Unlocking the Truth: What NAR’s Settlement Really Means for Homebuyers
If you’re planning to buy a home, the recent settlement by the National Association of REALTORS® (NAR) introduces important changes that directly affect how you work with a REALTOR®. These new rules that went into effect August 17, 2024, aim to bring more transparency to the homebuying process, particularly when it comes to how REALTORS® are compensated and the agreements you need to sign before receiving services.
Let’s unlock the truth about what the NAR settlement means for you as a homebuyer and how it changes the way REALTORS® can provide services.
1. No Obligation to Sign, But REALTORS® Must Have a Signed Agreement Before Providing Services
While you, as a homebuyer, are not required by law to sign a contract with a REALTOR®, the new rules mandate that REALTORS® cannot provide certain services, such as showing properties, without a signed agreement. This includes in-person and virtual home tours.
In other words, if you’re serious about working with a REALTOR® and touring homes, you’ll need to sign a Buyer Representation Agreement. This contract outlines what services your REALTOR® will provide and, most importantly, how much they will be compensated for those services. Without this signed agreement, a REALTOR® would be violating the terms of the NAR settlement by offering these services to you.
Although signing an agreement isn’t mandatory for homebuyers, REALTORS® must have this in place to comply with the new rules. In California, anticipated legislation will make this mandatory for all licensed agents serving residential buyers beginning January 1st, 2025.
2. Clear and Transparent Compensation Agreements
One of the major benefits for homebuyers from the NAR settlement is increased transparency around how REALTORS® are compensated. REALTORS® are now required to present a clear, written agreement that lays out:
The exact amount or rate of compensation: Whether this is a flat fee, an hourly rate, or a percentage of the purchase price, this must be explicitly stated in the agreement.
Compensation boundaries: REALTORS® cannot accept any additional compensation beyond what’s agreed upon in writing—even if the seller offers more.
Negotiable fees: All fees are negotiable. There is no law dictating a set fee structure, which means you have the power to negotiate how much you’ll pay your agent.
This level of transparency is designed to ensure that you, the homebuyer, are never left in the dark about what you’re paying for and how much your REALTOR® will earn from the transaction.
3. What the Buyer Representation Agreement Must Include
When reviewing your Buyer Representation Agreement, make sure it includes these four crucial elements:
A specific and clear disclosure of the compensation rate or amount.
A defined compensation structure: The agreement must state that compensation is not open-ended (e.g., it cannot be “whatever the seller offers”).
A clause prohibiting your REALTOR® from accepting additional compensation from other sources beyond what’s agreed to in the contract.
A clear statement that commissions and fees are fully negotiable, ensuring you understand that you have the right to discuss and adjust these terms.
This level of clarity protects you from any unexpected surprises and ensures that both you and your REALTOR® are on the same page.
4. Seller Concessions Are Still an Option
Despite the new rules, some things haven’t changed. One key example is that sellers can still offer concessions to cover some of your costs. If the seller is willing, they can agree to cover part or all of your agent’s fees as part of the deal.
However, under the new rules, the offer of compensation can no longer be publicly displayed on a Multiple Listing Service (MLS). This means it’s up to you and your REALTOR® to negotiate these terms privately and ensure they’re clearly outlined in your offer.
5. What Hasn’t Changed: REALTORS® Are Still Here to Serve You
While the NAR settlement introduces several changes, one thing remains the same: REALTORS® are still dedicated to serving your best interests. As members of the National Association of REALTORS®, they must adhere to a strict Code of Ethics, which requires them to act in your best interest, communicate openly about compensation, and provide you with professional guidance throughout the homebuying process.
However, not all REALTORS® are created equal. The stakes in a home purchase are too high to go it alone or to hire the wrong agent. You need a smart, savvy, hardworking, and experienced REALTOR® who has the right training from a reputable, local brokerage. The right agent will guide you through every step of the process, protect your interests, and negotiate the best possible terms on your behalf.
The Final Word
The NAR settlement brings much-needed clarity and transparency to the homebuying process. While you are not required to sign a contract with a REALTOR®, REALTORS® must have a signed Buyer Representation Agreement before they can provide services like home tours. This ensures that you, the homebuyer, understand exactly what services are being provided and how much you’ll be paying.
By asking the right questions, negotiating terms, and carefully reviewing the agreement, you can make sure that your homebuying process is smooth, transparent, and tailored to your needs. With these new rules in place, you have more control and visibility over how your real estate transaction unfolds.
