The headlines lately have been so misleading. For the most part, things aren't really changing all that much. Below answers how everything will change and our opinion on what it will look like in the future.

Technically, the settlement is still pending and these wouldn't go into effect until July of 2024. We'll keep you posted, but we are getting lots of questions based on the media information out there. A LOT has been wrong so we thought we'd touch on the facts below.

Frequently Asked Questions for Home Sellers and Buyers

General Questions:

Q: What is the NAR Settlement?

A: The NAR Settlement is an agreement resulting from litigation, aimed at addressing concerns and enhancing transparency in real estate transactions. It emphasizes consumer choice in real estate services and compensation, and introduces practice changes to how compensation offers are made.

Eric's Take - The NAR Settlement is like a new rule for sharing toys and treats at school. Before, there were some rules that made sharing a bit confusing for everyone. Now, there's an agreement to make sure everyone understands how to share nicely and fairly, so no one is confused or feels left out. This means when people want to buy or sell houses, they know exactly what they're giving and getting, making it fair play for everyone!

Q: Why did NAR enter into this settlement?

A: NAR sought to resolve the litigation to reduce strain on members and provide a clear path forward for the industry, ensuring liability release for its members and preserving consumer choices in real estate services and compensation.

Erics Take - After the lawsuits grew across the country, NAR and many of the large brokerages, including our own Keller Williams felt that it would be best to settle and agree to adjustments in how we operate in order to move forward and protect agents. What I've found interesting is that good agents were already making sure they were in agreement about commissions with their clients prior to entering into any sale. Its unfortunate that our colleagues that were not acting in this professional manner have created such a negative view on services provided for the cost.

Q: What are the key terms of the settlement?

A: Key terms include a significant release of liability for NAR members, prohibition of compensation offers on MLS, requirement of written agreements for MLS participants working with buyers, and a settlement payment by NAR, without admitting wrongdoing.

Eric's Take - Aside from the over $1b in settlement, we are now required to have a buyer agency agreement signed with buyers before we show them property (a practice Lindsey & Associates implemented years ago). Buyer agents will no longer be able to go into their mls and see how much compensation is offered, but they can just reach out to the listing agent first (a practice very common in commercial real estate brokerage). When we write offers, we are to spell out exactly what commission the buyer agent is getting, and sellers can still offer to pay part or all of that commission at closing (formal version of what we're used to now). Overall, these changes are very subtle. You can still have representation without paying the commission out of pocket, as long as the seller agrees.

Selling Your Home:

Q: What do I pay you and what do I pay the buyer’s agent?

A: Traditionally, sellers pay the listing agent's commission, part of which is offered to the buyer's agent as compensation. This arrangement can be negotiated based on your specific situation and agreement with your real estate professional.

Eric's Take - What we're used to now, is that both commissions come out of the sellers' side. Then part of the listing agent's commission would be sent to the buyer agent. That can still happen. Sellers are not required (only $1 was required prior to the settlement) to offer a commission to buyers agents. Honestly, if sellers opt to not offer a commission to buyers agents, they may miss a portion of the market that wants representation. Which, in turn, could greatly reduce interest in the property and, thus, the sale price. Are 10's of thousands or 100s of thousands of dollars worth saving 2-4%? Most likely not. Agents will still submit offers requesting commissions coming from the sale proceeds anyway.

Q: Can I negotiate to pay you less than a certain percentage?

A: Yes, real estate commissions are negotiable. Discuss your preferences and financial considerations with your agent to arrive at a mutually agreeable commission rate.

Eric's Take - With 15+ years of experience, I can tell you first hand that commissions have always been negotiable. People outside of the industry often forget that we are running our own small businesses that have to make a profit. So, as always, the negotiation of commissions will be up to each individual business (each agent) to compete in both price and level of service. Just as contractors give quotes and communicate their service level, experience, skill set, history of success, and customer reviews; YOU GET WHAT YOU PAY FOR. If it's the most expensive asset you own, it deserves the care and attention of top level service.

Q: What if I don’t want to offer anything to the buyer to pay their agent?

