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Homebuyers to See Changes in Two Weeks: What to Know
Homebuyers are set to see some major changes as the settlement rules for the National Association of Realtors go into effect beginning on August 17. The settlement, originally reached on March 15, got rid of the standard 6 percent commission on home purchases. The NAR also agreed to pay $418 million in damages and create new rules for broker compensation.
The settlement followed several cases alleging that the NAR — which has more than 1.5 million members — lacked transparency on commission rates and left homebuyers with excessively high fees.
"Prior to and throughout the Settlement litigation, NAR has remained committed to protecting consumer choice and transparency, and to making homeownership accessible for all Americans. With these new resources, Realtors are even better equipped to inform and empower consumers and continue to demonstrate the value they bring to real estate transactions."
— Nykia Wright, NAR Interim CEO
"It's like we're shaking up a snow globe. Everything's going to look different when it settles."
— Michael Ryan, finance expert and founder, michaelryanmoney.com
What Changes for Homebuyers
For homebuyers, several things may look different during their buying process.
Written Buyer Agreements Before Touring
Buyers would sign a written agreement with real estate agents before even touring a home. The agreement outlines the specific amount of compensation the real estate agent is expected to receive — whether it's a flat fee, percentage, or hourly rate. It would no longer be acceptable to have buyer broker compensation based on whatever the seller wants to offer.
Compensation Caps and Transparency
The agent would be prohibited from getting compensation for brokerage services from any source exceeding the amount agreed upon with the buyer. There would also be a clear statement that broker fees and commissions are negotiable and not decided by law.
Applies to In-Person and Virtual Tours
These written agreements apply to both in-person and virtual home tours in hopes of providing greater transparency on home-buying costs.
Seller Closing Cost Contributions Still Allowed
Under the new agreement, homebuyers can still accept offers from the seller to pay closing costs, but the amounts paid to the broker must be specified.
"A new buyer agreement will disclose all the fees associated with an agent and the compensation they and other entities will receive if the house is purchased. It's a settlement that could in theory benefit buyers in terms of transparency, but it also adds additional tasks to the home-buying process."
— Alex Beene, financial literacy instructor, University of Tennessee at Martin
Some Realtors have pushed back on the settlement rules, which could lower real estate commissions by 25 to 30 percent, recent estimates showed. In the former real estate business model, sellers paid their broker and the buyer's broker — fees many have criticized as the housing market faces an affordability crisis.
"The new NAR settlement will be a shock to the system for some time for both buyers and real estate professionals, but ultimately, I believe it will create a better experience."
"The better agents who provide a better experience for their customers will still continue to be prominent. The agents who aren't providing enough service will lose clients. Overall, by compensation being linked to buyers now, it ultimately provides them the opportunity to hire buying experts and have a better experience."
— Ralph DiBugnara, President, Home QualifiedAs a result of the settlement's rules, some new creative business models could emerge, like flat-fee services and pay-by-the-hour agents. However, it could also cause higher costs for homebuyers in different ways.
"Sometimes when we try to lower costs in one area, they pop up somewhere else. It's like squeezing a balloon. Sellers might just pocket the savings instead of lowering home prices."
— Michael Ryan, finance expert and founder, michaelryanmoney.com
"It's going to be less about who's offering the standard package and more about who's providing the best value. Don't just look at the price tag, look at what you're getting for your money."
— Michael Ryan, finance expert and founder, michaelryanmoney.com
Key Takeaway
The NAR settlement marks a fundamental shift in how real estate commissions work. Ralph DiBugnara sees it as a net positive — agents who deliver real value will thrive, while those who don't will lose clients. For buyers, the new written agreement requirement means more transparency upfront, but also more decisions to make before you even walk through a door.
Originally published on Newsweek by Suzanne Blake · August 2, 2024.
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