Navigating the NAR Settlement: Key Practice Changes and Implications

The National Association of Realtors (NAR) settlement, set to take effect on August 17, 2024, heralds significant changes to real estate transaction practices. These changes, aimed at enhancing transparency and competition, will reshape the responsibilities of buyers and sellers. Ultimately, the dynamics of the real estate market and relocation services may also be impacted.

Key Practice Changes

• Written Agreements for Buyers: Buyers will now be required to enter into written agreements with their brokers. This change ensures clear communication and a formal understanding of the services provided by the broker, along with the associated costs.
• Buyer Responsibility for Broker’s Commission: In a significant shift, buyers will be responsible for paying their broker’s commission. Previously, it was assumed that sellers would cover this cost. This change emphasizes the buyer's role in compensating their representation, potentially altering negotiation dynamics and market behavior.
• MLS Restrictions on Commission Information: The amount of commission paid by sellers can no longer be listed in the Multiple Listing Service (MLS). While sellers’ agents can include this information on their own websites, it will no longer be readily visible in the MLS. Buyers’ agents will need to inquire directly to obtain these details.

Anticipated Impact

These changes aim to foster increased competition and transparency within the real estate industry. However, the practical implications and outcomes remain to be fully seen.

Commission Rate Variability

These changes are expected to drive variability in commission rates at a transactional level. Factors such as agent experience, local market conditions, and the specific circumstances of each transaction will influence commission rates. This shift will likely lead to more negotiations and potentially more competitive pricing for real estate services.

Increased Negotiations

Purchase offers are expected to more frequently include compensation for the buyer’s broker. If a seller is unwilling or unable to cover this cost, negotiations will become more intricate, reflecting the balance of power in the market. Whether it's a buyer’s market or a seller’s market will heavily influence these negotiations.

Short-Term Recommendations for Relocation

• Maintain Competitive Commission Structures: To remain competitive and ensure a quick sale, it is advisable for employers to continue allowing the payment of both sides of the commission (typically around 6% of the transaction value).
• Incorporate Agent Commission in Relocation Policies: Corporations should consider including buyer agent commissions as part of home purchase closing costs in their relocation policies. This inclusion will support relocating employees in navigating the new payment structures effectively. At minimum, employers should expect exception requests when a transferee is purchasing a home if the seller refuses to pay the buyer’s agent commission.
• Mandatory Buyer Representation: Requiring buyers to have representation, regardless of who pays the commission, will help ensure relocating employees are well-informed and adequately supported through the transaction process.

As brokers and agents adapt to these changes, there will be a period of adjustment and potential confusion. Clear, interim policies and regular updates from credible sources will be essential to navigate this transition smoothly.

Long-Term Considerations

NuCompass will continue to monitor developments from ongoing litigation and the Department of Justice investigation. Staying informed about local and regional market trends and agent commission structures will be crucial. Corporations with relocation programs are encouraged to engage in discussions to clarify their policies and intentions, ensuring they are prepared for the evolving real estate landscape.

Key Takeaways

The NAR settlement introduces significant changes that will reshape real estate transactions. By understanding these changes and proactively adjusting policies and practices, organizations can navigate the transition for their relocating employees effectively. NuCompass remains committed to providing expert guidance and support, ensuring corporate clients and their relocating employees are well-prepared for the future of real estate transactions.