The NAR Lawsuit Settlement: What Buyers Need to Know
The real estate industry has been buzzing about the National Association of Realtors (NAR) lawsuit settlement and what it means for buyers and sellers. If you're in the market for a home, you might be wondering how this affects you. Below are answers to some frequently asked questions to help you navigate these changes with confidence.
Q: What was the NAR lawsuit about?
The lawsuit alleged that certain real estate commission structures were unfair to consumers, particularly in how buyer’s agents were compensated. The settlement aims to increase transparency and give buyers and sellers more flexibility in negotiating commission fees.
Q: How does the settlement impact homebuyers?
The biggest impact for buyers is the increased transparency in commission structures. Previously, commissions were typically set by sellers and their agents, with buyers often unaware of how their agent was being paid. Moving forward, buyers have to negotiate their agent’s compensation directly, rather than relying on seller-offered commissions. Much like any other small business, buyer’s (and seller’s) agents set their rates for their services.
Q: Will I have to pay my agent out of pocket?
Potentially, yes, although at no point is the buyer required to pay their agent directly unless they want to purchase a home where the seller will not offer commission concessions. Buyers should be prepared to discuss payment options with their agents and factor those costs into their home-buying budget.
Q: Should I still work with a buyer’s agent?
Absolutely! Buyer’s agents remain an essential resource for navigating the home-buying process and ensuring that buyers are protected during the transaction. Buyers should expect to negotiate their agent's commission upfront in a Buyer-Broker agreement. From there, they have several payment options:
Request the seller to pay the buyer’s agent commission: When submitting an offer, buyers can request the seller to cover their agent's commission. If the seller rejects this term, the buyer can choose to 1) pay their agent directly, or 2) walk away from the transaction.
Pay the buyer’s agent out of pocket: This option can potentially make your offer more appealing to sellers in a multiple-offer situation, although sellers will be evaluating the highest net offer. So far in San Francisco, we’re seeing that a majority of offers are requesting the seller to pay the buyer’s agent’s commission.
Pay a portion of the commission: If the seller is willing to offer part of the agreed-upon commission to the buyer's agent, the buyer can cover the remaining portion.
Q: Will home prices drop because of this settlement?
It’s too soon to tell. Some experts believe that eliminating mandatory commission structures could lead to downward pressure on home prices, but market conditions, inventory, and interest rates will continue to play a larger role in pricing trends.
Q: What should I do if I’m planning to buy a home soon?
Talk to your agent: Ask them about their commission structure and how they get paid.
Budget accordingly: Be prepared for the possibility of paying your agent directly if you fall in love with a home where the seller isn’t offering concessions.
Stay informed: The real estate landscape is shifting, and understanding your rights as a buyer is key to making smart decisions. A great agent will keep you in the loop on changes in the market.
While this settlement brings changes to the industry, the value of working with an experienced real estate professional remains high (perhaps higher than ever!).
Have more questions? I’d be happy to guide you through the process—let’s chat!
Lauren Dorsey is a San Francisco-based real estate agent helping buyers and sellers navigate the market. Reach out to schedule a quick call to chat through your questions HERE.
