NAR Settlement Explained: Is 6% Really Gone?
NAR has reached a settlement, we are still waiting for court approval, but hear me out -- this is actually GREAT news.
Reactions are coming fast and furious, yet MOST of the reactions I've seen from non-industry organizations are just plain wrong.
I've read the settlement agreement and both listened and read many attorneys' takes on it. I'm going to explain to you my first take and break down how this impacts your day-to-day work as a realtor.
This is a huge victory for NAR. It's also a huge LOSS for anyone who thought this would actually change things. There will of course be changes - but fundamentally very little will change.
Faulty Perspectives
The NY times made some pretty strong statements about what they think will happen. So did CNN. Both are stating that 6% commissions are gone. They also say that this will end seller paid commissions to buyer brokers. This will do no such thing.
If you read the actual agreement and you understand the nuances, you'll see that fundamentally nothing is going to change.
The Change: Offer of Compensation
At first glance, it appears that the offer of compensation is no more. This couldn't be further from the truth.
The agreement simply forces NAR to remove the mandatory offer of compensation. The wording states that "such offers, if made" must not be unconditional. The important part is the two words "if made." That means offers can be made. We can continue to indeed make offers of compensations - just not on the MLS.
Now that we know the offers of compensation by sellers isn't eliminated, let's dig deeper. The agreement goes on to say that realtors can display offers of compensation only on listings from their own brokerage. It says that when Realtors are working with sellers, Realtors must "conspicuously disclose to sellers and obtain seller approval for any payment to another broker and such disclosure must be in writing". This is actually granting us permission to make offers of compensation -- it's basically saying an agent can use a listing agreement that states the agent is going to offer 3% of the sale price to a buyer's broker. YUP - compensation is not only allowed, it has received the official blessing of the federal courts - it just has to be done off-MLS.
Does that eliminate compensation? I think not.
So how is this going to work? The buyer's agent can't find out about an offer of compensation from the MLS but they can find out on the listing broker's website. The buyer's agent can also call the listing agent: “hey on 123 main street what are you guys offering?" or they can send a text. Will lazy and incompetent realtors not be able to do this? Maybe. Will the good ones remain? Absolutely. Will this create more work for the agents beforehand? Yes but so what? Understand that listing agents have a duty to help their sellers sell. That means, they need to continue to advise sellers to offer compensation to buyer's brokers.
The best part about the settlement in my opinion is the fact that every buyer must execute a Buyer Agency Agreement. These are going to bind the buyer pretty tightly to paying one way or another. What I also love about this settlement is that if it's approved every defendant in every copycat lawsuit is covered. Let's hope the DOJ has signed off on this settlement agreement too, which I assume is the case and which hopefully gets them off our back too.
As you reflect on the implications of the settlement on your own career, it's crucial to consider if your current brokerage is equipped to navigate these changes effectively. Are you confident that your brokerage has the knowledge, experience, and readiness to guide you through?
At Premier Listings, we pride ourselves on being prepared for industry shifts, with a fierce broker who is not only knowledgeable and experienced but also available to support and guide our team members.
If you're looking for a brokerage that is proactive, forward-thinking, and committed to your success, we invite you to fill out an application at joinpremierlistings.com and join a team that is prepared and confident in facing the challenges and opportunities ahead.