Just Thank the Attorneys...
Here’s the final episode, though not the final word. What’s in it for home buyers?
To Recap: A nationwide lawsuit, otherwise known as the NAR Settlement, levied against real estate agents was settled with a decision to remove any offer to compensate the buyer’s agent from the MLS and require buyers to sign a compensation agreement that states that if the seller doesn’t offer to pay their agent then they will pay. Historically, both seller and buyer agent’s brokerage compensation fees were part of the sale price of the home. This new revelation struck a note of fear in many first-time home buyers and for good reason.
Homebuyers have felt the cash crunch for years as home prices increased exponentially and interest rates soared. Home buyers traditionally need to consider the out-of-pocket costs required to purchase a home: down payment, costs for inspections, appraisal fees, lender and title fees. This is especially for first-time home buyers where they have been saving a chunk of change in order to purchase a home. With the NAR settlement, all home buyers are potentially being asked to cough up additional funding to compensate their own agent's brokerage as well so that homeownership feels as if it’s slipping away. It’s not all dark and ominous. What we’re seeing is that many sellers are continuing to pay that compensation with a reasonable offer.
This new contract between the buyer and their agent for compensation isn’t really new. The fact is that the Buyer Agency Agreement has been around for years but didn’t have a very high participation rate unless it was required by the individual state or brokerages required it’s use. At present, the Realtor Associations require buyers to sign this form before viewing a property.
So as a buyer what should you know? What’s important?
A buyer who wants to pay a reasonable price and be guided in the homebuying process has a greater chance of success when they are represented by a qualified, professional real estate agent. After the NAR Settlement, the decision by the sellers to pay compensation to the buyer’s agent was pushed from pre-listing to the offer stage. Agents also will educate their clients and help them make smart decisions.
The deck is not stacked against the buyers and in fact, the buyer has some choices too.
- The buyer, through their agent, can ask for the seller to pay their agent’s fee and the agent will try to negotiate that with a reasonable offer price.
- If the seller authorizes the brokerage compensation to be included in the sales price as it has been done historically these fees may also be included in the buyers' financing.
- The buyer can pay this fee separately at the time of settlement if the seller chooses not to pay
- Buyers can also choose to walk away from the Offer/Counter Offer and find another seller who will include the Buyers’ Brokerage compensation in the contracted sales price as was historically done.
It can be a big ask for buyers to commit to an agent that they don’t know. In this case, buyers may choose to sign the Buyers Compensation Agreement for a short time: such as for 3 days or a month to see some houses, test driving the value the agent brings to the table. Unlike with attorneys who bill by the hour, compensation only occurs when the buyer closes on the property.
As this change percolates through the system, most sellers are compensating the buyer’s brokerage for these basic reasons:
- So, they don’t lose a ready, willing, and able buyer that either doesn’t have or doesn’t want to pay the money out of pocket to compensate their agent;
- Because no matter how much marketing a listing agent is doing, it’s the buyer’s agents who are bringing the buyers to the seller’s door.
At the end of the day, the NAR lawsuit gave the Plaintiffs' attorneys a huge payday and the changes put some additional burdens on buyers and sellers, but real estate hasn’t stopped. Right now, everyone is slowly and cautiously working through the changes together.
In fact, it’s been helpful to educate everyone about how real estate works and being informed makes everyone better consumers. It’s also done a lot to cull the agent herd as well. Great agents will educate their clients, negotiate for them and help them through the process. The ones who just like to show pretty houses and can’t explain the NAR settlement and how to work through the new process and potential impacts won’t be getting paid and they won’t be doing an adequate job representing their clients either.
The big news of the lawsuit, the polarization of the upcoming election, higher interest rates, lack of inventory and the end of the year normal slowness paused buyers and sellers. The good news is that the Fed is trying to get the housing market working again by reducing the interest rates. If you have any questions about what this means for you, please reach out to us. We have always believed in transparency in our business so, as far as we are concerned, requiring agents to be more transparent in all aspects of these changes is actually good!
If you missed the first 2 blogs regarding the NAR Settlement and possible impacts on both buyers and sellers, please click on the links below.



