By Cory Allen, Realtor at The Regan + Ferguson Group
You’ve most likely heard rumblings about the last week’s proposed settlement agreement (currently pending judge approval) between the National Association of Realtors and home sellers, related to broker commissions. Sending shockwaves through our industry, the $418 million dollar settlement and the accompanying policy changes will certainly disrupt several longtime practices in our business, but we are optimistic that the changes will allow even more transparency into the choices that consumers have regarding real estate services and compensation.
Despite what the media is portraying, commissions have always been negotiable and the ruling will essentially just change the way that brokers have traditionally advertised what a seller is willing to compensate the broker that represents the buyer of their home. It will no longer be advertised as part of the MLS and instead will most likely be negotiated as part of each offer. Additionally, there are new requirements (as part of the NAR settlement & a new Indiana law) for the documents that a buyer will be required to sign as part of their commitment to their agent.
We thought it might be helpful to answer some of the most common questions we are fielding about these changes.
Does this mean a buyer is going to start paying their agent’s commissions?
Not necessarily. Again, commissions have always been negotiable and will continue to be negotiated with the clients that we serve.
How do we see this impacting home prices?
The full impact is yet to be seen, but we don’t envision any significant changes to property values. Home prices continue to be based on demand/inventory in the market and changes to the compensation model for agents should have no impact on the home prices. Nothing in the current NAR policy has increased the costs for buyer or sellers and we don’t foresee that changing.
What am I now required to sign as a buyer that I wasn’t required to sign previously?
Based on the new Indiana law that Governor Holcomb signed just a few days prior to the NAR announcement, we are now required to have written representation agreements between us and all homebuyers. Similar to the Listing Contract that a seller signs, a Buyer’s Exclusive Agency Contract must be signed and will outline in writing what to expect from their real estate brokers, the terms of their compensation, and how it will be paid.
We are doing our best to set the record straight, stay informed on the topic, and to fully understand how this might impact buyers and sellers in our local market. We wanted to share what we know at this point and how we see any potential changes impacting consumers.
