation along with compensation to other brokers (i.e. buyer's broker) has always been agreed upon with the seller on the listing agreement.

Image taken from the Exclusive Right of Sale Listing Agreement courtesy of Florida REALTORS®

​Moving forward, sellers will still have the option to choose whether or not to agree to an offer of compensation to cooperating brokers, as long as such offers of compensation occur off of the MLS. If they opt not to offer co-op broker compensation, they may risk alienating buyers who are otherwise qualified to purchase but are unable to obtain representation due to their inability to afford agent fees. This settlement could introduce new financial challenges for homebuyers who may now face additional expenses to the already significant financial pressures of down payments and closing costs. This change means buyers must negotiate these fees directly with their agents and have a written agreement in place before viewing properties. An element to the homebuying process that was not previously required.
 
To avoid agent fees, buyers may decide to forego single agent representation altogether and request the assistance of the seller’s agent. This would be considered dual agency, whereby one agent represents both parties. This can get tricky for some, as buyers and sellers may feel they are not being fairly represented as they oftentimes have opposing interests. While dual agency's legality varies by state, in places like Florida, it is prohibited. In this case, sellers may allow their agents to transition to transaction brokers to facilitate deals, without representing either party in a fiduciary capacity. Additionally, unrepresented buyers may face obstacles when inquiring to view properties, as they will not be able to do so without a written agreement in place, potentially limiting their options of homes to choose from or eliminating them from the homebuying market altogether.
 
While there are many variables to this landmark settlement, it may fundamentally change how homes are bought and sold in the United States. Although it may help to foster added transparency in real estate transactions, it may also inadvertently complicate an already complex and oftentimes emotional process for both buyers and sellers.

Ruth Hillestad is a Florida REALTOR® serving buyers and sellers in Cape Coral, Fort Myers, and surrounding areas.