How Will the NAR Settlement Affect Local Home Sales?

New rules for buying and selling properties went into effect this weekend and we asked several local realtors how they anticipate these new practices might affect the market and the way they do business.

The changes were the result of a lawsuit against the National Association Realtors. While previously the seller charged the buyer 5% - 6% and split this commission between the buyer’s and seller’s agents, the new rule no longer permits the seller to offer a commission to the buyer’s agent on the Multiple Listing Service.

Instead, the terms of the agreement between a purchaser and his agent will be negotiated in an agreement that prospective home buyers and agents will sign before touring homes. They will agree on a fee that the buyer will pay their agent if they decide to purchase the home. Since that fee will not always be bundled into the purchase price, it may mean that buyers will need to have more funds available to purchase a home and renumerate their agent.

How might this affect transactions and what are possible outcomes of the new laws? Here is what a few local realtors think:

Mark Nadler, Director of Westchester Sales at Berkshire Hathaway Homes Services said, “Many things have changed as a result of the NAR settlement but yet many elements remain the same. Many buyers/sellers will continue to hire brokers/agents they know and trust based on past and/or personal relationships to receive professional guidance when making a transaction which may still be one of the largest in their lives. Hiring a broker purely based on perceived pricing is unlikely to affect a majority of the clients we transact with similarly to people choosing doctors, attorneys or financial advisors based solely on price. The financial stability of strong solvent firms with exceptional reputations will help those firms survive the uncertainty of the changes we are currently facing.

The need for professional guidance has not changed and the media’s portrayal of the settlement and impact has been largely inaccurate. The biggest change is that buyers will need to sign a representation agreement that they understand the broker is representing them and how compensation will be handled.

In the very low supply market we have, demand continues to remain very strong and prices very high. Coordinating the compensation will now be done on an individual basis by the parties involved. I am not overly concerned that the changes from the settlement will have a large detrimental impact to the local markets.

Jonathan Lerner, a licensed broker at Five Corners Properties commented:

“Our approach at Five Corners Properties will remain fundamentally client-focused, ensuring that we continue to provide exceptional service. However, we will adapt to any specific procedural changes required by the new ruling to maintain compliance and transparency. We will also enhance our communication with clients to ensure they are fully informed about any impacts on their transactions.

Buyers and sellers may notice more detailed discussions around certain terms and conditions, especially concerning commission structures and disclosures. We are committed to making these conversations clear and straightforward, so our clients at Five Corners Properties feel confident and well-informed throughout their buying or selling journey.

The new ruling might lead to some adjustments in how transactions are negotiated, particularly in relation to agent commissions. However, we anticipate that the overall market activity will remain robust. In the long term, these changes could lead to a more transparent and equitable marketplace, benefiting all parties involved.”

Anne Moretti, licensed broker with Julia B. Fee Sothebys Scarsdale said this: "This past week, real estate commissions paid to buyer agents officially can no longer be listed on the MLS. However, these commissions can continue to be advertised, offered and negotiated outside the MLS, including on our company’s website.

In addition, now all homebuyers working with real estate agents to find a home must sign an exclusive buyer representation agreement which specifies the various responsibilities of that buyer agent and the fee being charged for providing that service. Before selecting a buyer agent, we expect that consumers may want to interview a few agents to find the right fit.

The changes are on both sides, for sellers and buyers. Sellers, aware that commission rates have always been negotiable, can continue to offer specific compensation to a buyers’ agent, or they may decide to consider offers from buyers’ agents which include the payment of that particular agent’s fee, along with the offer itself.

Our market will continue to be an active market of home sales, and commissions will continue to be negotiable; however, while the mechanism for how brokers will work together in deciding how commissions are paid will change, I don’t see that sales volume will be impacted. Agents will continue to work hard for their clients and the more experienced agents will likely see a bump in their business as buyers now consider an exclusive buyer agent relationship. 

Shelley Grafstein, licensed broker with Berkshire Hathaway Home Services explained, “The biggest changes in the NAR settlement is that the sellers will no longer automatically cover the cost of the buyer's agent fee, and the buyer will now have to enter into a contract knowing what the agent's fee will be before touring a home. However, this compensation can be included in the offer to the seller along with any discussed seller concessions. Will this change the industry? Not really. In negotiations, the seller will accept the best offer that nets them the most money no matter how the compensation is distributed. That has always been the bottom line in a seller accepting an offer.

What will change for the buyer, is they must be careful and trust the agent with whom they are signing the agreed terms of the buyer's contract. A well-seasoned agent will be able to navigate the different nuances of presenting an offer to the seller where it can get the deal to contract in a quick and efficient manner.”