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    What Is the Impact of the NAR Lawsuit Settlement on Home Buyers?

    Following a landmark antitrust settlement by the National Association of Realtors (NAR), the stage is set to change how agents offer and sell real estate, potentially opening the doors to new compensation structures.

    In short, subsequent policy changes have effectively separated the once-traditional commission split. The seller’s agent is no longer required to offer compensation to a buyer’s agent to list a property via an MLS, and this has introduced the expectation that a buyer may now be responsible for compensating their agent.

    The two key changes to come from the NAR controversy are:

    • NAR agreed to create a new MLS rule prohibiting offers of compensation on the MLS. This would mean that offers of compensation could not be communicated via an MLS. Still, they could continue to be an option consumers could pursue off-MLS through negotiation and consultation with real estate professionals. Read more.

    • NAR also agreed to create a new rule requiring MLS participants working with buyers to enter into written agreements with their buyers before the buyer tours a home.

    NAR effect on buyers 1

    As a Buyer, What Does the New NAR Policy Mean for You?

    Effects of Change on the MLS

    A compensation offer may not be communicated via an MLS, but this information is readily available to any interested party by simply contacting the seller’s agent outside of MLS avenues, such as email or a phone call. The new policy only directs that compensation will not be communicated via an MLS, but could continue to be an option through off-MLS negotiation and consultation.

    Negotiating Differences in a Buyer’s or Seller’s Market

    Where consumers will likely first see differences is whether they are looking to buy or sell within what’s frequently dubbed a “Buyer’s” or “Seller’s” market.

    Seller’s Market

    When housing supply is low and demand is high, market conditions tip in the seller’s favor, creating favorable terms and conditions for home sellers.

    Buyer’s Market

    When housing supply is high and/or demand is soft, market conditions tip in the buyer’s favor.

    Although the first question in negotiations will be to determine what, if any, commission compensation will be offered from a listing, there are some general expectations that buyers can prepare for.

    In a highly competitive seller’s market, buyers may need to prepare to finance their buyer’s agent fees to present a competitive bid. Buyers offering to finance the commission split themselves, and thus, not paid from the seller’s proceeds, would be a powerful concession and have a strong chance of winning over other offers. However, a seller may have still elected to pay the traditional commission split to attract the most buyers and views to their listing.

    In a buyer’s market, an offer with the seller's concession of a commission split to be paid from the seller’s proceeds is a fair offer, particularly if demand has been soft and homes are sitting on the market. Time on the market is always a key indicator in negotiations, and an eager seller will likely be open to negotiating.

    young couple looking at paperwork with laptopPhoto from Canva

    Can I Still Use the VA Loan? 

    Yes, with a stipulation. This is certainly a dicey area and a valid question with the NAR change. One of the many rules in using a VA Loan is that borrowers cannot pay brokerage fees, including fees or commissions charged by a real estate agent or broker.

    The VA does not prohibit using “Buyer Brokers,” but it is quite clear that veteran purchasers may not, under any circumstances, be charged a brokerage fee or commission in connection with the services of a buyer’s agent. The VA does not prohibit a veteran (or user) from seeking independent legal counsel or paying a fee for legal services in connection with purchasing a home, but the VA will not pay any legal fees.

    This was originally a measure designed to shield VA users from additional costs. However, with the NAR change opening the doors to separately funding the commission split between buyers and sellers, this can put those looking to use the VA Loan between a rock and a hard place. If the seller does not cover the commission split, the buyer’s agents can either cut their commission fees or look to the buyer to cover the commission cost. Fees would reasonably range from one to three percent of the purchase price, likely tens of thousands of dollars out-of-pocket to a buyer.

    Terrence Hayes, the VA press secretary, stated that the VA and Justice Department are working together on a path forward and monitoring the situation closely. NAR has submitted a letter to the VA urging them to revise fee policies for those using their VA home loan benefit.

    It is possible that the VA could make buyer commissions a "fee" that users would then be able to cover within a VA Loan. Time will tell, but the topic is gaining discussion.

    Will Savings Transfer to Buyers?

    Contrary to many news headlines, several arguments can be made about why we aren’t likely to see a marked housing price decrease following the NAR changes. The theory is that if a seller no longer has to pay for the buyer’s agent commission, these two to three percent savings will be deducted from list prices nationally, and the savings will be passed on to would-be buyers.

    Prices aren’t likely to soften, as many areas still have chronically low inventory. Low inventory, coupled with high demand, tips to a seller’s market and often bidding wars. It is reasonable to assume that sellers may choose to pocket any potential savings from not covering the buyer's portion of the commission split, rather than using it to lower their list price.

    Additionally, a comparative market analysis, or comp, does not usually pad the list price to factor in the compensation commission. A market comp estimates a home’s list price based on recently sold comparable homes, including age, location, number of beds/baths, square footage, home condition, neighborhood, acreage, recent major renovations, and overall market timing. A market comp does not traditionally arrive at a list price, factor in the commission split, and then subsequently alter the list price.

    Another market factor to consider is that mortgage interest rates for 2024 remain persistently high, averaging well over seven percent. Those looking to buy a home have remained hopeful that the Federal Reserve will decrease short-term interest rates and open the door for more favorable lending terms.

    If rates decrease, this could entice more sellers to list, particularly those waiting on the sidelines for more buyers to enter the market. Where buyers could see stronger negotiating opportunities is if too many sellers list at once, saturating an area with listings. This would tip conditions in the buyer’s favor and offer more room for negotiation, particularly in the commission split.

    mortgage loan paperworkPhoto from iStock.com/BrianAJackson

    Interview Questions for a Buyer’s Agent

    Now, more than ever, it will be critical to carefully choose the right real estate agent for your buying needs. Tapping into your military family network for agent referrals is a good start, but the industry is changing, and it is in your best interest to interview any top contenders to ensure they are well-versed in the changing market dynamics, particularly if you will be looking to use a VA loan. 

    Some questions to ask a potential agent: 

    • With the NAR decision, what is the agent’s (or agency’s) compensation structure, and what services are included? In other words, will your agent ask you to pay a commission or flat fee or negotiate this with a seller?
    • Do you offer a flat-fee service or a discounted commission for military buyers? (A commission of 2 to 2.5 percent of the list price has been standard, but it is negotiable.)
    • Do you believe we are in a buyer’s or seller’s market, and why?
    • Are you intimately familiar with the VA Loan, VA loan assumption, and its restriction with brokerage fees?

    The real estate industry is poised for change, but military families are never alone—and you can count on MilitaryByOwner to be there with you and your family through every step of your housing journey.

    Get more help for your home buying journey with our free guide below.

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     Impact of NAR Lawsuit Settlement on Home Buyers

    Kristi Adams


    Kristi Adams

    Kristi Adams is a proud Air Force spouse and served on active duty herself as a Space and Missile officer. She is an Associate Professor for the University of Maryland’s School of Architecture, Planning, and Preservation and holds a Master of Real Estate Development degree from the university. She and her husband have profitably owned rental properties since 2004. When Kristi isn’t writing about real estate, she’s writing about travel and has been published in several books and national publications. Find more of her writing at Kristi Adams Media.

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