A year has passed since a landmark legal settlement promised to disrupt the way real estate commissions are structured in the US, but home sellers say they are still feeling pressured to pay excessively high fees. The National Association of Realtors (NAR) had agreed to end a long-standing practice of sharing commission information privately among agents through MLS databases. The settlement aimed to increase transparency and competition, potentially lowering commissions historically set between 5% and 6%.
Here's how the settlement has impacted the industry since then:
Overall Market Impact – While commissions may moderate, the settlement is not expected to significantly affect home prices or inventory, as interest rates and supply-demand dynamics remain the primary market drivers.
Buyer-broker agreements explain the duties and responsibilities of the parties and set out exactly what services the broker will provide. There are several types of buyer's broker real estate agreements representing the nature of the relationship between the buyer and the broker. These contracts can generally be provided by the broker in preprinted "fill-in-the-blank" forms adapted to the laws of the particular state. There are three common types of contracts between homebuyers and real estate brokers:
Buyers should evaluate their options based on exclusivity, contract duration, compensation, and home search preferences. Consulting professionals and comparing brokers can help buyers make an informed choice.
More information from NAR FAQs here.
Sweeping changes to the way realtors conduct business came into effect across the US last Saturday (8/17/24) that could have significant knock-on impact on the mortgage and housing markets. The new law now requires homebuyers to negotiate directly with their selling agents regarding payment of fees while sellers are no longer required to offer to cover the cost of the buyer's agent.
In November 2023, a federal jury in Missouri ruled that the National Association of Realtors, a powerful real estate organization that owns the trademark to the title Realtor and controls much of its members’ activities, and several other large brokerages conspired to inflate agent fees. This ruling will force buyers to negotiate a fee with their agent and it will make it easier for lower-priced agents to catch the attention of buyers and lead to greater price competition. But some argue that this case could leave most Seattle-area homebuyers to fend for themselves in an ultracompetitive and pricey market and that homebuyers to shell out more money upfront to buy a home. If co-op fees are prohibited, homebuyers might have to pay their agents out of pocket. This will further erode purchasing power for our veterans, minority buyers, and first-time homebuyers who are struggling for loan qualification to begin with.
In March 2024, the National Association of Realtors (NAR) reached to a Settlement Agreement to resolve a series of lawsuits against the organization. The key issue in the lawsuits was the practice of "tying," whereby NAR members require the commissions paid to buyers' agents to be set by the seller's agent. When a home is listed under tying agreements, the compensation for a buyer's agent is established before the buyer can be sure of the quantity or quality of their services their agent will provide. Tying also means that sellers may have to offer higher commission to maximize the chance they sell their home through the practice of "steering." If the agreement is approved, tied compensation will no longer occur on MLSs. Furthermore, buyers and their agents will have to explicitly agree about what services agents will provide, online MLS databases will no longer display commission rates, and NAR will also be required to permit real estate agents to be paid for their work without subscribing to MLS.
Here in Washington state and the Northwest Multiple Listing Service (NWMLS) which serves most of Washington have already made several changes to make the system more consumer-friendly. In 2020, NWMLS, which is not affiliated with the National Association of Realtors or subject to its rules started publishing agent commissions on its webpage. The seller is also not required to offer the buyer’s agent a fee – which is a key issue in the federal class action lawsuit. On January 1, 2024, important revisions to the law that governs real estate brokerage relationships (RCW 18.86) in Washington State – otherwise known as the “Agency Law” – become effective. These are the first significant revisions since the Agency Law took effect in 1997. The revisions, which are explained in detail in this bulletin and set forth in Senate Bill 5191, include the following:
NWMLS revisions to the state’s Agency Law will require agents to have a written agreement between buyers and sellers that spell out the scope of the agent’s services and compensation. Here's more information on Form 41.
Please keep in mind that in addition to a fully filled out form 41(buyer agency agreement), both fields on Line 17 (on form 21) must be fully filled out completely. Attention Buyer Brokers: You must complete both the "Seller's Offer (if any)" AND the "Amount to be Paid by Seller" fields. On page one of the purchase and sale agreement, the specific term titled “Buyer Brokerage Compensation” displays two fields: the “Seller’s Offer (if any)” and the “Amount to be Paid by Seller.” Both of these fields must be completed and should not be left blank.
The “Seller’s Offer (if any)” is a statutory disclosure required so the buyer knows how much the seller is offering, if anything.
The “Amount to be Paid by Seller” specifies how much the seller will pay toward the buyer brokerage firm compensation at closing.
Both fields must be completed even if the amount of the “Seller’s Offer” (e.g., 2.0%) is the same as the “Amount to be Paid by Seller” (e.g., 2.0%).
Please see below examples:
Example A: On page one of the purchase and sale agreement, the specific term titled “Buyer Brokerage Compensation” displays both the “Seller’s Offer (if any)” and the “Amount to be Paid by Seller.” Both of those terms must be completed and should not be left blank. This is true even if the amount of the “Seller’s Offer” (e.g. $7,000) is the same as the “Amount to be Paid by Seller” (e.g. $7,000).
Example B: If the “Seller’s Offer” is greater than the “Amount to be Paid by Seller”, the buyer can request a credit toward buyer’s obligations at closing. To do this, fill in the amount of “Seller’s Offer” (e.g. $7,000) and the “Amount to be Paid by Seller” (e.g. $5,000). Check the “Addendum for Buyer Credit” box and attach and complete the Addendum for Buyer Credit (Form 41C) for a $2,000 credit to the buyer.
*Note, if the buyer is not requesting a credit in this scenario, do not check the Addendum for Buyer Credit box and the seller would only pay $5,000.
Example C: If the “Seller’s Offer” (e.g. $7,000) is less than the amount that the buyer has agreed to pay in the buyer brokerage services agreement (e.g. $9,000) – and the buyer requests that the seller pay the additional buyer broker compensation, fill out the terms accordingly.
Example D: If the seller is not offering any buyer brokerage compensation – and the buyer requests that the seller pay all or a portion of the compensation that the buyer has agreed to pay in the buyer brokerage services agreement (e.g. $6,000), fill out the terms accordingly.
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