Last Updated: March 21, 2024

What does the National Association of Realtors (NAR) Agreement Mean for Home Buyers

Written By: Pearce RealEstate
NAR Agreement

The National Association of Realtors (NAR) just agreed to a $418 million settlement after facing lawsuits from home sellers. These lawsuits claimed antitrust violations by NAR, allegedly causing higher commission rates. Besides the big payout, this settlement also requires NAR to drop its commission rules, marking a historic overhaul in the way real estate transactions are conducted in the United States, with significant implications on the Connecticut market as well.

The Traditional Commission Structure

Traditionally, the NAR used to ask home sale listing brokers to give a commission to the buyer's agent, typically a percentage of the home's sale price, split between both agents. This setup has faced criticism for setting a fixed standard for commissions, limiting competition, and favoring brokers over consumers. In a Kansas City federal court case, a jury ruled this practice as collusive, resulting in a $1.8 billion judgment against NAR an individual companies, ending a spate of such cases around the country.

Changes for Buyers and Sellers

The newly announced settlement, awaiting approval by a federal court, suggests changing the existing commission structure. It eliminates the requirement for sellers to suggest compensation to buyers' agents on the MLS platform, a move that could have an impact on real estate sellers and buyers. This could lead to change in the division of home buying costs, as the traditional commission setup is a big part of closing expenses that sellers currently pay.

This also shines a light on the fact that some agencies didn’t always explain their commission splits with sellers. For example, when you split a commission unevenly between the selling side and the buying side, the listing firm needs to explain to the sellers what that might mean for showings and potential buyers.

This change also highlights the value of a good real estate agent. Having someone that you can trust to take care of you through this process is even more valuable now than ever before, as this settlement makes the process slightly more complex.

Potential Market Impact

This shift could bring about a period of uncertainty and adjustment for the industry. Real estate agents may need to tweak their business models, and both buyers and sellers will need to navigate changes in how properties are listed, shown, and sold. The long-term impact on the market's dynamics, like the role and pay of agents, is still uncertain. If all goes the way it should, buyers and sellers will be focused on their own bottom lines and will factor in commissions the way they do other expenses. In the long run, it makes sense for parties to pay for their own representation, but this will have to be explained and planned for, during the transaction. As the settlement details are sorted out, everyone in the market will have to adjust to a new reality that might change the U.S. housing market temporarily.

What Does this Mean for Connecticut Home Buyers?

Connecticut home buyers might not see immediate effects from the NAR's settlement on their home purchase. Connecticut has a very low listing inventory, and it is therefore a seller’s market.  Buyers can talk about not paying commissions, although they will have to consider that in a situation with multiple offers on one property. Sellers and their agents will have to take the time to translate offers into the cash value for them.  In the end, a transaction can be structured in many ways, but it needs to work for both parties. However, it's important to note that this will not happen overnight and may take some time for the new changes to roll out fully.

A Move Towards Flexible Commission Rates

Under the new terms, home sellers would no longer be allowed to specify commission rates for buyers' agents on the MLS, and it would be up to buyers to negotiate how much they're willing to pay their agents. This might lead to a variety of payment models, including flat fees or hourly rates, rather than the traditional percentage of the home sale price. Agents who are good—who add value—will continue to command fair commissions, as buyers look for insight in a strong market.

As this change takes place, both sides will want to try to save money, and everything will be negotiable. This leaves an opportunity for buyers and sellers that don’t know better to make a poor bargain, so having a trustworthy agent that is dedicated to helping you achieve your goals will be even more important.

Changes in Interactions with Real Estate Agents

One significant change that Connecticut home buyers will avoid is the reality of buyer brokerage, which has been mandatory in Connecticut since 1990.  Other states may have problems introducing this concept, but it’s old hat to Connecticut agents.  However, since it will not be possible for buyers to have their brokerage fees paid automatically through the MLS, there may have to be more clarity on what services are being provided and at what cost. This could help buyers make more informed decisions, and potentially negotiate alternative deals with their agents.

More Complex Negotiations

However, this also means that negotiations could become more complex, with buyers possibly facing increased financial burden if they arrange to pay their agents outside of the settlement. Buyers might ask sellers to pay the buyer’s agents at closing. This is another aspect that would need to be negotiated.  Of course, these fees have always been negotiable, but the new regulations will highlight the need for robust disclosure.

Overall, the NAR's settlement could have positive implications for Connecticut home buyers. They will have more choice in deciding how to be represented, so the true effect remains to be seen.  We would be happy if it meant that more attention is paid to the choice of agent and company, since offerings will differ, and we believe that, at our firm, we can demonstrate clear added value.

Stay Informed with a Trusted Real Estate Agent by your Side

This fundamental change in how real estate transactions are conducted might encourage innovation in the industry, but it could also present challenges, particularly for buyers who are not well-versed in real estate transactions or who have limited financial resources. Connecticut home buyers and sellers alike would benefit from familiarizing themselves with these upcoming changes and considering how those might impact their own real estate transactions. It's a crucial time for the real estate market, emphasizing the importance of having a well-informed real estate agent by your side to navigate these changes successfully.


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Pearce Real Estate is a full-service real estate company for Greater New Haven and Middlesex counties.  Check out the many real estate buying services that we provide, both in-house, as well as through our partners and affiliates.

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