National Association of Realtors Settlement Myths and The Facts Behind It
“The press has unfortunately given consumers the incorrect impression that the NAR settlement of current antitrust litigation (“NAR Settlement”) included provisions requiring real estate brokerage firms to slash their commissions. Nothing in the NAR Settlement requires this. REALTOR compensation in Georgia has always been negotiable, and the NAR Settlement simply confirms that point.” says Seth G. Weissman, GAR General Counsel in an article he wrote regarding THE NEW WORLD OF REAL ESTATE COMMISSIONS.
We’re no stranger to Real Estate being a hot topic and this new NAR Settlement seems to be no different. We have seen so many agents and news outlets alike spread misinformation and we’d like to offer full transparency, just like always.
So, let’s get into it.
The following questions are taken from Budge Huskey’s article, Special to the Herald-Tribune, “Real estate pro says don't believe National Association of Realtors settlement myths” The full article can be found here:
1. The settlement forces brokers to reduce their compensation. False.
The settlement in no way establishes a standard or limitation on Realtors for what they may charge, nor services they elect to deliver. Those fees have always been negotiable and there has never been any collective bargaining. In every market, there is a wide variety of fees, just as there are levels of marketing, service and competence.
2. The settlement will, for the first time, allow sellers to no longer pay compensation for an agent bringing the buyer. False.
There has never been an obligation for a seller to pay buyer agent compensation, yet it is a practice that’s worked well. A past rule requiring an offer of some amount of compensation was a rule of display on a Realtor-owned MLS, yet it could have been as low as $1. That limitation was removed and today the MLS accepts all listings, regardless of buyer agent consideration.
3. The settlement prohibits sellers from paying a commission to a buyer’s agent and relieves sellers of the financial burden. False.
The mandate restricts properties with an offer of buyer agent compensation from displaying on association-owned MLS, yet the practice can’t be restricted in any other form of marketing. Sellers may still elect to pay buyer agent compensation to differentiate their properties. While sellers can elect not to pay buyer agent compensation, that doesn’t mean they will avoid the economics as buyers may write into any offer a contingency requiring the seller to cover the cost or request other concessions.
4. The settlement will serve to meaningfully lower prices and make homeownership affordable again. False.
Values in real estate are determined by supply and demand. Fees in a real estate transaction represent additional expenses, yet these include not only commissions but many other related charges. Should real estate commissions be reduced by 1% because of compression, that $500,000 home will now cost $495,000. Not only is the potential impact marginal at best, but do you think the seller now believes the home is worth less and will happily give the difference to the buyer? The reason home ownership is increasingly less affordable is that homes in our market have significantly risen in value these last few years.
5. The settlement is a win for buyers who will now be able to negotiate the fee for representation. Questionable.
For readers who have purchased homes, it is more than likely you were happy to have the seller compensate your agent so you didn’t have to. For buyers who had to provide the down payment and closing expenses, having the commission paid by the seller and incorporated in the home price allowed them to finance the amount over time instead of coming up with additional cash at closing.
Here is our Managing Broker and CEO’s breakdown of this news, currently. Please note this has been edited and produced as of April 4th, 2024. Status and settlement are both subject to change.
In conclusion, Bolst wishes to remind you – our agents and clients remain at the heart of everything we do. Our commitment to facilitating homeownership for all is still our number one priority.
We have always aimed to earn our fee. That will never change.
This article was written by Bolst, Inc.