The NAR Settlement. What’s Changing for Buyers and Sellers?

April 14, 2024 | Inside Scoop | By: The Goodhart Group

Many articles have been in the news lately about the lawsuit and proposed settlement with the National Association of Realtors (NAR). Headlines have been sensational! I wanted to wait until the dust had settled a little bit to make sure I had a good handle on the terms of the agreement, what changes are on the horizon (in the event the Federal court upholds the settlement in July), and to internalize how I feel about said terms and agreement. 

Now that it has been some time since the proposed settlement was announced, and Compass has subsequently agreed to their own proposed settlement (more on this below) as part of the lawsuits over the commission, I finally feel comfortable sharing the facts of the NAR settlement and my thoughts on the case. 

First, let’s cover the facts

There are three significant agreements made surrounding the case and subsequent proposed settlement. 

  1. The proposed settlement making the news is with the National Association of Realtors, which includes protections for firms that sold less than $2 billion of real estate in 2023. Many large brokerage firms, including Compass, which sold more than $2 billion, have already made separate proposed settlement agreements. It’s worth noting that these are still just proposed settlements and these changes must be approved and upheld by a Federal Court later this year. 
  2. Sellers and listing agents will no longer be able to list an offer of compensation for buyers’ agents in any NAR-affiliated MLSs (although they can still offer compensation). The MLS is short for a multiple listing service, first created to distribute listings and offer compensation to a buyer’s agent or any agent for bringing the buyer for a listing for sale. According to the NAR, “The MLS is a tool to help listing brokers find cooperative brokers working with buyers to help sell their clients’ homes. Without the collaborative incentive of the existing MLS, brokers would create their separate systems of cooperation, fragmenting rather than consolidating property information”. 
  3. Agents who are NAR members (and any members of brokerages who have also independently settled) must have a Buyer Representation agreement in place before showing a house to a potential buyer. Agents cannot perform real estate services without an agreement. 

So, what does this mean? Are these significant changes? The headlines have been confusing at best and borderline irresponsible at worst, leading to mass confusion over what is happening with the real estate industry going forward. Let’s break it down for both buyers and sellers. 

What do the “Changes” mean for Sellers? 

Honestly, not much! Despite the headlines, there are not many changes here, but here are the major takeaways. 

Separate Discussion of Listing and Buyer Broker Commissions

There has been a lot of talk in the news (headlines) about the 6% commission going away. Many people outside the industry have interpreted this to mean that commissions will go down because of this settlement. What it means is that instead of the listing brokerage charging a total of one commission fee (for example, 6%) and splitting that commission with the buyer brokerage (3%) for bringing a buyer, now, the commissions will be listed separately.

The seller and listing agent will separately list the fee for the listing agent and what (if anything) they would like to offer a buyer broker to incentivize them to bring a buyer. Essentially, instead of listing one total fee that the brokers “share,” the fees are separately listed. This creates more transparency for what is being charged for the listing side of the transaction and what the seller offers as an incentive for a buyer broker to bring a buyer through their home. 

“Negotiable” Commissions

The fact is that commissions were ALWAYS varied or “negotiable,” and any Realtor who informed you otherwise was wrong. While industry standards for fees have never been set, every agent has always been able to set their commission or fee, just like individual doctors, attorneys, trainers, or any other professional can set their rate. So, essentially, nothing changes on this front but there will be more disclosure around the fact that rates are negotiable. 

Placement of Offer of Compensation

This is the biggie… listing brokers can no longer list the amount of compensation in the MLS for the buyer brokers to see. However, this does NOT mean that an offer of compensation can’t – or shouldn’t – be made. It will just happen off of the MLS platform. This creates another step for listing and buyer agents to communicate offline regarding commission, but ultimately, the process is the same. A good agent will alert their client if the commission being offered (or not offered, for that matter) is less than the agent and client have agreed upon as their fee.

