You’ve probably heard about the significant changes happening in real estate that will affect some aspects of home buying and selling. These changes will benefit both home buyers and sellers, bringing more transparency and clarifying what REALTORS® do for you during your homebuying process.
For homebuyers, the settlement means:
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You will have to sign a written buyer agreement with your agent before touring a home.
- Before signing this agreement, you should discuss its duration and terms with your agent, including what services and value the agent will provide you and how much they will cost.
- The buyer agreement must include four components concerning compensation:
- A specific and conspicuous disclosure of the amount or rate of compensation the real estate agent will receive or how this amount will be determined.
- The compensation set forth in the agreement must be objective and not open-ended, meaning that it will be expressed in terms of specific fees, percentages or hourly rates. It cannot be vague such as “whatever the amount the seller is offering to the buyer.”
- A term that says the agent may not receive compensation above and beyond the amount or rate negotiated in the agreement, from any source.
- A conspicuous statement that the agent’s and broker’s commissions and fees are fully negotiable and not set by law. It is important to keep in mind there is no pre-determined compensation for the agents, and you are free to negotiate the amount due to the agent for the work they will perform.
- Written agreements apply to both in-person and live virtual home tours.
- You do not need a written agreement if you are just speaking to an agent at an open house or asking them about their services.
- You can still accept concessions from the seller, such as offers to pay your closing costs.
- You may negotiate with the seller to have them pay all or a portion of your agent’s compensation.
For home sellers, the settlement means:
- Properties listed for sale in multiple listing services (MLSs) will no longer be able to include an offer of compensation to the buyer’s broker.
- However, if allowed by your listing broker’s MLS, you can use the MLS to communicate to buyer agents that you are open to making concessions to a buyer. Concessions are generally a credit to the buyer at closing to use for whatever they need – such as paying closing costs, paying the buyer’s agent, or as a repair credit.
- You can also negotiate with the buyer if they request that you pay all or part of their broker’s compensation as part of their purchase offer. Such a request can be in addition to or in lieu of other requests for concessions.
What remains the same:
REALTORS® help you navigate the process of buying or selling your home and they are ethically and fiduciarily obligated to work in your best interest. Compensation for your agent remains fully negotiable, and you can work with your agent to understand the range of your choices when buying your home.
Source: Article from the California Association of Realtors
What's the Impact - Let's go on!
Its Effect on Home Buyers and Sellers
Navigating the real estate market in the Eastbay and throughout the Bay Area can be challenging, especially with the recent changes brought about by the National Association of Realtors (NAR) settlement as of August 17. As many of you know, this settlement, resulting from recent legal actions against the NAR concerning the handling of real estate commissions, the anticipated changes promises to bring disruption and innovation to the real estate industry.
But what does this mean for you as a home buyer or seller in the Bay Area? Let's break it down so you can make informed decisions about buying or selling a home! 🏡 🏡
How the NAR Settlement could benefit Home Buyers and Sellers
1. Increased Transparency in Real Estate Transactions
One of the biggest wins from the NAR settlement is the increase in transparency—especially when it comes to commission fees.
- For Home Buyers: You'll now have a clearer view of what you're paying in terms of agent commissions. This transparency means you can ask questions and negotiate fees more confidently. When making an offer on a home, you should be aware of exactly what your agent's commission will be and whether it's in line with the service you're receiving.
- For Home Sellers: When listing your home, you'll know upfront what you're paying in commission to both your listing agent and the buyer's agent. This knowledge can help you budget more accurately and possibly negotiate better terms with your agent.
- What You Should Do: Before making an offer or listing your home, discuss commission fees with your agent. Ask for a clear breakdown of costs and ensure you understand what you're getting for your money. Don't be afraid to negotiate if you feel the fees are too high.
2. Increased Competition Among Agents
Another significant change from the NAR settlement is that it's expected to create more competition among real estate agents. This could be a game-changer for both buyers and sellers.
- For Home Buyers: More competition means you have more agents vying for your business. This could lead to better service and more flexible terms. When you're looking to make an offer on a home, you might find that agents are more willing to go the extra mile to win your business —whether that's through offering additional services or negotiating their commission rate.
- For Home Sellers: Increased competition among agents can also benefit sellers. If you're listing your home, agents may offer competitive pricing on their services, or they might provide enhanced marketing packages to help your home stand out. This means you could potentially sell your home faster and for a better price.
