Impact of Settlement for Web

Antitrust for Buyers

In March of 2024 a settlement agreement was signed between the National Association of Realtors (NAR) and a group with regards to an ongoing dispute. Action is required which affects buyers as of August 2024. At this point, there are several changes that need to be made by the REALTOR community but only a few that affect you as a buyer.

What does this mean to an active buyer?

There are a few relevant factors to be considered. By rule of the settlement, all REALTORS in the United States MUST have a signed agreement outlining the compensation they expect as a part of the transaction. In other words, before a Realtor can represent you as a buyer or show you a property, both you and the Realtor will be required to complete a document outlining how much that Realtor can earn.

At the same time, the agreement eliminates offers of compensation between seller’s brokers and buyer’s brokers through the Multiple Listing Service (MLS). That compensation is not eliminated but the advertising of it is. Sellers have always had and will continue to have a wide variety of options when offering compensation. The amount has and will remain negotiable.

Under the new guidelines, however, it may be more possible for a seller to offer a wider variety of compensations to the buyer's agent (including zero). In these cases, the balance may be due from the buyer.

How does this really affect me?

Basically, when making an offer on a home, there are at least three possibilities.

1. The amount of compensation to your agent may be handled by the seller already through an agreement with the listing brokerage. In which case there is no impact at all that is different from the way real estate transactions have been handled for decades.

2. The seller may not offer any compensation at all to your buyer’s agent and ask you to pay for it.

3. The seller may offer some amount which is between the full amount and nothing and essentially ask you to split it.

What can I do?

You have several options. First, you can only look at properties that offer the full compensation which will ensure that you don’t go down the path of seeing things that you may or may not be able to afford. Second, you can limit the properties you see to only those where there is an amount being offered which is palatable to you. Of course, you also have the ability to pay your representative on your own at closing. And lastly, you can ask the seller to make up the difference in the contract, regardless of what they have said they are willing to offer.

What is the impact of these decisions?

If you decide you are only going to work with sellers who agree to pay for the buyer's representation, you may either see fewer homes up front or end up in a situation in which you have to walk away from some properties. In the same way that you would have to walk away if the roof was flawed and the seller refused to fix it before closing.

What are the “gotchas” in this whole thing?

There are a few and you need to be aware of them as they can really impact your ability to buy the right home.

Veterans who would like to use the benefits they’ve earned

If you are using your VA benefits, you are prohibited from compensating your buyer’s agent by the Venteran’s Administration. You should either plan to fund your buyer’s agent’s commission or plan to find an alternative funding source and forgo the benefit to which you would otherwise be entitled.

Insufficient cash for down payments, closing fees, and representation

If you don’t have extra cash lying around you really need to find a seller who is willing to cooperate. In the traditional system, the cost of the buyer’s agent services has often been a seller’s expense and, as such, is included in the purchase price. The advantage is that it is financed over the term of the loan. For example, rather than coming up with $9,000 at closing, that same amount financed at 3% over 30 years is about $38/month.

Acting without representation

There will be a certain number of people who opt to operate without representation altogether. There is nothing that says you must be represented in a real estate transaction. However, for most people buying or selling a home tends to be one of the largest transactions that they will make. With today’s technology, finding a home is not difficult (our own website proves that) but the rest of the transaction should be handled with a seasoned professional who has the appropriate support team to help make sure the transaction goes smoothly from an offer being made, through inspections, to a successful closing.

Additional resources

There are plenty of resources available to find out more information. The National Association of Realtors (NAR) has created a frequently asked question (FAQs) site to address most of them at facts.realtor. However, one of the best resources for you is your local Realtor who can address your questions and help you to determine how to proceed.