NAR Changes: Are They Good or Sucky?

It’s been six days since the new NAR ruling took place, and you’d think the sky had fallen on brokerages everywhere. To a certain extent, it feels that way. Especially in light of all the misleading media and sudden real estate gurus. First, to recap. Here’s the new rules in a nutshell:

1. Buyers are now required to sign a contract with an agent before the agent can show them any properties. This is not exactly a brand new requirement, as most states (and any agent worth his salt) have already adhered to this. However, it is now mandated for all agents who are members of the National Association of Realtors (NAR)—a group that includes a substantial 1.5 million agents across the U.S.

2. Commission changes – Prior to the settlement, NAR members who listed properties would offer shared commissions through local multiple listing services (MLSs)—the platforms where most homes are listed. Typically, sellers paid around 6% of the home’s sale price, with 3% going to their own agent and 3% to the buyer’s agent.

Now, MLSs are no longer allowed to display these offers of compensation. While sellers and their agents can still negotiate and agree to pay a buyer’s agent fee, this must be done separately from the MLS. As a result, there may be situations where sellers won’t contribute to the buyer’s agent fee, placing the full responsibility on the buyer. Buyers will then need to either cover their agent’s fee out of pocket or handle the transaction independently without an agent.

First, the gloom and doom, I-need-a-drink, the sky is falling, sucky stuff: 

~ Many first-time homebuyers will not have extra cash to pay a buyer’s agent. They will either end up unrepresented or try to jump through hoops with their lenders to see if they can increase the sales price and then have the concessions/money to pay their agent at closing. Unrepresented buyers could potentially be taken advantage of, and some lenders won’t allow a buyer to include money for a buyer’s concession. 

~ Some agents will knowingly or ignorantly be guilty of steering their buyers towards properties that will offer a buyer agent compensation.

~ Some boneheaded listing agents will pressure their sellers to offer x amount to a buyer’s agent.

~ Buyer’s agents might end up working for free.

~ Sellers will lose money.

While the above may happen, there are some positives in the sky-falling free-for-all the real estate world currently feels like.

~ All prospective buyers must now sign some sort of agency agreement to even tour a home. This protects the agent who is showing complete strangers an empty house and clearly spells out the details of the client relationship with the buyer.

~ If done correctly, this arrangement should provide transparency to the buyer about their possible financial responsibility.

~ Crappy real estate agents will be weeded out. Harsh, I know, but there are a lot of those, which is why we’re in that situation.

So to my real estate colleagues, buck up, little campers, it’s just an acorn, not the sky that’s falling. Let’s tackle this new challenge head-on holding on to our ethics, our sanity, and our whiskey bottles.