Since agents will now be required to get a buyer representation agreement outlining the cost the agent charges for their service, the buyer will then determine if they want to see properties offering less compensation than is stated in the buyer agreement. Suppose they would like to see the property. In that case, it is with the understanding they will pay their agent the difference in compensation as part of their closing costs at settlement if they were to purchase the property when they would also pay any lender, title, or attorney’s fees. This leads me to changes for buyers. 

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What “Changes” for Buyers? 

This lawsuit did change the game a bit on the buyer’s side. Luckily, the changes are less dramatic in the DC Metro Area than in the rest of the country. In our region, we have operated with buyer representation agreements due to the requirements for agency disclosure for about 30 years. There are only 14 states that already require buyer agency agreements, and the entire DMV is part of that requirement. So, it is not a significant adjustment, but in many parts of the country, this is a significant departure from how things were previously handled.

Buyer Representation Agreements are Required

As agents, we MUST have a buyer agreement signed before showing a house to any buyers if the changes are approved by the Federal Court. Our team has practiced this in almost every interaction with buyers for years. Agents in the DMV have been required to have agreements signed and discuss agency and representation with their clients since the 1990s, it must now be done at a different point in the process before showing the house. 

Buyers Prepared to Pay for Realtor Fees Possibly

Now, buyers may sometimes have to pay their agent directly for their services. However it is likely in most cases, sellers will still be offering compensation to attract the largest pool of buyers (and ultimately net more money) in the sale of their home. In the instances they don’t, as I discussed above, they may need to pay some commission if it is not being offered or if it isn’t negotiated as part of the offer for the home. 

Here’s What I Like About the Settlement 

More Transparency (in some ways)

This change creates more transparency around commissions and fees for buyers and sellers. The separate listing of commissions clarifies for buyers and sellers who is being represented by whom, who is being paid what, and what work is being done by whom. 

Professionalizing the Industry

This professionalizes the real estate industry.. Many top agents and teams already operate through buyer representation agreements. I am glad that more buyers will be better represented going forward. 

Here are the “Nothing” Moments of the Settlement (for me) 

Commissions were always negotiable, period. Buyer representation agreements were supposed to be in use already, at least in the DMV. 

Buying a home soon? Check out these blogs for helpful tips!

Here’s What I Don’t Like About the Settlement 

Mass confusion in the headlines

So far, we have not seen much change as a result of the lawsuit or the settlement. However, it is creating lots of confusion and questions. These changes are extremely unlikely to lower the cost of housing and could make it even more expensive for buyers in some instances. I fully expect further changes to the settlement agreement with countersuits or other actions over time. 

Less Transparency (in some ways)

While there is more transparency for consumers in how agents in their transaction will be paid and by whom, there needs to be more transparency surrounding how much compensation is being offered from other sellers to buyers agents. Currently, this is something we can see in MLS and can relay to clients.

Without this information in MLS it could lead to less understanding for buyers, sellers, and agents of the range of commissions for buyer brokers since it is less transparent to everyone in the process. Agents will be able to relay anecdotal information as to how much buyers may have to pay out of pocket but will need more data to back it up. I imagine a new solution will be created for this particular issue quickly. 

Possible additional costs for buyers

When a seller enters into a listing agreement with a real estate brokerage, the seller can offer a commission paid to the buyer’s brokerage. If the commission is not equal to what the buyer’s agency agreement states, the buyer may need to pay the difference or ask the seller to cover the additional cost through a seller subsidy. 

The Bottom Line

To sum it all up, there are good and bad things to come out of the NAR lawsuit and settlement changes. I believe there will be further changes to what has been already agreed upon. As with any changes, the market and the industry will quickly adjust, and having an agent on your side who is paying attention and has their finger on the pulse of the market is going to position you for success best. If you have any questions about how this might impact you, or if you would like us to connect you with great agents outside of the DC area who will be best able to represent you, please reach out. As always, if we can help you buy or sell in the DC Metro Area, we are happy to help!

Have questions about buying, selling, or anything else we’ve covered in this blog? Give us a call at 703-362-3221 or email us at or today.

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