Industry Update

The recent settlement by the National Association of Realtors (NAR) has led to widespread misinformation. Here. I help to clarify the key misconceptions and provide accurate insights into the implications of this settlement.

REDUCTION OF BROKER COMPENSATION

Myth: The settlement forces brokers to reduce their compensation.
Reality: Realtor fees remain negotiable and independent. The settlement does not set or limit what Realtors can charge for their services.

SELLERS PAYING BUYER AGENT COMPENSATION

Myth: For the first time, sellers can avoid paying compensation to the buyer’s agent.
Reality: There has never been an obligation for sellers to pay buyer agent fees. The settlement merely stops MLS systems from referencing buyer compensation and allowing listings to appear without showing buyer agent compensation.

PROHIBITION ON SELLER-PAID BUYER AGENT COMMISSIONS

Myth: Sellers are relieved of the financial burden of buyer agent fees.
Reality: While sellers can opt not to pay, buyers might still request seller contributions to cover the fees or other concessions in the offer.

RELIEF FROM FINANCIAL BURDEN

Myth: The total cost of transaction services will be reduced.
Reality: The settlement shifts the payment responsibility rather than reducing overall costs. Buyers will now have to pay for their representation unless negotiated otherwise.

REDUCTION IN TRANSACTION COSTS

Myth: The settlement forces brokers to reduce their compensation.
Reality: Realtor fees remain fully negotiable and independent. The
settlement does not set or limit what Realtors can charge for their services.

IMPACT ON REAL ESTATE PRICES
Myth: The settlement will lower real estate prices and make homeownership affordable.
Reality: Real estate prices are driven by supply and demand, not Realtor fees. Any minor reduction in commission would have a negligible effect on overall home affordability.

BENEFIT TO BUYERS

Myth: The settlement benefits buyers by enabling fee negotiation for representation.
Reality: Buyers often prefer seller-paid commissions, as many are challenged even with coming up with the down payment to purchase. Buyer broker fees are, of course, negotiable and they always have been.

In summary, the NAR settlement clarifies the flexibility and independence within the real estate industry regarding compensation and services. The perceived benefits to consumers are overstated, with the settlement mostly maintaining the status quo while addressing transparency in MLS listings.