Recently the National Association of Realtors (NAR) reached a settlement in lawsuits regarding Realtor commissions. This topic came about as there was a concern about a fixed 5% or 6% fee being charged to sellers. Compensation fees have always been negotiable, however the lawsuit originated because there was less than desirable communication between the real estate agents and clients. The settlement, which will likely not occur until later this year, mandates significant changes in how real estate transactions are conducted moving forward, specifically affecting the compensation structure for agents representing buyers. These changes are designed to increase transparency and fairness in real estate transactions by ensuring broker fees are disclosed clearly between buyers and their agents.
Key changes include:
Elimination of MLS Compensation Offers: Offers of compensation can no longer be made through the MLS (Multiple Listing Service). Compensation must be communicated directly between the clients and agents via in person, over the phone, or through written communication, like using social media platforms.
Mandatory Buyer Agency Agreements: Buyer agents must present written agreements to their clients prior to viewing properties. These agreements will disclose any compensation details from the seller/listing broker and remind the client that the broker fees are negotiable.
Policy Changes for MLSs: Any compensation related information must be removed from MLSs. This goes into effect on August 17th, 2024 in Pennsylvania.
This settlement also introduces changes between sellers and their agents such as:
Disclosure of Compensation Offers: Sellers and agents must disclose in writing any offer of compensation to buyer agents, in advance.
Written Agreements Required: Sellers must approve any compensation offered to buyer agents in writing.
What does this mean for realtors?
Realtors must now negotiate their compensation directly with their buyer clients instead of relying on the advertised compensation from the listing agent through the MLS. As stated previously, realtors are required to have written agreements disclosing the agent’s compensation with buyers prior to showing them properties.
This transitional period directly impacts realtors as well, as they often work for the client before any compensation is realized. Realtors take on many expenses clients may not necessarily see. For a seller, Realtors wear many hats with non-traditional work hours to get a home go from ‘for sale’ to ‘sold’. These expenses typically are what Realtors factor into their compensation offers.
Additional expenses that frequently and directly benefit the client are:
Professional licenses and membership dues (such as National Association of Realtors, Pennsylvania Association of Realtors, & local Tri-County Association)
Local MLS subscriptions to list a home and analyze the market
Professional photography and additional media for a listing
Open houses and broker open events
Marketing and advertising for a home (MLS listing, yard signs, staging, online ads)
State license required continuous education
In short, the NAR settlement will ensure that realtors are more transparent with their clients in communicating a compensation structure, as well as reminding the buyers that the fees are negotiable and something a buyer may need to pay going forward.
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