{"id":177148,"date":"2024-08-30T12:56:42","date_gmt":"2024-08-30T18:56:42","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=177148"},"modified":"2024-08-30T12:57:32","modified_gmt":"2024-08-30T18:57:32","slug":"how-the-new-nar-rules-have-impacted-my-business","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/how-the-new-nar-rules-have-impacted-my-business","title":{"rendered":"I’m a Buyer’s Agent. Here’s How the New NAR Rules Have Impacted My Business"},"content":{"rendered":"\n

Sometimes, I have to laugh at how small our worlds can be. For agents and investors, there has been <\/span>lots <\/span><\/em>of talk about the new <\/span>NAR rules<\/span><\/a> regarding <\/span>commissions for agents<\/span>. If you aren\u2019t an agent, you probably aren\u2019t privy to <\/span>some of the chatter<\/span><\/a> between licensees, and that has been more than comical. I\u2019ve heard everything from unbelievable hubris to complete ignorance about how the changes will or will not affect people\u2019s livelihoods. <\/span><\/p>\n\n\n\n

The funny thing is, most of the public hasn\u2019t heard anything about these changes. <\/span>They don\u2019t know how commissions <\/span>are <\/span>currently<\/span> paid<\/span>, and they aren’t thinking about it now<\/span>, either<\/span>.<\/span> They <\/span>just<\/span> want to buy <\/span>and\/or<\/span> sell their home and know they need help <\/span>to do it<\/span>.<\/span><\/p>\n\n\n\n

I\u2019ve spoken to dozens of new clients about this over the last few weeks, and most of them shrug it off and tell me that they haven\u2019t heard about any changes and will <\/span>just<\/span> pay whatever fees we agree to, <\/span>exactly<\/span> as they had expected to in the first place.<\/span> <\/span><\/p>\n\n\n\n

What\u2019s Going On?<\/span><\/h2>\n\n\n\n

As for those of us in the real estate world, ostensibly, you\u2019ve at least heard rumblings about changes regarding compensation for agents<\/span>, but nearly<\/span> every news article, blog, forum, and social media post I\u2019ve read has conveyed a solid lack of comprehension regarding what is <\/span>actually<\/span> changing. If you aren\u2019t sure what the deal is or what has or has not changed, I\u2019ll explain. <\/span><\/p>\n\n\n\n

Regarding commissions, how much they are, and who pays them<\/span>, <\/span>literally,<\/span> nothing<\/span> is <\/span>changing<\/span><\/strong>.<\/span> I know\u2014you were going to sell your property and are <\/span>all excited because you don\u2019t<\/span> have to pay a buyer\u2019s agent <\/span>any longer<\/span>.<\/span> Guess what? You <\/span>never <\/span><\/em>had to pay a buyer\u2019s agent. <\/span><\/p>\n\n\n\n

As a buyer, you might have been having a mild panic attack because you heard <\/span>that you have to<\/span> pay your agent cash out of pocket, but that\u2019s also not necessarily true. At least, it\u2019s no more true today than <\/span>it was<\/span> five years ago. <\/span><\/p>\n\n\n\n

The only tangible thing that is changing is how commission payments <\/span>are <\/span>disclosed<\/span> <\/em>to consumers. That\u2019s it. <\/span><\/p>\n\n\n\n

Lazy buyer\u2019s agents who brought no value to their clients used to be able to sucker people into working with them by telling their buyers that they worked for \u201cfree.\u201d <\/span>This<\/span> was <\/span>obviously<\/span> a lie since their goal was to get paid, and rightly so, but that <\/span>was dishonest<\/span>. <\/span><\/p>\n\n\n\n

There\u2019s always been a misconception regarding how real estate commissions work. The script has always been that the seller pays <\/span>both<\/span> their agents\u2019 commissions. That\u2019s just a dishonest way that buyer\u2019s agents have tried to sell their \u201cservices\u201d for years. When a property closes, who brings the down payment and loan to the deal? <\/span>Certainly<\/span> not the seller. <\/span><\/p>\n\n\n\n

