National Association of Realtors (NAR) Settlement: What It Means For Buyers
You may have heard or read news about the NAR settlement from recent lawsuits, but there’s been a lot of confusion and misinformation. Starting August 15th, there are substantial changes in the real estate industry across all states. Here’s a quick overview of the changes, what they mean moving forward, and some commentary from me.
Buyer Paying Agents' Fees?
Sellers are no longer able to publicly offer compensation for the buyer’s broker on the MLS, but they can still offer to pay commissions and likely will continue to incentivize agents to bring qualified buyers. Commission has always been negotiable and disclosed, but the way it’s disclosed and negotiated has now changed:
Before: Buyers signed an agreement with the broker stating commission range and that the seller would pay the commission. If the seller refused, the buyer may have had no obligation to pay.
Now: Buyers sign an agreement with the broker stating what the broker’s commission will be. The buyer is responsible for any portion of the commission not covered by the seller.
My Two Cents: While commission has always been negotiable, it has become a convention that often the seller pays both sides of the commission. The recent settlement stirred things up, resulting in a change in processes and norms. Even seasoned buyers seek guidance and representation for real estate transactions, so I predict sellers will continue to offer compensation to find serious, qualified buyers. However, the full ripple effect of the changes to the required forms are not yet known.
How Does Your Buyer Broker Get Paid?
There are two options:
The buyer can pay the broker directly if they are able and willing.
The buyer can ask the seller to pay. It may be that the seller offers all or a portion of the compensation, and the buyer makes up the difference.
What if Buyer Cannot Afford to Pay or is Unwilling?
This is a reality for many buyers. Buyers can include in their offer a request for the seller to pay the commission as part of the contract. The Colorado Contract to Buy and Sell now includes a section specifically for this. Buyers can also direct their agents to show only homes where the seller is offering compensation.
How Will We Know if Sellers Are Offering Compensation?
Sellers can offer compensation in places outside of the MLS, including listing websites, print materials, and through communication between realtors. Sellers might not disclose if or what they are willing to pay, simply asking buyers to include it in the offer.
Signing a Broker Agreement
If you decide to work with a realtor, you’ll need to sign an agreement prior to touring homes. This ensures both parties are on the same page about terms and representation.
My Two Cents: The agreement isn’t new in Colorado, but the timing is. It's hard to commit to working with someone before building trust and rapport, which is why many service providers offer consultations. I will have clients sign a short agreement as a trial period. Once the trial period is over, I will ask my clients to either extend the agreement or terminate our partnership.
Using a Realtor Is Optional
This isn’t new. Buyers can represent themselves or hire an attorney. Having a realtor can provide valuable guidance in complex transactions. Every situation is different and yields different results. Realtors have deep knowledge of the process and the area, noting nuances like common local issues, appreciation variances, builder differences, etc.