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Last month, the National Association of Realtors announced a settlement that would resolve nationwide litigation over claims by home sellers related to broker commissions.
The $418 million settlement, and the practice changes it will introduce, have led some to speculate that real estate agents are in danger of becoming obsolete. As someone who has practiced real estate for 15 years, nothing could be further from the truth.
Members of the National Association of Realtors will continue to be the most trusted partner to the millions of Americans striving to realize the American dream through home ownership.
Specifically, the settlement will prohibit offers of compensation from being shared on multiple listing services (MLSs), the databases that show real estate brokers the properties for sale, and will require MLS participants enter into written agreements with their buyers.
These changes will come into force in mid to late July 2024.
It is important to note that the National Association of Realtors does not set commissions, and nothing in this proposed settlement would change that. Commissions would remain negotiable among buyers, sellers, and their brokers.
The litigated “collaborative compensation” rule says selling brokers must indicate on every listing offering compensation to buyers’ brokers. That offer could be any amount, even zero.
Consumers continue to have options when it comes to compensating the brokers they work with. Some users may choose to pay a fixed fee for their broker’s services. In other cases, a seller may offer a concession on the sale price, which may be used by the buyer to help compensate their broker. And in other cases, listing agents may offer a portion of their compensation to buyer’s agents as long as the offer of compensation does not occur on MLS.
Collaborative compensation, where the compensation a seller pays their broker is shared, covering the cost of a buyer’s broker’s services, will continue to be an important option for consumers in all transactions and especially those which involves lower and middle income home buyers, who may already be having a tough time saving up for a down payment.
The reality is that consumers will continue to be able to choose what type of professional real estate advice they would like to receive – and how much, and how, they will pay for the work of a real estate professional.
Historically, almost 90% of home buyers have chosen to work with a real estate agent or broker. That figure is unlikely to change.
Even in an era where it seems that everything can be researched and purchased electronically, the clear added value from realtors remains evident. Nine out of 10 home buyers would use their agent again or recommend their agent to others.
Agents and brokers untangle local markets and neighborhoods and provide access to extensive information about available homes. We help potential buyers determine realistic budgets and investigate various financing options, including programs that may help buyers with a down payment.
Experienced agents and brokers also offer insight into property values, taxes, regulations, and zoning laws while overseeing thorough due diligence processes. And we connect buyers and sellers with other responsible real estate professionals like lawyers, lenders, contractors and inspectors – any of whom can make or break a transaction.
When it comes time to make or evaluate offers, real estate professionals have a decades-long track record as skilled negotiators, ensuring their clients make the most competitive offers for their dream home – or actually preserve their home’s value . And at the settlement table, we confidently help our clients close what is likely the most significant financial transaction of their lives.
Even after sales, real estate agents and brokers are vital advisors to their clients, providing ongoing support, answering queries, and offering guidance as people face the challenges and joys of home ownership.
NAR’s proposed settlement agreement and the associated practice changes will not change what makes realtors valuable: expert knowledge, diligence, and commitment to the best interests of our clients. And it doesn’t change the fact that millions of people will continue to rely on us to help them realize their dream of home ownership.
Tim Hur is the Community Engagement Liaison for NAR’s 2024 REALTOR Party and is a seasoned real estate professional with 15 years of experience. He is managing broker for Point Honors and Associates, REALTORS, a boutique real estate firm in Metro Atlanta.
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