As a Real Estate Agent, Here’s My Perspective on the NAR Settlement and Its Impending Changes

After months of legal battles between home sellers and the National Association of Realtors (NAR), they reached an agreement which will include a payment of $418 million and monumental changes to multiple listing services (MLS) and how real estate agents conduct their business. These changes will take effect starting July and have caused various reactions within the real estate industry; from panic to people claiming it’s no big deal and continuing business as usual.

National media have taken notice, with CNN noting “The 6% commission is gone” and The New York Times Daily podcast discussing “The Bombshell Case That Will Transform the Housing Market.” Much remains uncertain regarding how this case will impact buyers, sellers and agents; we will have to wait and see.

Here, we will examine what changes are anticipated and their potential effects on real estate agents.

What Would Actually Change for Agents? The changes that would occur under an approved settlement before federal court approval include:

Listing agents no longer advertise buyer agent commissions on the Multiple Listing Service (MLS). Consequently, buyers and buyer agents will have to sign written agreements (buyer agency agreements) in order to tour homes and submit offers.
As of now, most MLSs do not permit listing agents to advertise buyer agent commissions in their listings. This commission was either agreed upon between seller and listing agent or, depending on state laws, listed agents could determine how much of their agreed-upon commission they would offer as compensation to buyer agents.

Current buyer’s agents could easily view properties on the MLS and know exactly what commission was being offered as a compensation option; thus allowing them to avoid having discussions about compensation with their buyer clients.

Contrary to headlines, this doesn’t signal the end of sellers offering buyer agent commissions (more on this later). Instead, it means two things:

Listing agents often receive more inquiries regarding buyer’s agent commission. While this could appear like more work for agents, good agents welcome this opportunity to connect with interested buyers and agent contacts and make deals happen more quickly.
Buyer agent commissions should be discussed throughout the home sale process, starting before visiting a home and continuing once under contract as an ongoing negotiation point.
Written Agreements between Buyers and Buyer Agents. Another key change brought on by this settlement is its enforcement of written working agreements between buyers and buyer agents; this will directly impact states (most) that still practice some form of subagency.

Subagency occurs when a listing agent and seller have a written agreement to work together to sell a home, while when prospective buyers visit with agents to view, see and make offers, that agent enters into a subagent relationship/agreement with both of them for compensation, rather than having a separate binding written contract with just their buyer exclusively.

At times, a disclosure is provided to buyers that details the working relationships among seller, listing agent, subagent and buyer and states that subagent will work in their best interests while simultaneously being compensated by listing broker and seller for providing this service.

Since years past, this practice has been seen as an obvious conflict of interest and an inconvenient way to do business. After settlement approval, buyers and buyer’s agents must enter into an agreement outlining their working relationship – in this instance formally known as buyer agency in some states like Colorado where I hold my real estate license since its implementation back then.

Frankly, the National Association of Realtors should have implemented this rule long ago to eliminate antitrust and conflict of interest complaints against real estate transactions. Such a ruling will clarify working relationships in real estate transactions while increasing disclosure about brokers’ compensation packages.

The second rule doesn’t directly impact agents in states that already practice buyer agency; however, both rules will significantly change how we do business and conversations about compensation with buyers.

Traditionally, real estate brokers like myself could inform buyers they had no obligation to pay us directly; we were paid by listing brokers or sellers instead – since 99% of listings on MLS offer decent compensation packages. This image illustrates how we structured that payment contractually through Colorado Real Estate Commission’s Exclusive Right to Buy Contract by selecting Option 7.3.3.

Beginning July, without knowing what commission the seller or listing broker has offered through MLS and without being aware of potential negotiation points between buyer agent, seller/listing agent and buyer themselves, most brokers must discuss the possibility of buyers paying commission if seller/listing agent refuses; and how this might be structured; agents will need to outline how they’ll be compensated and why; this means more buyer agreements where 7.3.1 clause is checked off in future deals.