The real estate industry is on the brink of a major transformation, thanks to the recent NAR settlement that is set to change how real estate transactions are conducted. Two new rules are set to go into effect on August 17th, 2024, and they have the potential to completely reshape the way real estate works.
The first rule prohibits offers of compensation on Multiple Listing Services (MLSs). This means that listing agents will no longer be able to specify the commission they are offering to the buyer’s agent on the MLS. The rationale behind this rule is that pre-determined commissions can lead to higher sales prices, as the cost is ultimately passed on to the buyer. By removing this information from the MLS, the hope is to increase transparency and allow buyers to negotiate directly with their agents.
While this rule may lead to lower fees for consumers, there are some unintended consequences that may arise. For example, sellers may still offer compensation to buyer’s agents through other channels, such as their own brokerage website or via phone calls. This could potentially lead to no change in the actual transactions, as buyers and sellers may still negotiate commissions outside of the MLS.
The second major change is that buyers must sign a written agreement before they can tour a property, and compensation will be discussed at that time. This rule aims to ensure that buyers are aware of the costs involved in the transaction from the outset.
One of the key questions that arises from these changes is how buyer agent compensation will be paid. Buyers will have several options, including relying on the seller to offer compensation, opting for dual agency with the listing agent, hiring a real estate lawyer, or paying the commission out of pocket. Some experts predict that buyers may increasingly be required to pay the buyer’s agent commission themselves, which could pose a challenge for those with limited funds.
One potential solution could be the use of a lender credit to pay for other costs, freeing up cash to compensate the buyer’s agent. However, it remains to be seen if such arrangements will be permitted in the future.
Overall, these changes have the potential to reduce real estate agent fees and increase transparency in the industry. It will be interesting to see how these rules evolve and how they will impact buyers, sellers, and agents in the long run. The real estate landscape is changing, and it’s important for all parties involved to stay informed and adapt to these new regulations.