The Truth About NAR's Proposed Settlement

You've probably seen headlines, heard stories, and maybe even watched a few Tik Toks about the proposed NAR settlement, expected to take affect in July. Everyone seems to have their own take on what's happened, what's happening, what's about to happen. With so much speculation and misinformation, especially from the main stream media, it's important to get the facts from people who are actually informed, and know the truth.

Let's take a closer look at what this settlement really means for the people who are most affected: buyers and sellers.

We'll start with three common myths I've been seeing in the media:

1. The days of 6% real estate commissions are gone. The truth is, commissions have always been negotiable. Here in Charleston, there are a variety of commission structures, from flat fees to variable rates, and that diversity isn't going anywhere. Each brokerage has the freedom to set its own rates and fees, a practice that will remain, regardless of the proposed settlement.
2. Sellers will no longer be responsible for paying buyers agent commissions. In reality, sellers have always been able to set their offer of compensation to buyers agents, and that won't change. Listing agents will likely continue to encourage sellers to offer buyers agent compensation as part of their marketing strategy. Choosing not to compensate a buyers agent will limit your buyer pool at best, and at worst, eliminate it altogether.
   
3. Commissions will become negotiable for the first time. Negotiating commissions has been standard practice in our industry for years. Buyers and sellers have always had the opportunity to discuss and agree upon commission terms that work for everyone involved, and that won't be different moving forward.

Now, let's look at some truths about the proposed settlement, and their potential affects:

• The settlement prohibits listing agents from offering compensation to buyer agents through the MLS. This limitation will add uncertainty to the home buying process, putting buyers who need sellers to compensate their agent at a disadvantage, and creating a barrier to home ownership altogether for others.
  
• The lawsuit seeks to separate the listing agent's compensation from that of the buyer's agent, aiming to shift more of the cost of representation onto the buyer. In a market where buyers already face numerous financial challenges, such as high home prices and closing costs, this change could sideline some buyers altogether.
• Groups who are already disadvantaged in the real estate market, such as veterans and first-time homebuyers, will be even more disadvantaged by the proposed changes. Veterans using their VA loan benefits are currently prohibited from paying for buyer representation, while first-time homebuyers will no doubt find it challenging to absorb additional costs beyond their down payment, closing costs, and inspection fees. Will the VA change its policies so that veterans can pay their buyer's agent's fee? If so, how long will it take for the changes to be implemented? The average age of a first-time home buyer is now 35. Will this settlement increase that age, or worse, make home ownership out of reach for the average American because of the additional cost of representation?
  
• The majority of buyers and their agents are likely to continue seeking buyer agent compensation from sellers. This aspect of the transaction, which was previously arranged and agreed to well in advance of any proposed offer to purchase, will now play a more prominent role in every buyer's home search.
  

Buyers agents are essential to the home buying process. In 2023, 89% of buyers used one. Should buyers agents work for free? Of course not. But while it's reasonable to expect compensation for their time and expertise, no buyer's agent wants to stand in the way of their client's homeownership dreams. Which brings us to the dilemma brought on by the settlement, and a potential unintended consequence: Will the cost of representation cause buyers to opt out of representation? What lawsuits will we see if that happens?

As we await the final approval of the settlement, we know one thing for sure: change is on the horizon. However, as dedicated advocates for homeownership, Charleston's real estate professionals are committed to finding solutions that support both buyers and sellers in achieving their real estate goals.

By staying informed and working together, we can navigate these changes and ensure that homeownership remains accessible to all who seek it. Do you have questions about how the settlement could affect you as a buyer or seller? Reach out to me using the form below, or call me at 843-870-0890.