Everything You Need To Know About The NAR's Recent Decisions On Commission Policies
In the world of real estate, adjustments to policies and regulations can significantly influence agents, buyers, and sellers alike. One recent alteration to these policies that has stirred discussions and captured industry attention is the National Association of Realtors (NAR) revision in broker commissions. This policy shift has gained notice due to its potential repercussions on real estate transactions and the dynamics between agents and their clientele.
Traditionally, real estate agents have functioned within a commission-based framework, wherein agents receive a percentage of the final sale price of a property upon the successful conclusion of a transaction. Nearly 9 out of 10 home sales are facilitated by real estate agents affiliated with NAR. The organization, as the nation’s largest trade association, mandates that home sellers establish a commission rate—typically 5%-6%—before listing their homes on the Multiple Listing Service (MLS), NAR’s property database. A segment of this commission traditionally goes to the agents and brokers, a practice deeply entrenched in industry norms that has shaped the financial landscape of real estate transactions.
However, modifications to this commission structure are imminent following NAR’s announcement of an agreement to settle litigation claims brought on behalf of home sellers regarding broker commissions. These adjustments aim to address specific concerns and adapt to evolving market conditions. NAR stated, “In addition to the financial payment, NAR has agreed to implement a new MLS rule prohibiting offers of broker compensation on the MLS. This would mean that offers of broker compensation could not be communicated via the MLS. Still, they could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals.” (Bouhia) Furthermore, NAR later clarified, “The National Association of Realtors (NAR) does not set commissions – they are negotiable.” (Bouhia)
What does this mean for the industry? It could potentially reduce the cost for homeowners when selling their properties, effectively slashing the standard 6% sales commission fee for realtors. This adjustment might also impact the earnings of the 1.6 million real estate agents, potentially shrinking their annual commission pool by about one-third, as analysts with Keefe, Bruyette & Woods reported on the pending litigation.
Housing experts anticipate that this agreement will repeat through the housing market, potentially influencing home prices across the board. While lower or more negotiable commission fees could incentivize new homebuyers, the market is anticipated to remain relatively stable, particularly amidst persistently high mortgage rates, which continue to significantly influence individuals’ home buying decisions.
If you have further questions or need assistance, don’t hesitate to reach out for the latest updates on the NAR and all relevant changes in real estate policies.
