What to Know About the National Association of Realtors® Settlement

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What to Know About the National Association of Realtors® Settlement

What happened?

On March 15, 2024, the National Association of Realtors® (NAR) announced a $418 million settlement with a nationwide class of plaintiffs in an antitrust lawsuit. The lawsuit centered around claims that Realtors® conspired to artificially inflate commission rates by not being transparent about how buyer’s agents are compensated.

How are buyer’s agents compensated today?

When listing a home, the listing agent negotiates their “commission” or “compensation” with the seller. That can include a portion of that amount being paid or offered to the broker who represents the buyer in that transaction. The details of these commissions are negotiable and incorporated into the written listing agreement, buyer’s agency agreement, and/or purchase and sale price agreement.

What’s changing about how buyer’s agents are compensated?

When a seller’s agent lists a home on a REALTOR®-owned Multiple Listing Service (MLS), they are currently able to include an offer of compensation to the buyer’s agent as part of the listing. Moving forward, this compensation cannot be advertised on the MLS.

The practice of putting the buyer’s agent commission percentage on the MLS has led many to believe that number is fixed. Many agents have not done a good job explaining that commissions are negotiable.

If the court approves NAR’s settlement, agents will no longer be able to advertise any buyer’s agent’s compensation when they list a home on a REALTOR®-owned MLS. This will encourage agents to have more in-depth conversations with their clients around compensation, promoting greater transparency across the industry.

Lastly, buyers will now be required to sign buyer’s agency agreements to ensure they fully understand the buyer-broker relationship, obligations between broker and client and how their buyer’s agent is compensated.

Does this mean buyers are now responsible for the buyer’s agent’s commission?

Not necessarily. Buyer’s agents can continue to be compensated by the seller, whether through the listing agreement which would directly outline the compensation offered or through a credit as negotiated as part of the purchase agreement.  

At the same time, sellers are not required to offer compensation to the buyer’s agent. So if a particular seller chooses to offer 0% commission to the buyer’s agent, as is their right, the buyer may have to find an alternative way to compensate their agent if they wish to purchase that property.

As a seller, what are the benefits of paying the buyer’s agent’s commission?

In most cases, it is in your best interest as a seller to have an experienced, highly professional buyer’s agent on the other side of the transaction to ensure the deal closes on time and that the buyer’s rights are protected. If the buyer, lacking adequate representation, feels the transaction was weighted against them, there’s a greater likelihood of them bringing a claim against you in the future.

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