- What You Should Do: Take advantage of this increased competition by shopping around. Interview multiple agents before deciding who to work with. Ask about their commission rates, marketing strategies, and track record in your area. Don't just settle for the first agent you meet—find one who offers the best value for your specific needs.
Drawbacks/Downsides of the NAR Settlement for Home Buyers and Sellers
1. Potential for Reduced Agent Incentives
While transparency and competition are good things, they might also reduce incentives for real estate agents, which could impact the level of service you receive.
- For Home Buyers: If agents are working with lower commissions, they might be less inclined to provide you with top-notch service. This could mean fewer showings, cherry-picking the home tour selection, reduced service by having buyers see a home on their own when the home is open, less negotiation on your behalf, or limited follow-up and follow-through. When making an offer, it is crucial to have someone fully dedicated to representing your best interests, even if their commission is lower.
- For Home Sellers: Similarly, if you're listing a home, agents might not invest as much in marketing or might prioritize clients who are willing to pay higher commissions. This could affect how quickly and effectively your home sells.
- What You Should Do: Be upfront with your agent about your expectations. Clearly communicate what you expect in terms of service and commitment. To ensure your agent remains motivated, offer performance-based incentives, such as bonuses for selling above a specific price.
2. Navigating the Evolving Real Estate Landscape
The changes brought about by the NAR settlement could make the real estate process more complex, requiring you to be more diligent and informed.
- For Home Buyers: With new rules on commission disclosures and competitive practices, more information will likely need to be processed. It's essential to understand all the details before making an offer. This could mean more homework, comparing agents, understanding fees, and ensuring you're getting the best deal.
- For Home Sellers: Listing a home might also become more complicated as you navigate these new dynamics. You'll need to be more strategic in choosing an agent and setting a price, considering how these changes might affect buyer behavior and market competition.
- What You Should Do: Stay informed and ask questions. Don't hesitate to seek clarity on anything you don't understand. Working with a knowledgeable and communicative agent can help ease the complexity and ensure you're making the best decisions.
3. Uncertain Long-Term Effects on the Market**
Finally, while the immediate impacts of the NAR settlement are becoming clearer, there's still a lot of uncertainty about what the future holds.
- For Home Buyers: The real estate market could become more volatile as it adjusts to these changes. This might affect everything from how quickly homes sell to how prices fluctuate. When making an offer, it's essential to be prepared for these shifts and work closely with your agent to navigate them effectively.
- For Home Sellers: As a seller, you might face new challenges in pricing your home and attracting buyers, particularly if the market experiences swings due to these changes. Understanding these dynamics will be key to timing your sale effectively.
- What You Should Do: Keep an eye on market trends and be flexible in your approach. Whether you're buying or selling, staying adaptable and working with an agent who has a deep understanding of the local market will help you navigate any uncertainty.
1. Impact on Housing Affordability
- For Home Buyers: If the settlement leads to lower commission fees, this could make home-buying more affordable in our Bay Area market. However, this might not happen due to the low inventory and high demand in most of the Bay Area.
- For Home Sellers: Sellers may need to adjust their expectations regarding pricing and competition. Understanding how these changes affect buyer affordability will be crucial in setting a competitive price.
- What You Should Do: Monitor affordability trends in your area and consider how these changes might impact your buying or selling strategy. Whether you're purchasing your first home or looking to sell, being aware of these broader trends will help you make better decisions.
2. Shifts in Market Dynamics
- For Home Buyers: The NAR settlement might change how buyers and sellers interact, potentially leading to more negotiation and a more competitive buying process. Being prepared to negotiate effectively will be key.
- For Home Sellers: As a seller, you may need to be more strategic in your approach, considering how increased competition among agents and shifts in buyer behavior affect your listing.
- What You Should Do: Stay proactive and strategic. Whether buying or selling, being prepared for these shifts and working with an agent who understands the new dynamics will help you stay ahead.
3. Regulatory and Policy Implications
- For Home Buyers: Changes in regulations and policies might continue to evolve as the market adapts to the settlement. Staying informed about these changes will be important.
- For Home Sellers: Sellers should also be aware of any new regulations or policies that might affect their transaction, from disclosures to pricing strategies.
- What You Should Do: Stay informed about any new regulations or policies that could impact your transaction. Working with a knowledgeable agent who keeps up with these changes will help you navigate them effectively.
The National Association of Realtors (NAR) settlement is set to bring significant changes to the real estate market, particularly in California. While there are many potential benefits, such as increased transparency and competition, buyers and sellers must also navigate challenges and uncertainties.
More, FAQ - NAR Settlement
