The National Association of REALTORS® (NAR) is implementing significant changes to real estate transactions starting August 17th, 2024. These new rules, stemming from a lawsuit settlement, will impact how broker commissions are handled and how buyer’s agents engage with clients. As these rules take effect, it’s crucial for buyer’s agents, seller’s agents, and clients to understand how these changes will influence their roles and decisions in real estate transactions.
Buyers Agents: New Requirements For Client Engagement
One of the most significant changes under the new NAR rules is the requirement for buyer’s agents to have a signed agreement with clients before showing any properties. This requirement applies even if the showing is virtual, as long as the agent facilitates the viewing. Agents must clearly outline their compensation in these agreements, specifying either a dollar amount or a percentage of the transaction. This transparency ensures that buyers know exactly what they’re paying for their agent’s services and prevents any unexpected costs.
This rule emphasizes the importance of formalizing the agent-client relationship early in the process. Without a signed agreement, agents won’t be able to tour homes with potential buyers, which could lead to delays or missed opportunities in a competitive market. Additionally, agents must be cautious about adhering to the agreed-upon compensation terms, as they cannot accept more than what the buyer is willing to pay.
Seller's Agent: Understanding The New Commission Disclosure Requirements
For seller’s agents, the changes primarily focus on how commissions are handled in the MLS. While NAR-affiliated MLSs will no longer display broker commissions, agents must now navigate the nuances of discussing commissions with their clients directly. Under NAR’s code of ethics, it’s the responsibility of the broker to help sellers understand their options regarding offering commissions to buyer’s agents.
Offering a commission to the buyer’s agent can be a strategic decision, potentially increasing the property’s visibility and demand. However, the decision must be communicated clearly, ensuring that the seller is fully informed of the implications. With the MLS no longer displaying this information, these discussions will likely move to more direct channels of communication, such as in-person meetings, phone calls, or even text messages.
In regions like New England, where MLS PIN operates independently of NAR, similar yet distinct rules apply. Sellers can choose to offer commissions, but they must be clearly disclosed in the listing agreement. This agreement must also recognize the cooperating broker as a third-party beneficiary, granting them the right to enforce the agreement.
What Homebuyers and Sellers Need To Know
For homebuyers and sellers, the NAR settlement introduces changes that might seem significant but, in practice, maintain much of the status quo regarding agent commissions. The most common misconception is that these new rules will drastically change the cost of agent representation. In reality, commissions have always been negotiable, and this remains unchanged. Buyers and sellers can still negotiate terms with their agents, whether they prefer a flat fee or a percentage-based commission.
Moreover, these changes underscore the importance of understanding the value of professional representation in real estate transactions. While it’s entirely possible to buy or sell a property without an agent, studies consistently show that clients who work with experienced real estate professionals are generally more satisfied with their outcomes, achieving better terms in their deals.
As these new rules come into effect, it’s vital for all parties involved in real estate transactions to stay informed and understand how these changes impact their roles and decisions.
Whether you’re an agent navigating new ethical requirements or a client weighing the benefits of professional representation, being proactive and informed will help ensure smooth, successful transactions in the evolving real estate landscape.
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