Understanding the NAR Lawsuit Settlement Agreement

Making Sense of Proposed Changes from the NAR Settlement Agreement

You’ve probably heard of the National Association of Realtors (NAR) v. Sitzer-Burnett lawsuit. It’s been all over the news recently and it seems everyone has an opinion on it.1 Unfortunately, there has been a lot of misinformation on the subject even from what some might deem to be reliable sources. Even the President of the United States had misspoken when he stated that commissions would now be negotiable for the first time which is simply false.2 In actuality, commissions have always been negotiable.

While the court still needs to approve the settlement agreement, which is likely to happen in July of this year, it’s important to understand what the agreement details and how that differs from how things are done today. Here is a breakdown of the current versus proposed methods:

 

POSTING COMMISSIONS IN THE MLS

CURRENTLY, commission percentages are posted in the Multiple Listing Services (MLSs) and are available for all agents to see. It’s important to note that websites such as Zillow.com and Realtor.com pull their listing information directly from various MLSs to display the information on their websites. On Zillow, the buyer agency commission percentage is visible to the public.

POTENTIALLY, should the settlement agreement be approved, there will be no mention of commission in the MLSs. And as a result, there won't be any mention of commission percentages on third-party websites such as Zillow or Realtor.

 

WHO NEGOTIATES COMMISSIONS

CURRENTLY, the buyer's and seller's agent commissions are negotiated and offered together as part of the listing agreement. Yes, presently, all commissions are negotiated. The seller often pays both the buyer’s agent and the seller’s agent commissions, but not always.

POTENTIALLY, the two commissions will be separated whereas the buyer’s agent commission will be negotiated between the buyer and buyer’s agent, and the seller’s agent commission will be negotiated by the seller and the seller’s agent. The buyer’s agent commission will no longer be dictated by the seller and seller’s agent. And the seller will still have the option to offer to contribute towards the buyer's agent commission. However, as in all offers, terms are negotiated upon receipt of an offer.

 

BUYER/BROKER AGREEMENTS

CURRENTLY, Buyer/Broker Agreements—legally binding contracts between a home buyer and a real estate agent that outlines the terms and conditions of their working partnership—are optional. When utilized, they include a mutually agreed upon commission percentage.

POTENTIALLY, Buyer/Broker Agreements would be mandatory.

 

WHAT THE POTENTIAL SETTLEMENT AGREEMENT ISN'T

It’s important to note, that the settlement agreement will not mean a cut or reduction in commissions. As previously stated, buyer’s agents and seller’s agent commissions would be negotiated and shown separately should the proposed NAR settlement agreement go into effect.

 

BOTTOM LINE

With the pending court approval of the settlement agreement, a homebuyer needs to understand the value your real estate agent brings to the table. When choosing a buyer’s agent, the buyer must do their homework and research potential agents. Interview them, ask lots of questions, and read online reviews. Ask friends and family for a referral then ask why they would recommend them. And ask candidates for a reference.

Opinions on the NAR lawsuit settlement agreement vary so it’s important to learn the facts. Don’t buy into just one opinion. Do your research to find the answers you seek. But understand, that the way real estate transactions occur is very likely to change—but for the better. Transparency is always a good thing and the new rules will allow for a clearer understanding of what to expect from all real estate agents.

For years, The Mountain Life Team has utilized Buyer/Broker Agreements to establish an even playing field and to set expectations for both parties. We will continue to stay ahead of the curve, operating with complete transparency and with a level of integrity our clients have come to expect from us.

 

SOURCES

1 The Truth About the NAR Settlement Agreement (2024) www.nar.realtor. This article can be found HERE (Accessed: 22 April 2024).
2 NAR Responds to President Joe Biden’s Remarks on Lowering Housing Costs for American Families (2024) www.nar.realtor. This article can be found HERE (Accessed: 22 April 2024).