As a luxury realtor serving the vibrant community of Belleair, Florida, I feel it's essential to address recent developments in the real estate industry, particularly regarding the National Association of Realtors (NAR) settlement regarding commissions. This settlement has stirred conversations and concerns within the real estate community nationwide. Here, I aim to provide clarity on key points surrounding the settlement and its implications for buyers, sellers, and real estate professionals.
1. Understanding the Basis of the Lawsuit:
Last October, a jury ruling favored plaintiffs who alleged that NAR and real estate brokerages colluded to artificially inflate seller-paid commissions to realtors during home sales. However, it's crucial to clarify that real estate commissions have always been negotiable. Here in Belleair, our listing agreements, approved by the board of realtors and the Florida Bar, emphasize the negotiability of commissions tailored to each transaction.
2. Changes Arising from the Settlement:
The March 25th NAR settlement introduces some changes. Listing agents are now prohibited from advertising buyer broker compensation on the Multiple Listing Service (MLS). This does not mean that sellers and their agents are banned from offering any buyer broker compensation, only that it cannot be advertised on MLS. This move, while intended to enhance transparency, presents challenges. In my personal opinion, this is a major step backward from NAR's recent attempts to add more transparency to the transaction by making buyer broker compensation publicly known, but the theory behind the decision leads into the next major change. NAR will also be requiring buyer's agents to enter into a written agreement with their buyers, specifically known as a buyer broker agreement. The purpose of this agreement will be for buyers to fully understand the costs associated with their purchase, including what the buyer's agent will cost. The truth is the buyer broker agreement is nothing new and agents like myself have been using it for years, it was just never required for the transaction.
3. The Persistence of Commissions:
The simple answer is no, commissions aren't going anywhere. The misinformation by the mainstream media has led people to believe sellers are no longer required to pay for buyer broker compensation. This simply is not the case. First, sellers were never required to pay for buyer broker compensation, it is negotiated and agreed upon by the seller and the listing agent prior to ever even listing the home. Second, sellers should be aware of the affects that not offering buyer broker compensation can have on the sale of their home. By not offering any compensation to the buyer broker, potential buyers will have to assume any associated costs for their realtor in the purchase of the transaction, thereby significantly diminishing their buyer pool. A smaller buyer pool means the home will likely sit longer on the market, which in and of itself can have drastic affects on the eventual sale price. Another factor sellers should consider is that by not offering any buyer broker compensation, they will be going to market and competing with all the other listings that WILL offer buyer broker compensation, and again have a negative affect on the time the property is on market and the eventual sale price of the property. Conversely, on the buyer side of the transactions, buyer's agents will have to be able to prove their value and why they are worth the commission they will charge. This is a huge positive outcome for the industry as it will go a long way towards disproving the overwhelming option that buyer's agents merely "open doors" for a living.
4. Seller Concessions and Their Role:
I have heard a lot of talk about the sellers and their agents being able to allow the advertisement of seller concessions. Like the buyer broker agreement, this is nothing new. Sellers have always been allowed to offer specific amounts or a percentage of the sale price in concessions to the buyer. Everyone should understand however, listing agents are not allowed to specifically advertise any concessions as a way of covering buyer broker compensation. Sellers may offer concessions and the listing agent may advertise those concessions for the purposes of paying buyer's closing costs, i.e., cost of title, repairs, or some loan costs.
5. Consideration for VA Buyers:
In discussions regarding the settlement's impact on VA buyers, it's vital to note that in states where buyer broker agreements were already required, VA buyers continued purchasing homes. The law mandates compensation for VA buyer brokers, underscoring the importance of incorporating this into purchase offers.
6. Timeline for Implementation:
While awaiting court approval, the proposed changes are expected to take effect by July of this year. However, it's crucial to recognize that these changes, though significant, maintain the negotiability of commissions and aim to elevate professionalism within the industry.
In Conclusion:
First it's important to understand that the settlement has not yet been approved by the Court. Should it be approved, we can expect to see this changes being implemented by July of this year. However, these changes to the industry are not as drastic as mainstream media is making it out to be. Commissions will still exist, they will continue to be negotiable, and hopefully with the requirement of the buyer broker agreement, agents will be better prepared to present their value proposition to their prospective buyers.
If you wish to understand more about whats happening the changes in our current real estate industry, call the Abreu Group. We are here for all your real estate needs.
The views, information, and opinions expressed in this blog are solely those of the author and do not necessarily represent those of Realty ONE Group, Realty ONE Group Beyond, or their affiliates. Neither Realty ONE Group, Realty ONE Group Beyond, nor any of their affiliates is responsible for the accuracy any information contained in the blog.
