NAR Real Estate Settlement Facts Vs. Fiction

By now, you've likely come across news headlines regarding the National Association of Realtor's proposed settlement spotlighting real estate commissions and property values, often taking aim at agents nationwide. Unfortunately, much of this coverage has been exaggerated or, in many instances, outright inaccurate.

I believe it's crucial to provide my community and clientele with some essential insights into what these developments truly signify for you. Below, I've outlined the NAR Settlement ruling, its implications for both buyers and sellers, and addressed some of the most common myths to offer clarity on the matter.

What did the NAR Settlement Actually Change?

1. When working with an agent, buyers will now be required to enter into a buyer-broker representation agreement. This agreement outlines the responsibilites of the buyer's agent, outlines what the agent's commission is and how that will be paid, and gives an agent of your choosing the permission to work on your behalf and represent your best interests as a buyer. Sellers sign listing agreements with agents and now buyers will sign buyer's agreements as well.

2. Sellers and their agents will no longer be allowed to post what amount of commission will be offered to the cooperating broker in the MLS. Historically, sellers have chosen to offer the buyer's broker compensation, which was always negotiable, and that amount of compensation could be posted in the MLS for other agents to see. If this settlement is approved and, come July, when the ruling takes effect, sellers may still continue to offer compensation to the buyer's broker it will just not be posted on the MLS. Sellers may still offer other incentives through the MLS including seller concessions like a credit towards the buyer's closing costs.

Common Myths About the Settlement

Myth #1: Sellers no longer need to compensate buyer's agents

Sellers retain, as they always have, the discretion to offer compensation to buyer’s brokers. The proposed settlement does not prohibit their ability to do so. The reason that sellers will likely still choose to offer compensation to the buyers's broker is to make their property more attractive to buyers and to be competitive in the market. As of today, I have yet to see a listing not offering compensation to the buyer's broker.

Myth #2: Commissions were not negotiable in the past

Commissions have always been negotiable and are not set by law. Reduced fee alternatives have been and will continue to be available for consumers seeking those options.

Myth #3: Buyers no longer need a buyer's agent

Buyers are best protected by professional real estate agents. Real estate transactions are complex and, when making one of the most important financial transaction of their lifetime, buyers deserve a trusted advisor to guide them through the process and represent their interests. Having an agent that solely represents your interests is invaluable in any real estate transaction.

Myth #4: The settlement will change the way Americans buy homes

Real estate professionals will continue to help buyers and sellers navigate one of the most complex and costly transactions of their lives

Myth #5: Real estate values will go down

In a recent article the NY Times insinuated that home prices will go down because sellers no longer have to pay a commission. Homes are priced based on a comparative market analysis of comparable home sales. If a seller choose not to offer the buyer's broker a commission that will not affect the value of their home it will just make it less affordable for buyers who will now have to pay their agent's commission. If sellers choose not to offer the buyer's broker a commission and end up lowering the price of their home but could have sold it for higher if they had offered to pay the buyer's broker commission is that really an advantage to the seller?

Myth #6: Real estate agents are overpaid

Real estate agents only receive a commission if they close a transaction. Agents can work weeks, months, and sometimes years with buyers before being paid for their work. Agents are advisors, therapists, confidants, friends, neighborhood and pricing experts, data analysts, and come with local experience and expertise. Agents are required to be licensed by national, state, and local associations and must abide by a code of ethics, legally adhere to rules of disclosure, and are legally required to perform a fiduciary duty on behalf of their buyer clients. Agents prepare detailed market analysis reports for properties buyers are interested in so they are prepared when making an offer, walk their buyers line by line through the purchase contract, coordinate and keep clients informed of and abiding by contractual timelines throughout escrow, recommend local professionals & inspectors, coordinate and attend inspections, understand and explain inspection reports & seller disclosures, negotiate repairs and credits, and help to keep their buyers informed & pro-actively problem solve throughout the transaction as any issues come up. Compass agents, in particular, provide a level of service and diligence that is unmatched anywhere else in the world. 

50 Things I Do as a Buyer’s Agent to Ensure a Successful Transaction

1. We will meet for a buyer consultation for overview and to plan strategy.

2. Align on the best communication plan throughout the entire process.

3. Encourage you to reach out to a lender for pre-approval and provide recommended local lenders (at least 3) if requested.

4. Collect market data and recent comparables in neighborhoods you’re interested in.

5. Provide insights on property types, neighborhoods, and pricing trends.

6. If necessary, I will research off-market opportunities for you to find additional suitable inventory.

7. Create a ‘Collection’ so you’re aware of listings that fit your criteria.

8. Select properties and set up tours to show you based on your criteria.

9. Accompany you to open houses to show you the most important aspects to look at in a home.

10. Accommodate multiple viewings and private appointments.

11. Request disclosure packages, analyze inspection reports, review seller disclosures together with you and explain what they mean.

12. Attend broker tours on your behalf to view other available properties on the market.

13. Stay connected to local buyers, sellers, and other agents to maintain a constant view of what drives the market.

14. Reach out to agents with similar listings to understand traffic and buyer demand.

15. Provide objective advice and help you evaluate the pros and cons of different properties.

16. Prepare a Comparative Market Analysis (CMA) for any home you are considering purchasing.

17. Understand the current condition of the property for negotiation purposes with the assistance of experts.

18. Advise you on potential offer strategies that reflect current market conditions.

19. Prepare and review the Residential Purchase Agreement line-by-line with you to make sure you understand all facets of your offer to purchase.

20. Review all transaction documents with you in advance of writing any offer.

21. Educate on competitiveness of offer, including advisement on any contingency removals.

22. Coordinate additional access to the property, if necessary.

23. Join you while you meet with experts about desired improvements including landscaping, painting, fixture updates, minor and major renovations, etc.

24. If requested, recommend at least three vendors to you on your specific request.

25. Maintain consistent communication to provide market updates.

26. Monitor any changes in the market to refine offer strategy and make needed updates (revising price, terms, etc.) accordingly.

27. Explain the offer process, timeline, and recommended preparation.

28. Align on offer strategy and prepare the offer on your behalf.

29. Maintain constant communication and relationship with listing agents to whom we may be submitting an offer.

30. Prioritize your offer dates and drop everything to make sure your offer is submitted on time and that the listing agent is aware of you and your offer.

31. Advise and strategize with you on counteroffer response.

32. Negotiate terms as needed with the listing broker and seller in writing.

33. Coordinate all DocuSign envelopes.

34. Facilitate deposit of earnest money and down payments.

35. Introduce you to your escrow officer once we are in contract and help you confirm wire instructions.

36. Create and execute closing timeline and transaction review.

37. Inform lender of signed contract and timeline.

38. Meet appraiser at property with comps to ensure appraisal comes back at value.

39. Coordinate and confirm any inspections during escrow.

40. Coordinate and confirm appraisal has been received.

41. Confirm loan approval is moving in a timely fashion and we are meeting deadlines.

42. Coordinate final walk-through and address issues that may arise by communicating with the seller's agent.

43. Introduce you to Home Warranty vendors if necessary.

44. Remind you to order homeowners insurance and set up utilities, providing insurance providers if necessary

45. Review Final Buyer’s Settlement statement with you to confirm final closing costs.

46. Help facilitate your signing with a mobile notary and be available for any last-minute changes or questions.

47. Stay in close touch with escrow officer to confirm lender funding and recording of the deed.

48. Inform all parties when we are on record and officially closed.

49. Deliver you the keys and property access.

50. Continue to check in post-closing to ensure a smooth move-in, answer questions that come up, and provide vendors if necessary.