The NAR Lawsuit Settlement:
This week, The National Association of Realtors (NAR) proposed a settlement to the ongoing real estate commission lawsuits. Here’s the rundown of the 2024 NAR Lawsuit update:
In addition to financial payment, the National Association of Realtors proposed a new rule regarding commissions, that would go into effect in July. The new MLS rule would prohibit the buyer’s side agent compensation amount from being displayed on the MLS. This means that on the MLS, the seller of a home does not have to commit to a compensation amount for the buyer’s side of the transaction. However, NAR clearly stated that although the compensation will not be communicated via the MLS, the rule does not limit buyer’s side broker compensation off-MLS.
The National Association of Realtors writes that “offers of compensation help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers.” Real estate compensation remains necessary in every transaction to ensure the best outcome for all parties. Buyer-side broker commissions are not going to be eliminated. So how will the NAR settlement affect home buyers?
How Will The Nar LAwsuit Settlement Ultimately Affect Real Estate Transactions Moving Forward?
Sheri Bienstock, the #1 Agent in 90036 and Hancock Park, gives insight as to how the settlement of the NAR Lawsuit will affect home buyers and sellers in Los Angeles:
Firstly, NAR proposed this settlement but it hasn’t been approved by the courts. If it does get approved, nothing will change before July. If you buy a house before July, it will be the same way it is now. After July, commissions will no longer be listed on the MLS. So when you find a house you’d like to buy, your agent will need to inquire if the commission is being paid by the seller or if it’s not. If the seller is offering full compensation to the buyer’s agent, then the transaction remains the same. If the seller has a different arrangement in mind, then presumably the offer you make will take into consideration the costs to purchase that house, including agent compensation.
“Much in the same way the final sales price on any home is a factor of every aspect of the sale – the condition, location, necessary upgrades, cosmetic improvements, etc. – commissions will be one more factor that goes into the mix.“
Buyer-side expert representation makes for the most effective real estate deals. The cost of expert buyer representation will be factored into the real estate deal, no matter who bears the cost. Every real estate sale is negotiable and deals happen when there’s a meeting of the minds between buyer and seller. In truth, like in every other area of life, payment is a conversation and every consumer and agent always has a choice around who they hire and what they pay. None of that will change going forward.
How Will Real Estate Transactions Look Following The NAR Lawsuit Settlement?
In the past, it was structured that the seller paid both seller and buyer side commissions. In the future, either the seller will pay the buyer side commission (the same way they did in the past), or the buyer will pay and request a seller credit or a reduction in the purchase price, taking into account all the costs and fees associated with the sale.
Court rulings and settlements won’t make buyers automatically pay more for houses. Court rulings and settlements won’t make expert buyer representation go away or go down in price. Companies like Purple Bricks, (a discount brokerage) opened up shop to much fanfare only to shut down entirely; we never saw Purple Bricks (or other similar discount brokerages) in our neighborhood of Los Angeles. There was hype at some time about house sales happening online, without agents, through Amazon or Zillow but that never happened (because it doesn’t work).
“In all areas of life, consumers pay for valued services, and the price consumers pay is what that service is worth. As long as expert effective real estate agents provide value commensurate with their fee, they will continue to be paid what they’re worth, and the commissions will be a part of the real estate sale between the buyer and seller, negotiated like every other term in the transaction.”
In summary, even though it may take some navigating to comply with new MLS advertising and compliance rules, nothing substantive is likely to change in real estate agent commissions moving forward. Ultimately, I believe the net result for the buyer and seller will be the same, it’s just a matter of time until matters get sorted out most smartly.
About The Bienstock Group:
The Bienstock Group, led by Sheri Bienstock, is an expert real estate group in Los Angeles, Hancock Park, and Miracle Mile. Sheri is committed to her clients and will invest all her effort to get you the best results possible. Sheri has 235+ five-star reviews on Zillow, and has been ranked #1 listing agent in 90036 since 2009 and in Hancock Park since 2016.