A: While it’s customary to offer compensation to the buyer’s agent, it’s ultimately your decision. Be aware, however, that this could impact the interest of buyer’s agents in showing your property to potential buyers.

Eric's Take - As I stated earlier, sellers that do not offer incentives to buyer agents will alienate their listings from a pool of buyers. That correlates directly with the final sale price. If it takes time to find a buyer, or there is less interest in a bidding war, you run a real risk of costing yourself a lot of money. For the average $750k home, a price reduction often is $25k or more. The math there isn't worth the risk of attempting to save a couple percent.

Buying a Home:

Q: Does this mean I have to pay you now?

A: The settlement changes how offers of compensation are communicated, not necessarily who pays the commission. Buyers might indirectly pay through purchase price negotiations, or directly, depending on their agreement with their buyer’s agent.

Eric's Take - This will be property specific. There are already deals that come across my desk where the buyer has pay directly for my services; in the end its just about math. Clients have been happy to pay a commission for prices that make sense to them. This theme will continue. The market for commissions will figure out an equilibrium, but the theory here in the Boston area is that the prices are so high, few will want to or be willing to pay out of pocket. We're expecting plenty of sellers will be educated in the risk of not offering and opt to offer some incentive. Also, there are options in negotiation. If the math works out, we can request a credit from the seller to cover the commission; this would allow the commission to be financed as they've been for years.

Q: What if I can’t afford it?

A: Discuss your financial concerns with your buyer’s agent. There are various compensation models, including seller concessions or a portion of the listing broker's commission, which can be explored to accommodate your financial situation.

Eric's Take - This is where our industry has the most concern. Prices have been driven up the last 12 years because there's just not a lot available. If we'd built the amount of new property we were supposed to the last 30 years, we would not see the prices we see now. There's just be too many options. It's sad really. Our economy does well when we're building a lot. We see hedge funds buying more homes than ever. Competition out there is stiff. For the first time homebuyer, this settlement feels to buyers like that's the nail in the coffin. As someone who's negotiated 100s of difficult transactions over my career, I'm confident you can get representation and make it work. Everyone starts with a plan, and that's what we'll talk about when we do a buyer consultation with you. Everything will be transparent and we can go over what your options are if you feel this is you.

Q: Sounds like I’ll save money if I work with the listing agent. Is that true?

A: Working directly with the listing agent may not necessarily save you money, as the listing agent's primary obligation is to the seller. Consider your need for independent representation to ensure your interests are fully protected.

Eric's Take - Save money now (maybe), pay money later. I've met too many people over the years that "represented themselves" only to miss key details because they aren't a part of 30+ transactions per year. When companies raise prices or their profit margin goes up (think of a home as the company here), do they usually ever reduce prices, or give that margin back to the buyer? I see sellers getting the same price and pocketing more proceeds. 

Changes to Practice:

Q: How will buyer brokers get paid now?

A: Buyer brokers can still be compensated through various methods, such as fixed-fee commissions, seller concessions, or a portion of the listing broker’s compensation, based on negotiations between the buyer and their agent.

Eric's Take - Nothing in this settlement fundamentally changes the options available to buyers. It will all be a shifted version of the current status quo.

Q: How will these changes affect transparency and fairness in real estate transactions?

A: The settlement aims to maintain transparency and fairness by requiring written agreements for buyer representation and prohibiting compensation offers on MLS, encouraging direct negotiation and clear communication regarding compensation.

Eric's Take - Buyer's are now required to sign agreement transparently spelling out how everything works ahead of time. Thankfully Lindsey & Associates has already used this practice. We welcome all of these changes with open arms as we are confident that the service we provide is worth the cost. 

Q: What steps should I take as a buyer or seller in light of these changes?

A: Engage in open discussions with your real estate professional about your expectations, compensation arrangements, and any concerns you may have regarding the buying or selling process.

Eric's Take - Please, please, please reach out and ask all the questions you want. We believe in transparency and we also believe in home-ownership. The best part of our careers is the fact that we get to guide and watch people create wealth in their lives through real estate. The right move can be life changing, as it has been in our lives and the lives of our beloved