So, who is <\/span>really<\/span> paying those commissions? <\/span>That\u2019s what<\/span> these changes are all <\/span>about:<\/span> clarity regarding where those payments come from and who is paying them. <\/span><\/p>\n\n\n\n

What Will Change for Buyers and Sellers?<\/span><\/h2>\n\n\n\n

In reality, you should <\/span>be seeing<\/span> a couple of changes in how deals play out for <\/span>both<\/span> buyers and sellers.<\/span> <\/span><\/p>\n\n\n\n

For sellers<\/span><\/h3>\n\n\n\n

For sellers, your agent never should have told you that you are required to pay a buyer\u2019s agent commission\u2014that\u2019s never been the case. The way it should <\/span>be presented<\/span> is that you can:<\/span><\/p>\n\n\n\n

    \n
  • Offer to pay a set compensation for a buyer\u2019s agent if you choose,\u00a0<\/span><\/li>\n\n\n\n
  • Ask buyer\u2019s agents to make their compensation part of their client\u2019s offer,<\/span><\/li>\n\n\n\n
  • Or you can <\/span>just<\/span> offer no compensation of any kind.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n\n\n\n

    This<\/span> is the same as <\/span>it was<\/span> before, but consumers weren\u2019t always provided with all those options, even though they always existed.<\/span><\/p>\n\n\n\n

    Until a few weeks ago, agents could see what kind of compensation sellers <\/span>were offering<\/span>. Even though it\u2019s an ethical violation, it is well known that some buyer\u2019s agents would steer buyers to listings that offered higher compensation and not show them properties that offered lower compensation. <\/span><\/p>\n\n\n\n

    Now, all MLSes nationwide no longer publish compensation information on their listings. <\/span>The buyer\u2019s agents now <\/span>simply<\/span> need to call the listing agent and ask them what type of compensation the seller <\/span>is offering<\/span>, if any.<\/span> <\/span><\/p>\n\n\n\n

    For <\/span>buyers<\/span><\/h3>\n\n\n\n

    For buyers, <\/span>a couple of<\/span> changes regarding your experience are on the way. Buyer\u2019s agents <\/span>are required to<\/span> disclose to you <\/span>how <\/span><\/em>they will <\/span>be paid<\/span> before they show you any properties, and <\/span>they<\/span> are required to have you sign a form attesting that you\u2019ve had that conversation with them and understand how they\u2019ll <\/span>be paid<\/span>. Exactly how they can or will <\/span>be paid<\/span> is not changing; it\u2019s <\/span>simply<\/span> that they have to disclose that information up front, and they can\u2019t hide behind the lie that the seller pays all the commissions <\/span>and<\/span> they work for \u201cfree.\u201d<\/span><\/p>\n\n\n\n

    Don\u2019t start stressing out about having to save up another 3% to pay your agent when <\/span>you are<\/span> buying a property. Nothing about the way you pay your agent is <\/span>actually<\/span> changing. Sure, you can pay them with cash out of your pocket if you like, but that was an option before. <\/span><\/p>\n\n\n\n

    You might be offering on a property where the seller has included compensation for your agent in their pricing, just like before. You can also make an offer that <\/span>includes<\/span> commission<\/span> for your agent as part of the deal, just like before. <\/span><\/p>\n\n\n\n

    I could go into all kinds of boring details about how retail prices of real estate already include value that compensates for commissions, but that\u2019s boring and irrelevant. <\/span>Just know that you don\u2019t necessarily have to come up with more cash\u2014<\/span>just<\/span> negotiate with your agent about how they will be compensated and move forward just as you would have <\/span>before<\/span>.<\/span> <\/span><\/p>\n\n\n\n

    For clarity: Your agent\u2019s commissions have always been 100% negotiable. <\/span>There\u2019s no \u201cstandard\u201d commission structure and <\/span>never has<\/span> been.<\/span> <\/span><\/p>\n\n\n\n

