TLTR? There’s a shorter version here.
The recent settlement between the National Association of Realtors (NAR) and various legal challengers has sent ripples through the real estate industry, with wide-ranging implications for everyone from first-time homebuyers to seasoned agents in Nashville and beyond. As we navigate these changes, it’s essential to understand both the immediate effects and the broader implications for the future of real estate transactions. Here’s an overview, blending new insights with our previous discussion to create an informative guide for our readers.
Understanding the NAR Settlement
With no admission of guilt, NAR has agreed to a $418 million settlement. This will be in addition to previous settlements already agreed to by large brokerages nationwide. If you’ve sold a home in recent years, you will soon be able to join the class.
- Elimination of Set Buyer Broker Commissions: Starting August 17th, 2024, the MLS will no longer publish “cooperating commission” to the buyer broker, making buyer-side commissions entirely negotiable.
- Written Buyer Representation Agreements: Buyers must now sign a written agreement with their buyer representative prior to previewing houses.
The Impact on Real Estate Practices
For Sellers: The potential for reduced commission costs could present an opportunity to retain a more significant portion of the sale proceeds. We’ve personally offered a competitive 2% commission rate to sellers for years, so we don’t anticipate a change there.
For Buyers: The shift towards negotiable buyer agent commissions introduces opportunities and challenges. Cooperative buyer agent commission paid by the seller won’t be gone completely, but it will now be negotiated inside the purchase contract instead of automatically assumed.
Navigating the New Landscape
It’s important to know that each agent and office will have different policies and procedures, but the two changes highlighted above are now in effect for all member agents of NAR.
Our Approach Explained
We’ve decided to set our fees at 2% on both sides of the transaction. That’s 2% if you list with us and 2% if you buy with us.
The Seller Experience: When you decide to work with us as your listing team, we’ll still use the same, now slightly altered forms and documents provided by the state association. The only compensation mentioned will be our 2% listing fee, which is payable only upon a successful sale. As your agents, we will be responsible for providing professional photography, videography, and all marketing collateral. The only change we will make is a sentence or two explaining that you, as the seller, are open to receiving and reviewing offers with concessions. The reason for this is threefold.
- While we can no longer advertise a specific pre-set offer of compensation within the MLS to a buy-side agent, the rules don’t prohibit you from ultimately paying both commissions. The reality is that most buyers will still want you to foot the bill for some or all of it. Many buyers, particularly first-timers, won’t have the wherewithal to pay it themselves.
- Our MLS has a new field that allows us to indicate that you are open to negotiating concessions. This info will be syndicated to other sites like Zillow, Realtor.com, and Redfin.
- It allows us, as your agents, to communicate verbally with other agents and, through off-MLS advertising, that you are open to paying a buy-side commission with a strong offer.
As a seller, you should expect that most offers will ask for buy-side compensation in some amount. No matter who you list your property with, you should strategize and discuss this with your agent when deciding on a list price. We expect that sellers who opt to forego participating in compensation entirely will struggle with longer days-on-market, fewer showings, and a lower eventual sales price. Some buyers may even instruct their agents not to show them houses that don’t offer help.
The Buyer Experience: Before touring homes, you should hire an agent. If you work with us, we aim to help you find potential savings to help you keep more money in your pocket.
Our buy-side commission rate is 2% of the sales price, lower than industry norms. When sellers offer a higher compensation rate, we work to pass the difference to you. Many sellers are still offering 3% buy-side compensation. It’s no longer advertised in the MLS, but when we hear from a listing agent that 3% is already factored into the list price, we have a few strategies for helping you. We might make a lower starting bid, or we can ask for that 1% to go towards a seller credit towards your closing costs. Cash rebates after closing are not allowed in Tennessee, so we find legal alternatives to pass savings on to you.
If the seller is unwilling to compensate us or they’re offering less than 2%, we have strategies for that, too. You can opt to pay us directly, but if that’s a hardship, we recommend offering a slightly higher price on the home to offset that upfront cost into your mortgage.
We aren’t advocating for you to pay the list price on every home. For every offer, we’ll run a sales analysis to see if the asking price is fair or even reasonable. Plus, we’ll discuss other strategies that could strengthen your negotiating position.
When we take on a new buyer client, it’s essential that we meet for a consultation session first.
Additionally, we always offer an easy-out guarantee. If we aren’t the right agents for you, we’ll cancel our representation agreement.
Conclusion and Looking Forward
As an independent brokerage with over 20 years of experience in Nashville, we’re uniquely positioned to navigate these changes. We’ve always advocated for client-friendly commission structures and transparency in every transaction. The evolving real estate landscape reaffirms our approach, emphasizing the importance of clear communication and tailored strategies to meet each client’s unique needs.
The NAR settlement represents a significant shift in the real estate industry, potentially benefiting sellers while posing new challenges for some buyers and agents. Our commitment to our clients remains unchanged. We will continue to offer our expertise, reduced commission rates, and a transparent, client-first approach to real estate transactions in Nashville.
We are excited to watch how the industry adapts. We expect to see new business models emerge whereby some agents or brokerages may offer a menu of services that could see traditional buyer-side commissions morph into individual fees. Upfront retainers, hourly fees, or payment for specific services could soon become options.
Stay tuned for further updates as we navigate these changes together. Don’t hesitate to reach out if you have any questions or need guidance on your real estate journey. We’ll explore how these industry shifts can work to your advantage.
Please comment below to keep the conversation going!
Thanks for explaining this and such clear detail.
If a realtor is serving as a facilitator and not an agent and . As a buyer do i have to pay her 3% of commission? I don’t remember signing a contract agreeing to that.
Hi Lorena, the agent’s status of facilitator or designated agent is not of consequence. If you are in Tennessee, ask for copies of the Purchase And Sale Agreement, the Confirmation of Agency Status, the Buyer Representation Agreement (if signed) and/or the Written Agreement With A Homebuyer Before Buying A Home (if signed). One of those documents should outline how commissions are to be paid. If still unclear, ask your attorney to get involved and call the managing broker of the agent’s office.