Buying a home is one of the most significant financial decisions ever. Navigating this complex process requires a trusted advisor who understands your needs and priorities. REALTORS®, who adhere to a strict code of ethics, have long been a key resource for homebuyers. However, recent changes resulting from a settlement with the National Association of REALTORS® (NAR) are set to alter some aspects of this relationship.
The NAR settlement introduces new rules designed to increase transparency and protect homebuyers throughout their journey. In this blog post, we’ll explore what these changes mean for you as a homebuyer, focusing on the new requirements for written agreements with buyer’s agents, how agent compensation is disclosed and negotiated, and what remains unchanged in your relationship with your REALTOR®.
What is the NAR Settlement?
On March 15, 2024, the National Association of REALTORS® reached a settlement with plaintiffs in a lawsuit related to broker commissions. This agreement aims to resolve ongoing litigation concerning how real estate agents are compensated and introduces new practices that will impact both homebuyers and sellers.
The changes resulting from this settlement will come into effect on August 17, 2024, and they focus on ensuring that homebuyers have a clear understanding of the services provided by their agents and how these services are compensated. Let’s dive into the key aspects of these changes and how they affect you as a homebuyer.
What the NAR Settlement Means for Homebuyers
1 | Written Agreements with Your Agent
One of the most significant changes brought about by the NAR settlement is the requirement for written agreements between homebuyers and their agents before touring a home. This written agreement must be in place whether you’re touring homes in person or via live virtual tours.
Why Is This Important? Having a written agreement ensures that you, as a homebuyer, fully understand the terms of your relationship with your agent. This includes the specific services your agent will provide, how they will advocate for you, and how they will be compensated for their work. The agreement must clearly outline the expectations on both sides, helping to avoid any misunderstandings later in the process.
Key Components of the Agreement:
Compensation Disclosure: The agreement must include a specific and conspicuous disclosure of the amount or rate of compensation your agent will receive or how this amount will be determined.
Objective Compensation: The compensation must be stated objectively (e.g., a flat fee, a percentage, or an hourly rate) and cannot be open-ended. For example, it cannot be simply stated as "whatever the seller is offering."
Prohibition on Excess Compensation: The agreement must include a term that prohibits your agent from receiving compensation for their services from any source that exceeds the amount agreed upon in the written agreement.
Negotiability: The agreement must include a conspicuous statement that broker fees and commissions are fully negotiable and not set by law.
What You Should Do: Before signing this agreement, take the time to review it carefully. Ensure that it accurately reflects the terms you’ve negotiated with your agent and that you understand exactly what services will be provided and for how much. If anything is unclear, ask questions and make sure you’re fully comfortable with the terms before proceeding.
2 | Changes to How Agent Compensation is Handled
The settlement also introduces new rules regarding how agent compensation is handled, particularly in relation to the Multiple Listing Service (MLS) platforms used by real estate professionals.
Understanding MLS and Agent Compensation: The MLS is a local marketplace where real estate professionals share information about properties for sale. Traditionally, the compensation offered to buyer’s agents by sellers has been displayed on the MLS, but under the new rules, this practice will no longer be permitted. While sellers can still offer compensation to your agent, these offers cannot be shared on the MLS platform.
What This Means for You: This change emphasizes the importance of having clear and transparent discussions with your agent about their compensation. Since the compensation offered by the seller won’t be visible on the MLS, it’s crucial that your written agreement with your agent specifies exactly how they will be paid and by whom.
Seller Concessions: It’s important to note that sellers can still offer concessions, such as covering your closing costs. These concessions can still be communicated through the MLS, allowing for some flexibility in negotiations.
Your Role as a Homebuyer: As a homebuyer, you have the power to negotiate the terms of your agent’s compensation. Make sure to discuss this aspect thoroughly with your agent and understand the full range of options available to you. If you’re unsure about anything, don’t hesitate to seek clarification.
What Remains Unchanged
While the NAR settlement introduces several important changes, some aspects of your relationship with your REALTOR® remain the same. Here’s what hasn’t changed:
| Ethical Obligations of REALTORS®
REALTORS® are still bound by the REALTOR® Code of Ethics, which requires them to act in your best interest throughout the homebuying process. This means they are ethically obligated to provide you with honest advice, advocate for your needs, and ensure that you are fully informed about every aspect of your transaction.
