The real estate industry is undergoing significant changes as a result of the recent National Association of Realtors (NAR) settlement. These changes, effective August 17, 2024, are designed to increase transparency and empower consumers—whether you’re buying or selling a home. Here’s what you need to know about how these updates might impact you as a home buyer.
Key Changes and What They Mean for You
- Negotiability of Agent Compensation
- What’s Changing: Compensation for buyer agents is now more negotiable than ever. Buyers and sellers can negotiate the terms of how agents are paid, allowing for greater flexibility and potentially lower costs for buyers.
- What It Means for You: When choosing an agent, it’s essential to discuss and understand the compensation structure. This includes knowing exactly what services you’re receiving for the fee you’re agreeing to pay. You now have the power to negotiate these terms more openly.
- Transparency in Commission Payments
- What’s Changing: Buyer agent commissions must now be clearly detailed in a written agreement before any home tours take place. This agreement will outline the amount and method of payment, ensuring there are no surprises down the line.
- What It Means for You: Before touring any homes—whether in person or virtually—you’ll need to sign a written agreement with your agent. This document will specify the services provided and the exact compensation structure. If the seller isn’t covering the full commission, you may need to pay the difference.
- Limitations on Marketing of Commission Offers
- What’s Changing: Sellers and listing brokers may still offer compensation to buyer agents, but this offer can no longer be communicated via the Multiple Listing Service (MLS).
- What It Means for You: This change means you’ll need to rely more on direct discussions with your agent regarding any compensation being offered by the seller. If the seller does not offer compensation, you’ll be responsible for paying your agent as per the written agreement.
- No Financing of Agent Commissions
- What’s Changing: Current regulations continue to prohibit financing agent commissions as part of your mortgage.
- What It Means for You: You will need to plan for any agent fees as out-of-pocket expenses, separate from your mortgage. Discuss with your agent how these costs will be handled to avoid any financial surprises.
- Written Agreements Are Now Mandatory
- What’s Changing: Buyers must sign a written agreement with their broker before they begin touring homes.
- What It Means for You: This step ensures that all terms, including services and compensation, are clear from the start. This agreement is not required when just speaking to or meeting with a listing agent, but is mandatory before any home tours.
How to Prepare
To navigate these changes effectively, here are a few steps you can take:
- Ask Questions: When working with an agent, make sure to ask detailed questions about their fees and the services included. Understanding this upfront will help you make informed decisions.
- Review the Agreement Carefully: Before signing the mandatory written agreement, review it thoroughly to ensure you understand the terms. Don’t hesitate to negotiate if needed.
- Plan Your Finances: Since agent commissions can’t be rolled into your mortgage, make sure you have a plan to cover these costs.
The NAR settlement is a significant step towards greater transparency and consumer empowerment in real estate. By understanding these changes, you can make more informed decisions as you embark on your home-buying journey. If you have any questions or need further clarification, feel free to reach out—I’m here to help guide you every step of the way.
