Major Changes in Real Estate Transactions: What You Need to Know
The real estate industry is on the brink of significant changes that will impact how transactions are conducted. These changes, stemming from the recent National Association of Realtors (NAR) settlement, will introduce new rules and practices that both buyers and sellers need to be aware of. This blog post will break down the key changes in simple terms, ensuring you stay informed and prepared.
Overview of the NAR Settlement
The NAR entered into a settlement to address litigation related to broker commissions. The primary goals were to secure a release of liability for members and preserve consumer choices in real estate services and compensation. This settlement affects over one million NAR members, local REALTOR® associations, and MLSs (Multiple Listing Services).
Key Changes and Their Impact
Offers of Compensation
- Old Rule: Compensation offers were commonly listed on MLS platforms.
- New Rule: Starting August 17, 2024, offers of compensation will no longer be allowed on MLS platforms. This means compensation details will be negotiated directly between buyers, sellers, and their agents.
Written Agreements for Buyers
- New Requirement: Real estate agents working with buyers must enter into written agreements before touring homes. This ensures clarity on services provided and the compensation involved. This change also takes effect on August 17, 2024.
Steering and Fair Housing
- Reaffirmed Policy: NAR continues to prohibit steering buyers based on the amount of broker compensation. Agents must always prioritize their client's best interests over their own compensation.
Non-Filtering of Listings
- Updated Policy: MLSs cannot filter out listings based on compensation offered to buyer brokers. This ensures buyers have access to all available listings, regardless of broker compensation.
Practical Changes for Buyers and Sellers
For Buyers:
- Written Agreements: You will need to sign a written agreement with your agent before touring a home. This agreement will clearly outline the services provided and the compensation terms.
- Transparency: Agents must disclose any compensation they receive from sources other than the buyer.
For Sellers:
- Compensation Offers: While compensation offers cannot be listed on MLS platforms, you can still negotiate and offer compensation to buyer brokers off-MLS.
- Seller Concessions: You can offer concessions, such as covering buyer closing costs, on MLS platforms.
Impact on Financing and Mortgages
The settlement does not change how real estate commissions are treated in mortgage calculations by Fannie Mae, Freddie Mac, and the FHA. Commissions paid by the seller to the buyer broker are not considered interested party contributions (IPCs) and will not affect the buyer's loan amount.
Wrapping Up
These changes aim to increase transparency and fairness in real estate transactions, benefiting both buyers and sellers. It's crucial to stay informed and work closely with your real estate agent to navigate these new rules effectively. For more detailed information, visit the NAR's official website or give me a call!
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