Impact of Settlement for Web

Antitrust for Seller

In March of 2024 a settlement agreement was signed between the National Association of Realtors (NAR) and a group with regards to an ongoing dispute. Action is required which affects buyers and sellers as of August of 2024. At this point, there are several changes that need to be made by the REALTOR community including some that affect you as a seller.

Addressing the confusion

Of all the challenges that exist with regard to the settlement agreement, the largest is a misunderstanding of the agreement as a whole. In fact, the media has woefully misreported the information. There has been representation that simply doesn’t consider all of the facts. The most important thing for you to understand is how it affects you as an individual.

What does this mean to me as a seller?

The situation is not dramatically different today than it was before. There will be new disclosures and agreements that previously existed but were optional between a buyer and their agent. Those agreements have become mandatory and will be enforced across the United States. These agreements are important and, while cumbersome, increase the transparency in the overall transaction., At the end of the day, they are a good thing for buyers and have very little impact on sellers.

Sellers have always had the ability to negotiate the amount of commission or the fee that you will pay to your listing brokerage. In addition, you have always had the ability to negotiate or set the amount of commission or the fee that the buyer’s agent will earn. That has not changed. What has changed is how that information is conveyed. Realtors have long depended on an MLS (Multiple Listing Service) to share that amount in order to streamline the transaction. Your listing Realtor will now be required to convey that information to each individual prospect in some other fashion. That’s not only true of buyers who make an offer or even see your home, but it is true of everyone who wants to consider their ability to purchase it. The information will not be publicly available and can be skewed. That simply puts more work into the hands of your listing agent.

What are my options?

As a seller, you have always had a series of options when it comes to commission. It’s important to understand that commission is paid to both the listing brokerages and to the buyer’s brokerage. Both parties have work to do. These amounts can be equal or they can be different but they have been and continue to be negotiated. Your agreement with your Realtor should be determined based on the individual and their company. You may consider your relationship with the person or with the company, past experience, their history and track record in the community, or other factors.

In addition to the amount paid to the listing brokerage, you have the ability to make an offer to the buyer’s brokerage. That amount is used to make the property more enticing to potential buyers and to open up the field of who can purchase the property.

For example, you are perfectly within your rights to offer nothing at all. On the other hand, you may decide to offer a strong commission in order to ensure that the buyers are not coming out of pocket for any additional cost.

What are the pros and cons to each solution?

If you offer a larger co-operating commission, it typically opens the “buyer pool” up to the largest possible group. For example, some buyers don’t have the ability, either legally or financially, to pay a buyer’s brokerage. Veterans using their VA benefits for example, cannot pay their agents and would have to exclude from consideration any listing that is not offering sufficient cooperating compensation. Similarly, first time home buyers who likely have enough savings for the down payment but may not be able to pay the additional amount and exclude them from a look. The disadvantage of offering a higher co-broke is that you may leave money on the table when considering an offer from an uninformed buyer who wouldn’t already ask for it to be included.

If you offer no compensation or a lower amount you may be able to exploit the situation with an uninformed buyer or a buyer who does not have representation. If they don’t realize the competition (or comparables in real estate jargon) have offered compensation, they may pay you in line with what the home would be worth with compensation built into the price.

Lastly, lower offers of compensation could attract more cash offers. When a property is listed there are often a certain group of buyers who will make quick cash offers with the intent of making improvements to the home and reselling it in short order for a profit. These buyers don’t often ask for compensation but include the difference in the lower offer price. In these scenarios, the seller doesn’t pay the fee at closing but, instead, pays in the offering price or the amount that they net on the sale.

Additional resources

There are plenty of resources available to find out more information. The National Association of Realtors has created a frequently asked question site to address most of them at facts.realtor. However, one of the best resources for you is your local Realtor who can address your questions and help you to determine how to proceed.