Beginning in July of 2024, there will be significant changes to how the real estate industry operates on the buyer side of transactions. This shift is a direct result of the recent National Association of REALTORS (NAR) settlement with regards to the Sitzer-Burnett lawsuit. As part of this settlement, NAR has agreed to implement several modifications that are set to redefine industry practices moving forward.
Originally filed back in 2019, the Sitzer-Burnett lawsuit was a landmark case that challenged some long-standing norms within real estate transactions. The case alleged that the plaintiffs, real estate sellers, were harmed due to the offer of compensation between the selling and buying agents. Recently, this case was settled with NAR admitting no fault. It focused on the ways and processes that have become the norm when considering real estate compensation to a buyer’s agent. With its resolution, we can expect several changes in how buyers interact with their agents and navigate property purchases, along with direct compensation to the class plaintiffs in the case from NAR.
Changing Dynamics for Buyer's Agents Commissions
One major change coming up concerns commissions offered by sellers to buying agents; these will no longer be listed in MLS (Multiple Listing Service). Traditionally, listing agents would offer compensation to participating buyer's agents as part of facilitating transactions. This setup aimed at enabling first-time homebuyers, or those without substantial down payments, to afford an agent and negotiate on par with more financially robust buyers.
However, under new NAR agreements, following the real estate commission lawsuit outcome, while sellers can still offer compensation for competition purposes, it cannot be communicated via MLS anymore. This change aims to increase negotiation practices between all parties involved.
Mandatory Buyer Broker Agreements Before Home Showings
Another crucial aspect arising from these real estate agent changes is that a potential buyer must sign a Buyer Broker Agreement before being shown any homes henceforth. The agreement should clearly state what compensation will be paid out to the buyer's agent prior to showing any property.
This change is designed to ensure that buyers are fully aware of the financial implications before they start their home search journey. It also protects buyer's agents by ensuring they have a signed agreement in place, outlining their compensation for services rendered.
Seller Payment to Buyer's Agent: A, NOW, Formal Negotiation
While it remains possible for sellers to pay the buyer's agent, this will now be a formal part of negotiation processes. The buyer's agent can only accept up to an amount agreed upon in the prior Broker Buyer Agreement even if the seller offers more. This rule ensures that all parties involved understand and agree on how much commission will be paid out to the buyer’s agent.
NAR Settlement Details
In settling this lawsuit, NAR has not admitted any wrongdoing but has agreed to make significant policy changes alongside paying $418 million over four years as part of settlement costs. All REALTORS belonging to brokers with $2 billion or less in revenue are covered by this settlement.
These changes reflect a shift towards greater competition within real estate transactions while protecting both buyers' and agents' interests alike. As we move closer towards July 2024, these new regulations promise an evolved landscape where enhanced competition will lead to significant changes in the industry.