The recent NAR lawsuit has been settled and is awaiting approval this summer. Real estate agents need to know how this will affect them and how they must adapt to the new real estate landscape for buyer’s agents.
The National Association of Realtors (NAR) agreed to a $418 million settlement to resolve a legal dispute with home sellers who claimed that NAR inflated real estate commissions. This litigation came after the federal class-action antitrust lawsuit, Burnett v. National Association of Realtors et al., where a judge ruled that NAR colluded with brokerages to raise seller commissions.
This settlement effectively ends the claims against the over one million members of NAR, all association-owned MLSs, all brokerages where a NAR member is a principal and accumulated a residential transaction volume of $2 billion or below in 2022 and all territorial/state and local REALTOR® associations.
This landmark decision changes the real estate industry, specifically buyer’s agents. Here’s what you must know and how to prepare as the NAR settlement moves closer to court approval.
As part of the NAR settlement, they’ve agreed to enact a new rule for MLS that prohibits offers of broker compensation on their platform. This means that broker compensation needs to be communicated somewhere besides MLS. MLS must also remove any fields related to broker compensation and realtors cannot be pushed to join MLS for transactional purposes or to receive compensation.
Another change for buyer’s agents is that they must enter into a written agreement with their clients. This will outline the services that will be provided to the buyer and the compensation that will be owed to the buyer’s agent.
Moving forward, sellers will have control over the compensation for buyer’s agents. Sellers will work with listing agents who may recommend a commission percentage and all parties are required to stick to the original compensation agreement.
The typical 6% sales commission will likely be lowered. Since many real estate agents and brokerages have abandoned the 6% commission model, this shouldn't be as drastic a change as initially thought. However, some industry projections have the annual total commission of around $100 billion in the real estate industry reduced by up to 30%.
Another outcome of this settlement is that new real estate agents and part-timers might leave the industry out of frustration and a refusal to accept lower commissions. This would open opportunities for more experienced agents to gain new leads and clients and, ultimately, close more sales.
Before the dust settles, agents motivated to maintain or even grow their real estate business should start putting in the work. Now is the time to strategize on how to take advantage of whatever opportunities are presented post-NAR settlement approval.
Learn more about how to separate qualified real estate leads from unqualified ones and how to generate real estate leads in 2024.
The short answer is no. A buyer’s agent may start at a disadvantage as some homebuyers will look to cut them out or have them agree to a reduced commission.
It’s feasible to suggest that over time, the value of buyer’s agents will be proven to buyers and they will be open to paying for their services. Of course, it’s on the buyer’s agent to prove their value and how they can help potential clients.
In the meantime, you must adapt to the new rules and find a way to showcase your worth as a buyer’s agent.
Don’t panic! There is a lot buyer’s agents can do to navigate this new real estate landscape.
Follow these tips to make things easier and safeguard your real estate business or brokerage.
Work with the system. Let go of the old ways and, remember, your clients might not know how it used to be done and probably don’t care. These are the rules, so adhere to them and work with them to find success.
Treat buyers like sellers. Traditionally, a real estate agent's commission was agreed to by the seller and their agent and this isn't changing. What is changing is that this will no longer happen on MLS, and the relationship between buyers and buyer's agents must be formalized before any properties are shown. This agreement must include the compensation plan.
The most important tip for buyer’s agents in light of the NAR lawsuit settlement is to breathe. Markets are volatile and they shift. You are more than capable of adapting as other realtors have before you to whatever changes were imposed on them.
NAR agreed to a $418 million settlement to end the lawsuit brought on by home sellers who claimed that NAR inflated real estate commissions.
The most notable changes from the NAR lawsuit settlement for buyer’s agents are that they must enter into a written agreement with buyers before showing any properties and offers of compensation cannot be made on MLS.
Approval is pending but the courts are scheduled to reconvene regarding the NAR lawsuit settlement in July 2024. Most believe that the settlement will be approved.