Home buyers will need to navigate significant industry changes stemming from the NAR settlment. Bennion Deville Homes put together a guide to what you need to know when buying a home.
Everything Future Home Buyers Need to Know about the NAR Settlement
The recent settlement by the National Association of REALTORS® (NAR®) has significantly changed the real estate industry and the process of buying and selling homes. This settlement aims to create a more transparent and fair process for home buyers. By understanding these changes and following best practices, future home buyers may navigate this new landscape with confidence.
Coverage of these changes has highlighted the broad strokes of the settlement but has not gone into detail about what these changes mean for home buyers. Our goal is to outline what has changed along with some best practices to follow to help you successfully purchase a home in this new era for the real estate industry.
How the Changes Came to Be
Earlier this year, NAR® settled a series of lawsuits alleging that the trade group’s policies around buyer broker compensation were anti-competitive, citing the practice of requiring sellers to offer broker compensation through the Multiple Listing Service (MLS) as a measure that inflated home prices. Although NAR® has admitted no wrongdoing in the settlements, they agreed to major changes to its practices that all home buyers should be aware of.
Key Changes to the Home-Buying Process
Written Agreements: Home buyers must sign a written agreement with their agent before touring properties. This agreement clearly outlines the agent’s compensation terms, which will ensure transparency and creates an understanding between the buyer and the agent.
Compensation Disclosure: This agreement will include a specific disclosure of the compensation amount or rate the agent will receive in exchange for their services. The agreed upon compensation must be defined and not open-ended or on a sliding scale.
Prohibition of MLS Compensation Offers: Offers of compensation are no longer allowed to be made through the MLS. This is designed to eliminate the practice of sellers indirectly paying buyer brokers, which was seen as a potential conflict of interest. However, sellers may choose to offer buyer broker compensation as a way to attract buyers to their listing. These offers may be advertised through the listing agent and their brokerage, just not through the MLS.
Negotiability of Fees: Agent fees have always been negotiable. However, by decoupling the buyer broker’s compensation from the MLS, it is the responsibility of the buyer and their agent to negotiate and agree upon a fee separately. Buyers should have a discussion with their agent about compensation so they understand what their agent is going to do in exchange for the fee.
What Future Home Buyers Should Know
The changes to the rules are designed to ensure buyers have a clear understanding of the compensation their agents will receive. In theory, this will help buyers make more informed decisions. Because buyer broker compensation is now agreed upon separately, buyers may have additional power to negotiate fees with their real estate agent. By making it clear these fees are not set by law and are negotiable, there’s potential for buyers to save money depending on the situation and circumstances. Through their agent, buyers may also use buyer broker compensation as a negotiation tactic with a seller to help offset the cost of the agreed upon buyer’s agent fees.
Another big change is the requirement of a written agreement between the buyer and their agent prior to touring homes. This agreement will detail the services provided by the agent and the compensation terms.
Additionally, the MLS will no longer display offers of compensation, which means you will need to discuss and agree upon buyer broker compensation directly with your agent. However, brokerages may publicly advertise offers of compensation for their listings. For example, Bennion Deville Homes will display available offers of compensation for our brokerage’s listings on our website if a seller gives us authorization to advertise the offer.
Best Practices for Home Buyers
Ask Questions: Understanding how this new procedure works is essential to making a proper decision. Ask your agent about the services they provide, what they will do for the agreed upon fee, and any other inquiries you may have about the transaction process.
Engage: Since broker fees are negotiable, engage with your agent and discuss these fees up front to avoid any surprises later in the process.
Review Agreements Carefully: As with all documents related to a real estate transaction, review any agreements carefully to ensure accuracy, and that the paperwork reflects the terms you have negotiated with your agent.
Stay Informed: Keep up to date on any changes to real estate practices and the industry at large. Being informed will help you have an even better home-buying experience and allow you to ask the right questions of your agent.
As the desert real estate leader and one of the top independent real estate brands in the nation, Bennion Deville Homes is uniquely positioned to help you. Whether buying or selling a home now or in the future, your Bennion Deville Homes agent is an excellent resource to direct any questions you may have about the NAR changes, the state of the real estate market, the value of your home, or anything else related to real estate. We will unlock possibilities for you.
