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NAR Settlement: What it Means to You!

NAR Recently announced a Settlement that affects consumers. Learn more.

On Friday, March 15th, the mainstream media broke a news story regarding a settlement in the wake of the landmark class action lawsuit “Sitzer-Burnett.” The Plaintiffs claimed that policies within the National Association of Realtors violate antitrust laws — specifically regarding real estate agent commission structures.

 

You can find a copy of the settlement here: Sitzer-Burnett, NAR Settlement 

 

This might sound like a game change for you as a home seller or buyer with headlines reading: 

 

"Real Estate commissions are being slashed."

"Selling your house will now be less expensive."

"No more paying 6% to real estate agents!"

 

However, you likely don't know what this all means or how it will work for you. Unfortunately we don't know the whole story either. As the news broke, real estate agents found out along with the general public. There was no discussion with agents prior to the release of the news we found out the same way you did. What we know is that this is a Proposed Settlement that still must make its way through the court system. While they indicate changes could happen in July, the process still takes time and the settlement can be modified through the court process. What we know now, may not be the final decision. When it does eventually pass on the National level, it will need to find its way through Texas as well. For the time being, we are taking note, reviewing, discussing and will ultimately take action after final rulings.

 

Here is what Matters to Buyers and Sellers

You might not want to read the whole 60 plus page report for the findings. So let's break it down into bite size chunks. 

 

First, NAR's proposed settlement indicates that there could be a New Rule prohibiting the listing of a buyer's agent commission field within the MLS. This would mean a seller who has agreed to offer compensation to a buyer's agent is not allowed to advertise this through their listing which their agent puts in the Multiple Listing Service (MLS). However, they can continue to offer the compensation, should they chose to do so, outside of the MLS through negotiations and other communications. 

 

Second, there could be a New Rule that requires all buyer's to sign an exclusive agency agreement (written contract) with their agent, prior to touring any homes. In this agreement it is likely to state how a buyer's agent will be paid and it could be the buyer's responsibility. Now there have been many discussions in the industry about how this will actually work, especially when a buyer is unable to financially pay the agent's commission. The discussion is ongoing and only when a final court approved settlement agreement becomes available can we really drill down on our options to one that works for all parties involved.

 

Now before going further, let's remember this is a proposed settlement; still, so working out a scenario of how to offer compensation when the MLS cannot may not be fruitful at this time.

 

What do you Really Need to know?

In Texas our Listing Agreement always indicated commissions were negotiable. It also explains the breakdown of the other agents fee as well. You as a Consumer Seller have the right to negotiate the terms of the agents commission as well as any buyer's offer. Note this situation, where commissions may not be paid by a seller, will likely cause a higher amount of unrepresented buyers appearing to purchase the seller's property. In turn, this can lead to further issues in getting deals closed as some buyers who wish to remain unrepresented may not know the path towards purchasing your home and may create more hurdles than a buyer with an agent, especially around disclosure. This is an area that could become litigious down the road as unrepresented buyers begin to sue for various things gone wrong in the transaction. Its something to think about when choosing to sell. 

 

 

If you are a buyer what you need to know is that decades ago buyer's didn't have access to agents and they often felt the seller's agent was their agent, yet they didn't feel the agent represented them well. Thus, laws were passed that created agency for buyer's and it became a practice of agent's to share the commission earned on the listing side with the buying side agent. This gave the buyer representation that they wished to have and a way to compensate them, especially when the buyer was unable to financially compensate them, such as a Veteran. 

 

Now if this is passed, you as a buyer consumer, will be able to choose your agent, however, you will be required to sign an agency agreement before touring any home. In addition, you yourself may have to pay the commission of your agent. This is something that should be discussed in a strategy session/interview of any agent you speak to; specifically how it will be handled. In addition, don't expect buyer's agents to work for less than they have been accustom to earning just because of the changes. You can always find one that will charge less, however, just like in any industry, going lower may not be the best option as you could still end up loosing more than if you had gone with a more mid level pricing. 

 

 

Be careful of thinking that now seller's don't have to pay their agent so they will be happy to take a lower offer since they don't need to pay the commission. It could backfire as seller's may truly want to sell where all the comparable data (or the neighbor) sold regardless of the commission situation. 

 

 

Finally. if you consider going it alone, be sure you understand what that means. Are you familiar with the pre-contract phase and the contract to close phase. Are you certain you have completed all the steps necessary prior to the deadlines in the contract. Do you understand what the contract indicates and how to perform. Don't mistakenly think you can rely on the title company to assist either. Their job is simply to facilitate the transaction not to be a trusted advisor for either party.

 

The Takeaway

If the settlement is accepted, Sellers will have the option to chose not to pay a buyer's agents commission or not offer compensation to a buyer's agent. They should weigh this decision prior to making it, to know how that might impact their sale. They may also want to understand what it looks like to work with an unrepresented buyer. On the other hand, Buyer's will be able to decide if they want representation or not, and then will be required to sign an agency document in order to tour any home. Finally, they will need to discuss compensation directly with their agent prior to any offers being made.

 

 

While the headlines sure do sell some news. They are simply headlines and don't lend much credibility to what is or might happen in the industry. We suggest you stay in touch with your friendly Realtor to stay informed, or check our site and social media for updates as this journey unfolds. 

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