The recent National Association of Realtors (NAR) settlement has been a hot topic in the media, sparking discussions about potential changes in the real estate market. Here at Dickson Realty, we understand this can be confusing when you don’t live day-to-day in the industry like we do. In this article, we’ll explain the NAR settlement, focusing on its impact on Nevada real estate, specifically on the two key adjustments brought about by the settlement (still awaiting court approval).
Setting the Record Straight: Understanding the Landscape
Before we explain the NAR settlement, let’s take a step back and understand the current landscape of buyer-agent compensation. Traditionally, real estate transactions have involved a few key players:
- Sellers: The party looking to sell their property.
- Listing Agent: The real estate professional representing the seller and marketing the property, setting up showings and open houses, assisting with negotiations, etc.
- Buyers: The individuals seeking to purchase a home.
- Buyer’s Agent: The real estate professional working on behalf of the buyer to find a suitable property, negotiate the purchase, analyze the property’s condition and interpret noted deficiencies, manage repairs, create a seamless transaction, etc.
Historically, compensation for buyer’s agents has been facilitated through the Multiple Listing Service (MLS). This means the amount a seller is willing to offer a buyer’s agent (often called buyer-broker compensation) is typically displayed on the listing itself. This system has worked for years, however, some sellers felt that it created pressure to offer certain levels of buyer-broker compensation despite it always being negotiable. Also, since sellers have primarily paid for buyers’ agents’ commissions, the relationships between buyers and their agents have not often been well defined and agreed to via a contract like a seller and their listing agent do with a listing agreement.
The NAR settlement seeks to address two key changes impacting buyer-agent relationships and compensation structure. Let’s explore these changes in detail and how they might affect you.
#1 Transparency Through Written Agreements
The first major change involves increased transparency in buyer-agent relationships. Nevada does not formally require buyers and sellers to sign an agreement outlining services a buyer’s agent will provide and the associated costs. Not using an agreement can sometimes lead to misunderstandings.
The new settlement requires buyers and their agents to establish a written agreement at the outset of the home-buying journey (including before showing any homes to prospective buyers). This mirrors the practice between sellers and agents when negotiating a listing agreement. This written agreement will clearly define:
- The scope of services provided by the buyer’s agent, such as property searches, market analysis, negotiation on your behalf, and guidance through the closing process.
- The fees associated with these services. This could be a flat fee, a commission based on the purchase price, or another agreed-upon structure.
This increased transparency benefits both buyers and agents. Buyers will have a clear understanding of what they’re potentially paying for and what services they can expect. Agents can ensure their clients are aware of their expertise and the value they bring to the transaction.
#2 Shifting Landscape of Buyer Agent Compensation
The second key change revolves around how buyer agents’ compensation is marketed. Currently, compensation for buyer’s agents is often facilitated through the Multiple Listing Service (MLS). This means the amount a seller is willing to offer a buyer’s agent is typically displayed on the listing itself.
Under the new settlement, this will no longer be the case. Buyer agent compensation will not be advertised on MLS listings and per normal, every brokerage has the right to set their own rates and fee structure for buyer agent compensation depending on the services they offer.
This does not, however, mean the end of compensation for buyer agents. Here’s what this means for both sellers and buyers:
- Sellers will still have the option to offer compensation to buyer’s agents but they will do it through different means than the MLS; such as their broker’s website, and the agents directly. They can choose to factor this compensation into their overall asking price or negotiate it as part of the offer process. History shows sellers decided to offer a buyer broker compensation as a marketing tool to attract buyers being represented by agents, which buyer representation has actually been increasing over the years even in these times when more technology and data are available to the consumer than ever before.
- Buyers will also have the option to directly compensate their agents. Again, much like a seller and listing agent negotiate their compensation and sign an agreement to work together, a buyer and their agent will do the same. Just to note, 14 states (not including NV) in the country have already been operating with a mandatory Buyer Representation Agreement, so this is not new for every state.
Why These Changes Matter
These changes might seem like a shake-up to the traditional real estate transaction model. However, it’s important to remember that qualified real estate agents provide a valuable service. Just like financial planners, lawyers, and accountants, they deserve fair compensation for their expertise.
Real estate agents bring a wealth of knowledge and experience to the table, helping you navigate the complexities of the buying process. Their services include:
- Market Expertise: They can accurately assess property values, ensuring you don’t overpay or miss out on a great deal.
- Skilled Negotiation: They can negotiate on your behalf to get you the best possible price and terms on your purchase.
- Risk Management: They can identify potential issues with a property and help you mitigate risks associated with the transaction.
- Streamlined Process: They guide you through the complex paperwork, inspections, and deadlines involved in buying a home.
- Invaluable Connections: They have established relationships with industry professionals like lenders, inspectors, and title companies, making the process smoother.
The Future of Real Estate at Dickson Realty
The real estate industry is constantly evolving, and we at Dickson Realty are committed to adapting alongside it. We’ll continue to work with full-time real estate professionals who are dedicated to ongoing education, training, and exceptional customer service. We believe these qualities, coupled with the buyer agent representation transparency brought about by the settlement, will ultimately lead to a more informed and empowered experience for both buyers and sellers.
The Bottom Line: We’re Here to Help
While the exact long-term effects of these changes remain to be seen, we support any adjustments that empower buyers and sellers to achieve their real estate goals. We may not have all the answers yet, but Dickson real estate professionals are here to guide you through this transition. Please reach out with any questions you might have or if you want the NAR settlement explained to you directly. Our experienced agents will help you navigate the buying or selling process, ensuring a smooth and successful transaction in this new landscape.
