Real Estate Industry Undergoes Significant Changes: What It Means for Realtors, Buyers, and Sellers
As of August 17, 2024, the real estate industry has experienced significant changes due to new practices implemented by the National Association of Realtors® (NAR). These changes follow lawsuits alleging that NAR violated antitrust laws and artificially inflated commission prices.
The National Association of Realtors® reached a $418 million settlement in March, leading to significant changes that are overturning the industry’s traditional commission structure.
In the past, sellers typically covered the 5% to 6% commission, which was then divided between the buyer’s and seller’s agents.
While the NAR has argued commission rates were always negotiable, the lawsuits alleged the practice violated antitrust laws. The lawsuit, which went to trial in October 2023, resulted in a jury siding with the plaintiffs, leading to fines and the mandated changes to NAR’s practices.
Realtors® Face New Compliance and Educational Demands
For realtors, the most immediate impact comes in the form of new compliance requirements. All Multiple Listing Services (MLSs) affiliated with NAR were required to implement changes by the August 17 deadline to remain in compliance with NAR policies. This includes the elimination of offers of compensation on MLSs—a practice that had been a cornerstone of many real estate transactions.
Realtors will now need to adjust their practices and focus on educating clients about the new landscape. This includes guiding buyers through the process of entering written agreements before touring homes and ensuring that all compensation terms are clearly communicated and understood.
Homebuyers Encounter New Requirements
Homebuyers will also see significant changes in how they interact with real estate professionals. Under the new rules, buyers must now enter into a written agreement with their agent before they can tour homes. This agreement must include clear details about the agent’s compensation, which remains fully negotiable and must be explicitly outlined.
This shift is designed to increase transparency and ensure that buyers fully understand the financial aspects of their real estate transactions. However, it also places an additional responsibility on buyers to carefully review and negotiate these agreements before proceeding with their home search.
Additionally, while sellers can still offer compensation to buyer agents, this information will no longer be shared through MLS platforms. Buyers and their agents will need to negotiate compensation separately, adding a new layer of complexity to the process.
Sellers Retain Flexibility but Face New Disclosure Requirements
For home sellers, the changes primarily affect how they can offer compensation to buyer brokers. While sellers still have the option to provide compensation to attract buyers, these offers can no longer be listed on MLS platforms. Instead, sellers will need to consider alternative methods to promote their concessions.
Moreover, sellers must now provide written consent for any compensation agreements with buyer brokers, ensuring that all parties are fully informed and in agreement before any transactions take place.
Despite these changes, the overall flexibility for sellers remains intact. Sellers can still offer buyer concessions, such as covering closing costs, and they retain the ability to negotiate the terms of their real estate transactions to best suit their needs.
The real estate industry is bracing for these adjustments, which could prompt new business models and alter the landscape of agent compensation. While some predict that the changes will drive full-service Realtors out of the industry, others believe the adjustments will ultimately benefit consumers by fostering transparency and competition.
These new practices are designed to protect consumers and ensure a more equitable process for both buyers and sellers. As the real estate market adapts, the impact of these changes will become more evident in the months to come.
