What’s the issue:

The National Association of Realtors (NAR) and other defendants have been ensnared in a series of class action lawsuits backed by the Department of Justice (DOJ). 

The basis of the lawsuits take issue with the National Association of Realtors MLS Cooperative Compensation Rule, which, up until now, allowed Realtors representing Sellers to offer a commission to Realtors representing Buyers that was posted on each listing on the MLS. 

Historically, this meant the home buyer didn’t pay their agent’s fee directly. Instead, the Buyer’s Broker’s fee is included in the price of the house and is part of the Seller’s closing costs.

What’s changing:

Even though the settlement is not yet approved, NAR is moving forward with practice changes effective July 2024. The two primary changes are, 1. Cooperating compensation paid from the Seller to the Buyer’s agent can no longer be offered via the MLS and, 2. Buyers must sign a Buyer-Broker agreement that includes compensation to the agent, paid by the Buyer. This agreement must be signed before any property showings or writing any offers. 

What does it mean for buyers?

The financial responsibility of payment to a Buyer’s Broker/Agent is shifting to buyers come July 2024. If you were considering purchasing a home this year, it might mean it's time to act sooner rather than later if possible. Beginning this Summer, buyers will need to sign an agreement between them and their agent for their representation, and this will include a compensation agreement. If purchasing sooner isn’t an option, you should begin interviewing potential agents who you feel are the best to represent you on your purchase in this competitive market and who will do so for a fee that is manageable for you. 

What does it mean for Sellers? 

These changes are being hailed as a ‘big win’ for Sellers who can now save 2% or more on their bottom line of the sale of their home. But is it? While commissions will no longer be advertised on the MLS, Sellers should consider potential downsides to offering zero to the cooperating side. Prices are at historical numbers here in Orange County. Buyers are coming to the table with loans at rates higher than they’ve been in decades. They are paying for their down payment, closing costs, moving costs, and struggling to obtain insurance. And now, they will be hit with another bill for their representation, which most of them will simply not be able to afford. This can reduce the buyer pool or more certainly reduce the price they are willing and able to pay for any given listing. This will reduce competition and demand. Will there be more unrepresented buyers out there? Perhaps. But an unrepresented buyer will bring a new set of risks for Sellers. 

The good news.

Hiring a skilled and professional agent will help you expertly navigate the forthcoming changes and decisions regarding compensation. Good representation doesn’t cost more, but bad representation will cost you a fortune. At Heritage Coast, we’ve spent hours pouring over settlement papers, past legislation and more so that we can help answer any questions you might have. Please reach out to us so we can help you plan for these upcoming changes!