    You can pay your agent $0, an hourly rate, for every door they open, for every open house, or you can pay them a percentage of the sale price. <\/span>Heck, you can <\/span>just<\/span> agree to a flat fee of any kind.<\/span> It\u2019s always been that way\u2014no changes there. <\/span><\/p>\n\n\n\n

    How Am I Handling All This?<\/span><\/h2>\n\n\n\n

    To be completely honest,<\/span> I had no idea that this was an issue in so many states.<\/span> I work and live in Idaho, and we\u2019ve <\/span>actually<\/span> had these types of<\/span> disclosures built into our buyer\u2019s representation agreements for decades <\/span>now<\/span>.<\/span> As this news story unfolded, it <\/span>was a real shock to<\/span> me that other states didn\u2019t all require buyer\u2019s representation agreements or disclosures regarding how agents <\/span>were compensated<\/span>.<\/span> That would make it pretty easy for lazy agents to hide behind <\/span>that idea<\/span> that their client doesn\u2019t have to pay them. <\/span><\/p>\n\n\n\n

    How does that change how my team will operate day to day? Honestly, not much. <\/span><\/p>\n\n\n\n

    As mentioned, when we work with buyers in Idaho, we\u2019ve always had to disclose how <\/span>our commissions were paid<\/span>, and the buyer\u2019s rep contract that we use has always stated that if the seller didn\u2019t pay us, our client would. Guess how many people have complained about that over the years and hundreds of transactions we\u2019ve done? Zero. We work hard to bring real value to our clients, and your agent should <\/span>too<\/span>\u2014and they should be paid fairly for that expertise. <\/span><\/p>\n\n\n\n

    The only functional change we are making is that initial disclosure regarding compensation before we show a property. <\/span>It\u2019s now required<\/span> for every Realtor in the U.S., and your buyer\u2019s agent should <\/span>be doing<\/span> that <\/span>too<\/span>. <\/span>In Idaho, we\u2019ve always <\/span>been required<\/span> to disclose a consumer\u2019s rights to representation before we have any meaningful business dealings with them, so now, we <\/span>just<\/span> add to that conversation about the different ways we can <\/span>be compensated<\/span>.<\/span> No<\/span> big deal. <\/span><\/p>\n\n\n\n

    Final Thoughts<\/span><\/h2>\n\n\n\n

    So many agents are worried about how this will affect their business, and rightly so! If all you have done is buy Zillow leads and open doors for prospective buyers, you aren\u2019t adding any <\/span>real<\/span> value to the buyer experience. You <\/span>should <\/span><\/em>be worried because it will be <\/span>very difficult<\/span> to explain to your clients why they should pay you. <\/span><\/p>\n\n\n\n

    I\u2019m <\/span>actually<\/span> pretty excited about these changes. Don\u2019t get me wrong\u2014I don\u2019t love the extra paperwork, but I think this will clean up the industry a bit, and the agents who have been getting by on their good looks and shiny cars might be going away. <\/span><\/p>\n\n\n\n

    It will be more <\/span>important<\/span> than ever before<\/span> to show your clients that you offer <\/span>true<\/span> value,<\/span> because you\u2019ll have to justify to them why they should pay you before you even open a door. I firmly believe you\u2019ll see higher-quality service and more effort from agents <\/span>in the near future<\/span>. <\/span><\/p>\n\n\n\n

    That\u2019s a good thing for real estate, and it\u2019s a good thing for agents too. Just don\u2019t expect to see an immediate drop in prices or think you\u2019ll be able to get an agent to work for \u201cfree.\u201d However, I think you can certainly expect much higher-quality experiences and significantly better service from agents in the very near future. Stay tuned.<\/span><\/p>\n\n\n\n \n

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    <\/div>\n\n\n <\/div>\n <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"

    Now that the new NAR rules are in effect, Corby Goade, a buyer’s agent in Idaho, gives us a look at the real-world impacts.<\/p>\n","protected":false},"author":613697,"featured_media":177151,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4433],"tags":[],"class_list":["post-177148","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/177148","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\/613697"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=177148"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/177148\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/177151"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=177148"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=177148"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=177148"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}