Why This Matters: The Code of Ethics is a cornerstone of the REALTOR® profession, ensuring that you receive the highest level of service and integrity. Even with the new rules in place, you can trust that your REALTOR® is committed to helping you achieve your homebuying goals.
2 | Flexibility and Choice
The NAR settlement reinforces that you, as a homebuyer, have choices when it comes to selecting and working with a real estate agent. You are free to negotiate the terms of your relationship, including the services provided and the compensation structure. This flexibility allows you to tailor your homebuying experience to your unique needs and preferences.
Making Informed Decisions: To make the most of this flexibility, take the time to explore your options. Interview multiple agents, ask questions about their services and compensation, and choose the one that best aligns with your needs. Remember, you are in control of the process, and your REALTOR® is there to support you every step of the way.
Navigating the Homebuying Process with the New Rules
With the new NAR settlement rules in place, it’s more important than ever to approach the homebuying process with knowledge and confidence. Here are some practical tips to help you navigate these changes effectively:
1 | Start with a Clear Understanding of the Process
Before you begin touring homes, make sure you have a clear understanding of the homebuying process, including the roles and responsibilities of your REALTOR®. This will help you set realistic expectations and avoid surprises along the way.
Tip: Ask your REALTOR® to walk you through the entire process, from initial consultation to closing. This will give you a roadmap to follow and help you stay informed at every stage.
2 | Be Proactive in Reviewing the Written Agreement
As mentioned earlier, the written agreement with your agent is a critical document that outlines the terms of your relationship. Don’t rush through this step—take the time to review the agreement thoroughly and ask questions if anything is unclear.
Tip: Consider having a trusted friend, family member, or legal advisor review the agreement with you to ensure that you fully understand the terms.
3 | Negotiate Compensation Terms with Confidence
The NAR settlement reinforces that agent compensation is fully negotiable, so don’t be afraid to discuss this aspect openly with your agent. Whether you prefer a flat fee, a percentage, or an hourly rate, make sure the compensation structure works for you.
Tip: Use the information provided in the written agreement as a starting point for your negotiations. If you feel that the terms are not in your best interest, discuss alternatives with your agent.
4 | Stay Informed About Market Conditions
The real estate market is constantly changing, and staying informed about current conditions can help you make better decisions. Work closely with your REALTOR® to understand market trends, property values, and other factors that could impact your homebuying experience.
Tip: Ask your REALTOR® for regular updates on the market and any changes that could affect your home search. This will help you stay ahead of the curve and make informed decisions.
5 | Communicate Openly with Your REALTOR®
Open and honest communication is key to a successful homebuying experience. Keep your REALTOR® informed about your preferences, concerns, and any changes in your situation. This will help them provide you with the best possible service and support.
Tip: Set up regular check-ins with your REALTOR® to discuss your progress and address any questions or concerns. This will ensure that you’re both on the same page throughout the process.
Moving Forward with Confidence
The NAR settlement introduces important changes that will impact the way homebuyers work with their agents, particularly in terms of written agreements and compensation. By understanding these changes and approaching the process with confidence, you can navigate your homebuying journey with ease.
At Paradisum Group, we’re committed to helping you understand and navigate these new rules, ensuring that your homebuying experience is smooth, transparent, and tailored to your needs. Our experienced REALTORS® are here to guide you every step of the way, offering clear advice and dedicated support.
Remember, the more informed you are, the better decisions you’ll make. Whether you’re a first-time homebuyer or an experienced real estate investor, understanding these changes and how they affect you is crucial. Take the time to review your options, ask questions, and ensure that your relationship with your agent is built on a foundation of trust and transparency.
Key Takeaways:
Written Agreements: You’ll need to sign a written agreement with your agent before touring homes, which outlines services, compensation, and negotiable terms.
Agent Compensation: The compensation your agent receives must be clearly disclosed and agreed upon in the written agreement, with no hidden or open-ended fees.
MLS Changes: Compensation offers from sellers will no longer be displayed on MLS platforms, so it's important to discuss compensation directly with your agent.
What Stays the Same: REALTORS® continue to adhere to the Code of Ethics, ensuring that they act in your best interest. You also retain full flexibility and choice in how you work with your agent.
Contact Us
If you have any questions about how these changes affect you, or if you’re ready to begin your homebuying journey, Call Paradisum Group eXp at 850-320-8385 or Contact Us today. We’re here to provide the guidance and support you need to make your homebuying experience as seamless and successful as possible.
