The 2024 NAR settlement will continue to make waves long after its laws are implemented. If you are buying or selling a home, or if you work in real estate, it’s important that you understand what these changes mean for the US housing market. From the lawsuit’s origins to the potential long-term effects, here’s what you need to know.
Before you read on, are you buying or selling property? LPJ Legal specializes in protecting our clients while they navigate a full spectrum of residential and commercial legal services. From simple real estate transactions to more complicated contracts and disputes, our lawyers will help you successfully resolve any real estate legal matter. To schedule a consultation, visit the LPJ Legal website, or call us at 202-643-6211.
What Caused the NAR Commission Settlement?
This settlement stems from Burnett v. National Association of Realtors et al., a class-action antitrust lawsuit filed in Missouri by a group of home sellers. The plaintiffs accused the NAR (and large real estate brokerages) of colluding to keep seller commissions artificially high, inflating costs for property sellers across the board.
The Financials: What Was the Settlement?
NAR agreed to a $418 million settlement in March 2024, designed to compensate the Missouri home sellers who launched the lawsuit. While that number is significant, the case also brings sweeping changes to the way commissions work in real estate transactions nationwide.
What Changes Will We See from the NAR Settlement?
Starting in August 2024, several new rules came into play for real estate professionals, especially those affiliated MLS systems. While these rules are currently in play, please note that a hearing for final approval of this settlement and all subsequent changes will take place on November 26, 2024.
- Goodbye to Automatic Commission Offers: Arguably the biggest change we’ll see from the NAR settlement is the removal of the offer of compensation field from MLS platforms, meaning listing agents will no longer be able to automatically offer commissions to buyer agents. Agents and MLSs will also be prohibited from creating external methods for these offers.
- No More Blanket Offers: The 2024 NAR settlement eliminates the requirement for sellers’ agents to make blanket unilateral offers of compensation to buyer brokers.
- Clear Compensation Agreements: Any compensation agreements must now be objectively clear, with set terms including flat fees, percentages, or hourly rates, leaving no room for open-ended terms. However, the agreement does leave flexibility in that it does not dictate one specific payment system, leaving multiple options for agents and buyers to decide on a compensation structure.
- Mandatory Buyer Representation Agreements: Starting August 17, 2024, agents must formalize their relationships with buyers through representation agreements that clearly outline services and costs, increasing transparency. If you are an agent with an existing agreement that was drafted prior to the settlement, you may need to amend the agreement, or have buyers sign new agreements to comply with these rules.
How Will the NAR Settlement Affect Buyers and Sellers?
The changes will shift the landscape for both buyers and sellers, with a heavier emphasis on buyer transparency and competition:
- Buyer Control Over Compensation: The responsibility for determining agent compensation will now primarily fall on buyers, not sellers. However, sellers can still negotiate or offer to cover these costs during negotiations.
- More Transparent Market: Clearer rules around MLS agent compensation are expected to increase the transparency within real estate transactions, helping buyers better understand the fees they’ve been assigned.
What’s Next?
As mentioned, there’s still some time before all settlement changes are finalized. A court hearing scheduled for November 26, 2024 will determine final approval of the settlement.
For all of your real estate legal needs, LPJ Legal specializes in protecting our clients while they navigate a full spectrum of residential and commercial legal services. From simple real estate transactions to more complicated contracts and disputes, our lawyers will help you successfully resolve any real estate legal matter. To schedule a consultation, visit the LPJ Legal website, or call us at 202-643-6211.
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