NAR Lawsuit Explained: What Buyers and Sellers Need to Know.
Buying or selling a home is one of the most significant financial transactions most people will ever undertake. Licensed agents who are REALTORS® are a trusted source of advice who can help you navigate the real estate market - and any changes it may face.
The most recent news to affect the real estate market has been the National Association of REALTORS®' (NAR) proposed settlement agreement to end litigation of claims brought on behalf of home sellers related to broker commissions. The litigation claimed that NAR and its members set commission amounts, breaking antitrust laws.
However, NAR and the Vail Board of REALTORS® (VBR), the local association representing Realtors® in Eagle County, have never encouraged or required a set amount. There has never been a standard commission amount pre-set or suggested by Realtors®.
Historically, compensation for buyer's agents has been facilitated through the Multiple Listing Service (MLS) - local marketplaces used by buyer brokers and listing brokers to share information about properties for sale. Eagle County's MLS is the Vail Multi-List Service (VMLS) operated by the VBR.
Compensation is the amount a seller is willing to offer a buyer's agent, often called "buyer-broker compensation." It's typically displayed in the property listing and has always been negotiable.
This system has been in place for years and has been effective. However, some sellers felt it created pressure to offer certain levels of buyer-broker compensation - despite always being negotiable.
The NAR settlement, which a judge must approve, will end litigation of claims and bring about a few changes in handling offers of compensation between agents for the buyers and sellers.
In this article, the VBR clarifies the changes and what they mean for home buyers and sellers.
The NAR Settlement and Home Buyers.
The first significant change is increased transparency in buyer-agent relationships. The settlement requires home buyers to sign a written agreement with agents before touring homes, whether in-person or virtual. Buyer's agreements are a good thing and not a massive change for the industry. They've been a best practice suggested by NAR, and many agents have used them for some time. You won't need a written agreement if you just speak to an agent at an open house or ask them about their services.
Written agreements will clearly define the scope of services the buyer's agent provides. Services can include market analysis, property searches, negotiation on your behalf, and guidance through the closing process. The agreements will also outline any associated fees.
Before signing any agreement, make sure it reflects the terms you have negotiated with your agent and that you understand precisely what services and value will be provided - and for how much.
- A specific and conspicuous disclosure of the amount or rate of compensation the real estate agent will receive, or how this amount will be determined.
- Objective compensation - and not open-ended. For example, a flat fee, percentage, or hourly rate.
- A term that prohibits the agent from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and,
- A conspicuous statement that broker fees and commissions are fully negotiable and not set by law.
The NAR Settlement and Home Sellers.
Sellers still have the choice of offering compensation to buyer brokers. Compensation is a way of marketing your home or making your listing more attractive to buyers. You will do it through means different from the MLS, such as your broker's website. You can also factor this compensation into the overall asking price or negotiate it as part of the offer process.
Also, your agent must conspicuously disclose to you and obtain your approval for any payment, or offer of payment, that a listing broker will make to a buyer broker. This disclosure must be made to you in writing before any payment or agreement to pay another broker acting for buyers and must specify the amount or rate of such payment.
If you choose to approve an offer of compensation, there are changes to how this can happen.
- You, as the seller, can still make an offer for compensation, but your agent cannot include it on a Multiple Listing Service (MLS).
- Your agent can advertise your listing via off-MLS platforms such as social media, flyers, and websites.
- As the seller, you can still offer buyer concessions on an MLS (for example, concessions for buyer closing costs).
What will never change.
Regardless of any process changes for compensation, consumers will continue to work with outstanding, competent agents. And agents will continue to be compensated for their efforts and expertise.
As licensed brokers, Realtors® can effectively price and market a property, navigate details like transfer taxes or homeowners' association fees, negotiate for clients, and complete complex contacts. They also support consumer access and opportunity through the MLS—local broker marketplaces that provide the most accurate and up-to-date information.
Consumers continue to have choices regarding real estate services and compensation — a major goal of NAR. The proposed settlement achieves this goal and provides a path for Realtors® to move forward and continue to preserve, protect, and advance the right to real property for all.
To find a Realtor® who is committed to consumer access and opportunity with expert knowledge of the Eagle County real estate market, visit www.vbr.net/why-use-a-realtor.