NAR Rule Changes in Full Effect

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NAR Rule Changes in Full Effect

Noah BaconPro Member
Property Manager · Lansdale, PA · Member since 2021 · 844 posts · 1k+ votes

Now that August 17th has passed, and the new NAR Settlement is in effect, big changes for consumers on both sides of real estate transactions are being felt across the nation. If you haven't bought or sold any real estate recently, the new rules in play may leave you wondering how this may impact your financial responsibility in the transaction. 

The two biggest changes that went into effect over the weekend are:

1. Buyers must now enter into a contract with an agent before that agent can show them any properties

This change may or may not impact you at all, as roughly 20 states already had in place a requirement to have a signed buyer representation agreement with an agent before showing any homes. Even in the 30ish states that did not require an agreement, it is still common practice for many agents to have a buyers agreement in place before showing homes. Not a major shift, but still worth highlighting. The bigger change is around commission.

2. Listings with advertised offers of compensation are no longer allowed in an MLS

Prior to this weekend, NAR members who listed properties included offers of shared commissions within their local MLS. Historically, the exact amount of shared commission varied, but this led to most sellers paying about 6% of the home's sales price, with 3% going to their agent and 3% to the buyer's agent. Boiling it down even further, having the seller pay both agents commissions was common practice until this weekend.

Now, sellers and their listing agents can still offer to pay a buyer’s agent's fee, BUT that must happen via outside negotiations. This means that in some transactions, sellers pay nothing to the buyer’s agent fee at all, putting the financial burden fully on the buyer instead. Buyers could then negotiate and pay the buyer agent’s fee out of pocket or go without an agent, managing their transaction on their own. So what can buyers, sellers, and agents expect with the changes? 

Buyers

Focusing on the changes around showing properties, t is more crucial than ever to vet your list of agents up front before even considering touring a home now that you are required in every state to sign a buyer representation agreement. Developing a relationship and understanding the skillset your agent will bring to the table is vital upfront and puts even more responsibility on the buyer to have selected an agent that will get them to the finish line. 

With the new commission laws in place, some buyers going directly to the listing agent in lieu of having their own buyers agent because they’ve heard that they will need to pay their agent directly out of pocket and they just don’t have the extra funds, with high interest rates and home prices in todays market. Buyers agents may start to get more creative on the payment of their services by offering a la carte pricing, flat fees, and hourly services to better fit their buyers budgets. 

Sellers

With the changes, sellers will technically now have the choice whether they want to offer any compensation to the buyer's agent...or none at all. This does not mean that sellers have just magically been gifted all of the power over negotiating the buyers agent commission, and will net more after the sale of their home. Seller should not be surprised if buyers will now make lower offers than what is listed on the MLS, factoring in the cost of paying for their buyer agent's commission. Seller should also expect a smaller pool of buyers to their listing if they are unwilling to pay a portion of the buyer's agent fee. If you are a seller willing to pay portion or all of a buyer's commission, make sure your listing agent knows that and is aware of how much. Your listing agent can let other agents know off the MLS that you're open to negotiating and can increase the pool of buyers willing to negotiate.


This change has already caused a lot of buyer hesitancy, seller's with inflated expectations, and a whole lot of agents wondering how this will impact their transaction volume. 

Have you already seen big changes in your market over the weekend with the new NAR rules in effect?

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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    2y

    Fun time to be in. Just takes extra time to explain and onboard but I haven't had issues yet. I do think it will weed out agents that are part time and not in it for the long haul 

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  • Griffin Jacobs
    Realtor · Grand Junction · Member since 2024 · 1 post · 1 vote
    2y

    There is a lot of truth to this post, however there are quite a lot of misleading and inaccurate lines as well. I am a Licensed Real Estate Associate Broker in Colorado who has been reading everything I can get my hands on as well as running through scenarios with my employing broker. Keep in mind that the changes made to STATE approved contracts will vary. I can only speak to how things are working in Colorado.

    1. Buyers must now enter into a contract with an agent before that agent can show them any properties

    Instead what this should read is: "Prior to showing properties, Buyers must sign either a Brokerage Disclosure to Buyer (BD-24) OR an exclusive right-to-buy listing contract."

