New Rules

How the recent National Association of Realtors^® (NAR) settlement will impact how home buyers, sellers and real estate agents interact beginning August 17, 2024.

Based on the recent Sitzer-Burnett class action lawsuit, Realtors^® will be required to change the way they do business with home buyers and sellers. While the goal of the settlement is to create more transparency and fairness in real estate transactions, it will take some time for consumers and agents to adjust to this new landscape.

We’ll go into greater detail around what this all means later in this document, but these are the most notable changes that we’ll all need to be aware of:

• Sellers are not required to offer compensation/commission to a buyer’s agent (but they can if they wish to)
• Buyers will need to agree to and sign a Buyer Broker Agreement (BBA) with an agent of their choice before the agent can show them any home
• As part of the BBA, the buyer and agent will agree to compensation/commission to be paid to the buyer’s agent by the buyer
• The buyer’s agent cannot be paid more than the agreed upon amount in the BBA, even if the additional compensation is coming from another source (seller, or builder’s bonus, for example), unless agreed to in writing by all parties
• Area Multiple Listing Services (MLS), the databases where agents post and view listings available for sale by real estate agents (and the source of the vast majority of listings found online at sites like Zillow, Realtor.com, etc.) can no longer show any information about commissions/compensation offered
• Lastly, as it has always been, all commissions/compensation are completely negotiable

What This Means for Home Sellers

In the past, in order for a home to be listed in the MLS, sellers would have to make at least some offer of compensation to buyer’s agents, even if it was only a dollar. Going forward, that requirement will be removed, and sellers won’t even have to offer any compensation to a buyer’s agent, if they so choose. That said, sellers are free to offer compensation to buyer’s agents, whether in the form of a traditional commission (2.5% on the closing price of the home, for example) or as a concession to the buyer that they can use however they like (e.g., $5,000 towards buyer fees, whether closing costs, rate buydown or buyer’s agent commission).

See NAR’s Guidance on What the Settlement Means for Sellers

What This Means for Home Buyers

Buyers who want the expertise of a real estate agent to help them navigate the home buying process will have to a) sign a Buyer Broker Agreement (BBA) with a specific agent before that agent can show them any homes, and b) specify how much in compensation they will pay their buyer’s agent for those services. Note that BBA can be for a single property/showing or extend to a more comprehensive agreement allowing the buyer’s agent to show the customer multiple properties that meet their criteria, much as traditional agent/consumers relationships work today. The BBA can be limited by a specific timeframe (30 days, 6 months, or less, or more) or a specific number of properties. All of these terms, including the commission rate, are completely negotiable.

See NAR’s Guidance on What the Settlement Means for Buyers

What This Means for Realtors^®

One of the biggest challenges for agents will be determining how much commission, if any, a seller is offering to a buyer’s agent on the sale of their home. You can imagine how important this information will be to a potential buyer who will need to negotiate how much they will pay to their buyer’s agent. For first time homebuyers, the challenge may be even greater, as they can be struggling to come up with the funds for a down payment and are now in a position where they may have to pay their buyer’s agent directly, as well. How this will impact home prices/sales, is anyone’s guess. On a side note, while no offers of compensation will be made available in the MLS, The Sandberg Team will be posting any buyer’s agent compensation offers made by our seller customers on our website, and other online sites as allowed, in order to cast the widest net possible for potential buyers.

So that’s it, in a nutshell. How much this decision truly upends the way homes have been bought and sold in the US for the last 100 years or more remains to be seen. One thing that’s certain, however, is that there will be more changes to come as agents, buyers and sellers learn how to navigate in this new model. Ultimately, we believe this will be a change for the better for consumers, while agents will have to lean into their training, experience and sound relationships with other agents to continue to provide the best service and counsel to their customers.