The NAR Settlement

The Scoop:‍

It is important to know that the settlement does not go into effect until July, and it still requires court approval. If it is approved it will spell out a few things nationwide. The biggest two items we see this effecting are how and by whom buyer agent commissions are paid, and how buyer’s agents handle client representation.  Let’s break those down:

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Buyer’s Agent Commissions

First, it’s important to know that Real Estate Agents are independent contractors. That means they are not employees of any company, but instead they are hired by a client via a contract with their brokerage to complete a service. The agent is generally not paid on a transaction unless it completes.  Traditionally, each side of a transaction has their own agent to represent them. These agents are known as the Buyer’s Agent and the Listing (seller’s) Agent.  The point of contention regarding commission in the settlement agreement has been that the seller has had to pay for both agents in the transaction through their proceeds of the sale. This way of paying buyers' agents started in the 1990s to make sure that buyers were properly represented in real estate deals, since most did not have enough cash on hand to make a down payment, pay closing costs AND pay for a Realtor to represent them. 

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The settlement argued that sellers were required to pay for the buyer’s agent. Here in Utah seller’s have been able to determine how much to offer the buyer’s agent fees, if any. However it is important to note that most sellers have chosen to offer that payment to cover the fee for the buyer’s representation. We hope the value of both parties to the transaction receiving representation is a benefit to all involved in the home sale process. Without seller assistance in covering buyer’s agent fees it may lead some prospective home buyers to choose to go unrepresented.

"The settlement isn't really what the media have portrayed it to be," said Dawn Stevens, president of the Salt Lake Board of Realtors. "The absence of a buyer's agent leaves the buyer to navigate an intricate process of drafting offers, negotiating repairs, and signing legal contracts. Conversely, homeowners seeking to bypass the buyer's agent commission might find themselves significantly reducing their asking price to attract buyers. It really is going to hurt buyers and sellers in the end."

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Buyer Representation:

This leads to the second topic of importance in the settlement. That is a clear and concise rule regarding how Buyer’s Agents disclose their fees, and how they obtain a client. 

Again, we are grateful the Utah Division of Real Estate has already required Buyer Broker Agreements as part of our transactions. This agreement is entered between the Buyer and their agent to ensure compensation and representation are clear. The biggest adjustment we expect to come from the settlement agreement is that this form must be signed BEFORE we show any homes. That is standard practice already for many agents, but this will mandate continuity of when these agreements are signed. We also expect to see minor changes to our state mandated form to ensure clarity.

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Summary:

As agents we do not expect to see drastic changes in the way Real Estate is conducted here locally, but it will lead to some shifts. We are ready to adjust as needed to continue serving our clients with integrity and transparency. Our doors are always open so please reach out with any questions or concerns. Thank you for your continued support & trust.

https://slrealtors.com/

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*It is important to note that we suggest reading the class-action settlement documents for yourself. As this is still up for court approval we are doing our best to accurately represent the information.