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Understanding the National Association of REALTORS® Proposed Settlement

Dear valued clients, customers, and friends,

You may have seen the news stories about the recent proposed settlement from the National Association of REALTORS® (NAR). The good news is that our brokerage has been preparing for these potential changes for 2-3 years. Unfortunately, there has been a lot of misinformation about our industry in the click-bait headlines. 

Below is a basic understanding of what this proposal means:

What is the NAR settlement all about? 

On Friday, March 15, 2024, The National Association of REALTORS® announced a proposed lawsuit settlement that included a monetary settlement, as well as two changes to business practices: removal of the offer of Buyer Agent Compensation in NAR-owned MLSs and adding a requirement for Buyer Agents to use Buyer Representation Agreements. 

What will change and when? 

Assuming this proposed settlement is approved, the changes will take place in mid-July of 2024. We expect MLSs to remove the offer of Buyer Agent Compensation. As this proposal is written, sellers may still offer Buyer Agent Compensation, without it being published in MLS. There are some concerns that this could be a step away from consumer transparency. Buyer Agents will also need to have signed agreements, just like how Listing Agents need to have Listing Agreements.

Did or does everyone charge 6%?

No. This allegation is wildly inaccurate. Different marketplaces see different ranges of compensation. From town to town, company to company, and listing to listing, there has always been variation in our marketplaces. The industry does not – and cannot – collude or collaborate on what a universal commission rate can be. Commissions are derived from the brokerage and our services, market share and experience; not what our competitors are asking for. 

Will this lower housing costs? 

Home prices in a free market economy are determined by supply and demand. Nothing in this settlement addresses the lack of supply or the high levels of demand. Therefore, this does not lower the cost of buying a home.

What if I have an existing contract? 

Nothing is likely to change before the July target date. However, we are awaiting the final details of the settlement as approved by the court. At this time, our understanding is when the July target date arrives, the only change to an existing contract is that no offer of Buyer Compensation from the List Agent or Seller can be published in the MLS and agents working with Buyers will need to have written contracts to represent.

What consumer protections are in buyer representation?

A Buyer Agent has the responsibility of being an exclusive Fiduciary. Fiduciary duties are all the duties that a real estate agent or broker is legally beholden to when working with a client. These duties, which are in the client's best interest, are: obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care.

Does a buyer in the market need buyer representation? 

A buyer does not have to use a Buyer Agent. However, in a low inventory “seller's market”, it is difficult to compete against other buyers who are getting expert advice on offer strategies and negotiation.

What can the listing agent not do for the buyer?

  • Offer strategies that have your interests in mind
  • Recommend Home Inspectors (Under Massachusetts law, only a Buyer’s Agent exclusively representing the Buyer can recommend a Home Inspector)
  • Act as your exclusive Fiduciary
  • Provide Comprehensive Market Analysis interpretation for pricing
  • Advocate for you

What are the risks with a buyer not having a representative? 

  • Not learning about off-market opportunities
  • Not being informed and educated about the market
  • Not having a well-prepared, competitive offer in a multiple offer situation
  • Not getting a house

Will buyer agency go away?

No. Buyer Agency is the way that buyers get expert guidance — from preparation and search, to offer strategy and negotiation, and so much in between. A home represents an important investment — one that continues to be at the heart of financial wellness for most Americans.

 

Gibson Sotheby's International Realty’s priority is to focus our resources on those we serve. To our clients, thank you for the privilege of representing your interests and providing outstanding service as you navigate one of life’s most important and complex transactions. We will continue to communicate with you as we understand more about their settlement and the ongoing industry dynamics. Please don’t hesitate to reach out to us with questions.

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