A change happened on August 17, 2024 for the residential real estate industry nationwide in response to the recent National Association of Realtors’ (NAR) Settlement Agreement. But what does this change mean for YOU… our local home buyers and sellers?
Services offered and fees charged did not change, but how they are listed and negotiated did.
You may have read something along the lines of “The standard 5-6% commission fee on a housing transaction will beeliminated.” Or commissions will be “slashed.” As is often the case, those tend to be exaggerated headlines.
What’s changed is the way commissions are listed and how they are negotiated. The focus is on ensuring that both buyers and sellers understandhow their respective brokers will be compensated for their services. This settlement does not change what Realtors offer or the fees charged for those services. It’s important to note that all commissions have always been negotiable between the client and Realtor.
Typically, buyers and sellers each have their own broker with specific service agreements. Traditionally, listing brokers have shared their compensation with buyer’s agents as an incentive to attract more buyers. The sharing of these fees is beneficial to buyers because it reduces the cash they need upfront to pay their agent, therefore allowing more money to be put towards their down payment and to make a more aggressive offer. Considering that a majority of buyers (around 70%) put down 20% or less, this approach has been instrumental in helping expand homeownership.
Sellers may opt to only cover the listing agent’s fees and thus, require the buyer to cover the buyer’s agent’s fees. Offering a buyer’s incentive is typically beneficial for sellers, but we recommend discussing the best strategy with a Realtor. Also, the offers of buyer agent compensation are no longer displayed in Multiple Listing Services (MLSs), which are listing platforms agents use to access detailed property-related data. Agents will need to use a different form of communication amongst one another to share compensation details and negotiations.
Although not new in Michigan, buyers are required to enter into written agreements before touring homes. We have always followed a similar agency disclosure protocol in Michigan, so there is not a big change there for us.
A real estate agent is a trusted advisor who puts their client’s best interest first.
A Realtor is a trusted advisor who is orchestrating what’s often the largest, most complex sale or purchase made in a lifetime. They are trained professionals who will advocate and negotiate on their client’s behalf to get the best possible result. Per a BrightMLS study, 91% of buyers report they would find navigating the process “very stressful” without an agent.
If real estate transactions were easy, the reality is that Realtors never would have come to be in the first place. Each Realtor’s efforts, expertise and network are what make it easy. A Realtor’s entire business and livelihood is completely dependent on commission, meaning they do not get any base pay from their broker or any other form of compensation.
Sellers who continue to see value in offering buyer’s agent compensation will maximize their pool of buyers and experience a more efficient process all together. A listing agent will discuss all the options and benefits that are available, so sellers can make an informed decision on the best offering for their needs and property sale.
As an organization that was founded at the start of the Great Depression in 1929, we’ve always seen change as an opportunity to become even greater and stronger at what we do. And ultimately, that’s to empower and enable the people around us to create a life of stability and wealth through real estate.
If you have any questions or concerns, please reach out to your real estate agent to further discuss this industry-wide event. Our clients always come first and we are here for you!
