{"id":169663,"date":"2024-03-22T15:16:12","date_gmt":"2024-03-22T21:16:12","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=169663"},"modified":"2024-03-27T11:00:38","modified_gmt":"2024-03-27T17:00:38","slug":"what-the-nar-settlement-means-for-real-estate-investors","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/what-the-nar-settlement-means-for-real-estate-investors","title":{"rendered":"What the NAR Settlement Means for Real Estate Investors, According to Sources in the Industry"},"content":{"rendered":"\n

The National Association of Realtors (NAR) <\/span>agreed to a settlement<\/span><\/a> last week that will eliminate its rules on sales commissions. The deal, if approved by the federal court, is likely to shake up the real estate market and could potentially decrease housing prices across the country.<\/span><\/p>\n\n\n\n

Anthony Panebianco, a real estate attorney at Davis Malm, told BiggerPockets that the settlement is unsurprising, as a judgment would have likely led to the NAR’s bankruptcy.<\/span><\/p>\n\n\n\n

\u201cThe elimination of the mandatory cooperative compensation model was predicted before this settlement and now is guaranteed,\u201d he added.<\/span><\/p>\n\n\n\n

The NAR agreed to pay $418 million in damages and implement new rules by July that will change <\/span>how real estate brokers are compensated<\/span><\/a>. One rule would prohibit brokers from offering compensation on the <\/span>multiple listing service<\/span><\/a> (MLS), which critics say led to brokers pushing more expensive properties on buyers. Another rule would require buyer-brokers to enter into a written agreement with their buyers.<\/span><\/p>\n\n\n\n

\u201cIt has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,\u201d Nykia Wright, interim CEO of NAR, said in a <\/span>statement<\/span><\/a>. <\/span><\/p>\n\n\n\n

An End to the Traditional Commission Model? <\/span><\/h2>\n\n\n\n

The change to NAR rules essentially means the end of the standard 6% commission rate for brokers, and commissions are expected to be cut <\/span>by as much as half<\/span><\/a>.<\/span><\/p>\n\n\n\n

In turn, this could open opportunities for alternative selling models. These could include an increase in models that already exist, such as flat fees and discount brokerages, or even completely new models, Nick Narodny, founder and CEO at real estate startup Aalto, told BiggerPockets.<\/span> <\/span><\/p>\n\n\n\n

\u201cThey could be everything from subscription to flat just giving consumers more of a power of choice and the representation of buying,\u201d he said.<\/span><\/p>\n\n\n\n

With all the <\/span>current issues facing the NAR<\/span><\/a>, Panebianco said there would be traction if other groups were to try to step in and offer other models.<\/span> <\/span><\/p>\n\n\n\n

\u201cNow would be a good time if an entity was so inclined to come up and say we’re different than the NAR, and we will lobby on your behalf and be able to better predict what the future holds,\u201d he explained.<\/span><\/p>\n\n\n\n

Some brokers feel the news could improve the industry, as less experienced brokers are likely to leave. And the decoupling will also mean more transparency in an often complicated commission system.<\/span><\/p>\n\n\n\n

\u201cReal estate investors will benefit from only the savviest agents remaining in the industry,\u201d Michael Martirena, founder of the Ivan and Mike Team with Compass in Miami, told BiggerPockets.<\/span> <\/span><\/p>\n\n\n\n

Martirena said this will lead to a \u201ccollective leveling-up in terms of education, information, and client service,\u201d as agents can help clients with no hidden costs. \u201cThe transparency will benefit investors as much as consumers,\u201d he added. <\/span><\/p>\n\n\n\n

What This All Means for Real Estate Investors <\/span><\/h2>\n\n\n\n

The NAR\u2019s settlement isn\u2019t the end of the compensation debate. While the NAR rules apply to just agency members, not all databases require membership. Other real estate companies, such as RE\/MAX and Redfin, have gotten rid of requirements for agents to be part of the NAR in response to numerous lawsuits.<\/span><\/p>\n\n\n\n

The Department of Justice (DOJ) is still continuing its investigation into the NAR, including its MLS, which it has questioned for stifling competition and potentially going against antitrust laws. In a statement of interest related to the commission lawsuit, the <\/span>DOJ advocated<\/span><\/a> for an end to cooperative compensation.<\/span><\/p>\n\n\n\n

Narodny said he doesn\u2019t see the DOJ allowing the settlement to stand. \u201cThey want commissions to be decoupled, not have the rules be changed,\u201d he said. \u201cI think we\u2019ll see true change by this summer, and I think commission will be decoupled. This means buyers have to pay their own way, and potentially investors have to pay fees out-of-pocket.\u201d<\/span><\/p>\n\n\n\n

It\u2019s widely believed that the changes will also help bring down the costs of financing or even overall home prices, which could be welcome news, as the market has been beset by record-high prices over the last few years. Some buyers may even opt to forgo an agent completely.<\/span> <\/span><\/p>\n\n\n\n

Brokers are likely to get paid somehow, even if the price structure changes. While the elimination of buyer\u2019s broker fees should be seen in the purchase price, \u201cI\u2019m skeptical of that being a reality,\u201d said Panebianco. \u201cThe market sets the price, rather than the machinations of how the industry conducts a deal.\u201d<\/span><\/p>\n\n\n\n

Final Thoughts <\/span><\/h2>\n\n\n\n

Still, industry experts are hopeful that in the long run, the NAR settlement will ultimately be a win for the real estate market.<\/span><\/p>\n\n\n\n

\u201cWith the ability for buyers and investors to now favorably negotiate with their broker on commission fees as a result of the NAR settlement, we are likely to see an increase in the volume of deals, which has been generally on a decline for the past few years,\u201d said Panebianco.<\/span><\/p>\n\n\n\n \n

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The National Association of Realtors (NAR) agreed to a settlement last week that will eliminate its rules on sales commissions. The deal, if approved by the federal court, is likely to shake […]<\/p>\n","protected":false},"author":613681,"featured_media":169666,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8],"tags":[],"class_list":["post-169663","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/169663","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613681"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=169663"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/169663\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/169666"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=169663"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=169663"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=169663"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}