Money and house concept, representing NAR settlement and FAQs asked by home buyers and sellers.

Home Buyers and Sellers: NAR Settlement FAQs, Part 2

If you’ve been following The Cyr Team Blog, you may have seen our most recent article (read here) answering some frequently asked questions about the recent National Association of Realtors® (NAR) settlement. The ways real estate commissions are split and paid for listing agents and buyer’s agents could be changing significantly. As a home buyer or seller, it’s important to know how this could affect your side of the transaction. In this article, we will continue to explore this settlement and more questions relating to this topic.

How Will the Changes Affect Open Houses?

Open houses provide an opportunity for home buyers to view a listing on the Multiple Listing Service (MLS) before signing an agency agreement with a buyer’s agent. Once discussions reach the point of making an offer, an agreement will be required the agent representing that buyer.

How Will the Home Buyer Pay Their Agent’s Fees?

If a home buyer is paying their real estate agent’s commission fees directly, the payment would be settled during the closing process along with the down payment and other closing costs. The fees cannot be rolled into a mortgage loan per Fannie Mae, Freddie Mac, VA and FHA regulations. There will still be numerous situations where the seller or the listing agent covers some or all of the buyer’s agent/broker fees:

  • The listing broker offers a cooperating fee
  • The buyer can ask the seller to pay their agent’s fee as part of the offer
  • Some combination of these approaches (which may include a direct buyer payment)

Can “Seller Assist” Be Used to Pay the Buyer’s Agent?

There may be some cases where the selling price may be elevated to essentially cover the buyer’s agent fee in the form of a credit back to the buyer. This may be a viable solution, but it can also impact home appraisals and/or credit limits in place on the buyer’s mortgage pre-approval. There are several MLS platforms that will start providing a field for seller concessions. How this may be used is still unclear as these concessions may also apply to repairs and or other items. The real-world application of this feature is still unclear.

Can Sellers Still Offer Buyer’s Agent/Broker Commissions?

Yes, the traditional way we’ve been doing things for many years can and will happen despite the NAR agreement. The listing agent/broker can still offer a portion of the overall commission to compensate the buyer’s agent/broker fees. However, this agreement needs to be more clearly explained upfront. In addition, this detail cannot be part of the MLS listing description. It is the responsibility of the listing broker to explain to a home seller how a home sale could be impacted when the home buyer must provide a down payment, cover closing costs and now potentially pay the buyer’s agent fee directly. Any commission split offers should be clearly explained in the listing agreement and communicated to buyer’s agents before any showings occur.

How Will the NAR Settlement Impact Home Prices?

Traditionally, agent commissions have never been a significant contributor to home prices and resale values. These are driven more by market conditions like inventory, interest rates and buyer demand. Even if commission costs are reduced by the listing agent, home prices likely won’t be affected and those savings probably won’t pass onto the buyer as some are predicting. What could affect the home’s price and the transaction itself is reduced buyer traffic. A listing agent/broker not offering some sort of compensation to the buyer’s agent/broker could turn some buyers and their agents away. Buyers not willing to pay their own agent commissions directly might ignore any listings where the seller isn’t covering some or all of these fees.

How Will Property Showings Be Affected?

House showings may require more upfront disclosures about buyer’s agent compensation. Listing broker cooperating fees will no longer be included on the MLS. This means the buyer’s agent must know what is being offered by the selling agent (if anything) prior to showing a property or preparing an offer for their client.

How Are These Commission Details Communicated to Clients?

One of the purposes of the settlement is to require clearer and more upfront explanations to both home sellers and buyers about the agency agreement. This will include agent/broker compensation for their side of the transaction, specific fees being paid and any cooperating fees being offered by the listing broker.

When Will These Changes Happen?

Per the original NAR settlement, most of the notable changes must be implemented by August 17, 2024 (pending final court approval). More details will come and it may take some time before we have a full grasp of the market trends and the most common transactional practices between buyers, sellers and agents on both sides.

If you have any further questions about the NAR settlement or any aspect of real estate, we’ll be happy to provide answers and insight. Contact The Cyr Team if you are thinking about buying or selling a home in the near future and want to be fully prepared for your move.

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