    The primary difference here is that the BD-24 is NOT a contract nor does it obligate the buyer to the agent showing them the property. The paragraph following uses the phrase "buyers agreement" several times which can cause a lot of confusion. In order to create "buyers agency" between a buyer and an agent there must be the state approved form Exclusive right-to-buy Listing Contract WITH BUYERS AGENCY checked on page 1 and signed by all parties. The Brokerage Disclosure to Buyer (BD-24) does not create a buyers agency agreement and explicitly says "Broker is not the agent of Buyer" in the last line of all 3 options on page 2 of the BD-24. Lastly the Brokerage Disclosure to Buyer (BD-24) says this in bold capital letters further showing that this form is not a contract.

    THIS BROKERAGE DISCLOSURE TO BUYER IS NOT A CONTRACT. IT IS BROKER’S DISCLOSURE OF BROKER’S WORKING RELATIONSHIP.

    2. Listings with advertised offers of compensation are no longer allowed in an MLS

    CORRECT! The MLS no longer shows Buyer agent compensation.

    "Boiling it down even further, having the seller pay both agents commissions was common practice until this weekend." This is still happening. Just because I can't see that amount advertised in the MLS does not mean the seller is not offering cooperative compensation. There is no such thing as common practice because all compensation is NEGOTIABLE. 

    Now, (same as it was before) sellers and their listing agents can still offer to pay a buyer’s agent's fee, BUT that must (can) happen via outside negotiations (brokerage firm compensation agreement). This means that in some transactions, sellers pay nothing to the buyer’s agent fee at all, putting the financial burden fully on the buyer instead (this is only true if Broker discloses to Buyer the amount Buyer must pay, in writing and prior to Buyer entering into a contract with the seller.)  Buyers could then negotiate and pay the buyer agent’s fee out of pocket or go without an agent, managing their transaction on their own. So what can buyers, sellers, and agents expect with the changes? (They should expect clear communication from their agent as usual)

    The issue with this paragraph is that this scenario will very rarely occur. The thing people aren't talking about is that it is up to the buyers sole discretion on what house they want to purchase, who they want to help them accomplish that purchase and if they are willing or able to compensate a buyers agent in the unlikely event the seller is not offering cooperative compensation to the buyers agent. As long as the agent is performing the uniform duties listed in an exclusive right-to-buy listing contract (5.1.6. Keeping Buyer fully informed regarding the transaction) then there shouldn't be any issues. 

    There are several options a GOOD agent should be aware of when submitting an offer in order to make sure they get paid for the work they are doing. The last place I want to get paid from is my buyer. The seller has built up equity and in my opinion should be factoring compensating both agents for getting their home sold. I'm certainly not saying a specific amount they should have to pay because as always COMPENSATION IS COMPLETELY NEGOTIABLE. If a seller does not want to pay a buyers agent that is perfectly fine. The seller should just be aware that a potential buyer may not be willing to submit an offer if they have to pay their buyers agent. This point is highlighted in the following "Sellers" paragraph

    Sellers

    With the changes, sellers will technically now have (always had) the choice whether they want to offer any compensation to the buyer's agent...or none at all. This does not mean that sellers have just magically been gifted all of the power over negotiating the buyers agent commission, and will net more after the sale of their home. Seller should not be surprised if buyers will now make lower offers than what is listed on the MLS, factoring in the cost of paying for their buyer agent's commission. Seller should also expect a smaller pool of buyers to their listing if they are unwilling to pay a portion of the buyer's agent fee. If you are a seller willing to pay portion or all of a buyer's commission, make sure your listing agent knows that and is aware of how much (This is filled out in the exclusive right-to-SELL listing contract under section 7.1.1.1. If buyer’s brokerage firm: (i) procures a buyer; and (ii) the transaction results in a closing of the Sale of the Property to such buyer, Seller’s Brokerage Firm may enter into a compensation agreement with buyer’s brokerage firm to contribute from the Sale Compensation an amount of ___% of the gross purchase price or $_____, in U.S. dollars to buyer’s brokerage firm.) Your listing agent can (must) let other agents know off the MLS that you're open to negotiating (if the seller is offering compensation and if so, how much) and can increase the pool of buyers willing to negotiate. ( 5.1.1. Performing the terms of any written or oral agreement with Seller; so yes, the listing agent has a uniform duty to the seller informing buyers agents if the seller is offering cooperative compensation to a buyers agent)

    Like I said at the beginning, I am a licensed real estate associate broker in the state of Colorado. This information pertains to Colorado and I cannot speak to how thing are functioning in states I am not licensed in. The information provided is copy and pasted directly from state approved forms and has not been altered in any way.

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