In March, the National Association of REALTORS® (NAR) came to a settlement agreement that would resolve litigation brought on behalf of home sellers related to broker commissions. The agreement, which is pending court approval, is expected to bring some changes to housing transactions.

What are the changes and when will they take effect?

Traditionally, sellers have paid a commission on the sale price of their home to their listing agent, who would make an offer of compensation to the buyer broker who brought the buyer who purchased the home. These offers of compensation have customarily been visible to real estate agents on a Multiple Listing Service (MLS), the databases where agents list homes for sale.

As part of the proposed settlement, NAR has agreed to implement a rule that would prohibit offers of compensation on an MLS. Offers of buyer agent compensation would continue to be an option for consumers to pursue off the MLS.

Additionally, buyers will need to enter into a written agreement with their agent that outlines exactly what services and value their agents provide, and for how much. These changes are expected to take effect in late July.

How will real estate agents be paid?

Real estate agents will continue to negotiate payment directly with their clients. Payment may not necessarily be percentage-based – buyer’s agents may be paid a flat fee or at an hourly rate. It is possible that some buyers may end up paying their agents out of pocket in addition to their downpayment and closing costs. As of now, buyers cannot include an agent fee in their mortgage or financing of their home. 

How will the settlement impact home prices?

Because both buyer’s and seller’s agent commission fees had traditionally been factored into the price of a home, many are anticipating a decrease in home prices as a result of these pending changes to the agent payment structure.

However, despite this speculation that home prices will drop if NAR’s settlement is approved, it is not guaranteed that the agreement will result in lower prices for those looking to enter the market. Several other contributing factors – such as low inventory, increasing demand and fluctuating mortgage rates – continue to create roadblocks for prospective buyers and fuel the nation’s housing affordability crisis.

The full impact of NAR’s settlement remains unclear when it comes to home prices and how agents will be paid. The Alliance will continue to provide the latest news and resources as the situation progresses.

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