July 5, 2024 — By Ian Johnston (Broker/Owner of NoCo Flex Real Estate)

We’ve already taken a detailed look into the impact of the recent NAR settlement so if you’d like more details don’t miss our deep dive here. This post is designed to provide a quick overview of the changes that came from that settlement and what you will actually see when they go into effect in mid-August (on or before August 15th).

First, a quick refresher on the details of the lawsuit. NAR was sued by homeowners in Missouri and other states that alleged that some of the rules set across the multiple listing services (MLS) databases which are home to nearly all of the listing data across the country and managed by NAR were harming homeowners by artificially keeping broker commissions high while limiting competition. In addition to agreeing to make the changes below to settle these concerns, NAR agreed to pay $418 million over 4 years to compensate for damages to class members and pay their legal fees.

Here’s an overview of the changes coming in late-July into August:

No More Commission Offerings in MLS Listings

This is arguably the biggest change to come out of the NAR settlement and is the one most relevant to the central complaint about co-op commission offerings (what listing brokers offer to the broker who brings a successful buyer). The allegation was that it is unfair and expensive for sellers for MLS operators (and NAR) to require listing brokers to offer this compensation to buyer’s brokers. So, starting in August, this will no longer be the case. In mid-August all MLS databases will no longer permit brokers to stipulate what (if anything) they are offering to cooperating brokers. All historical data about co-op commissions offered will also be removed from MLS databases and since these are the primary source of data for all the major real estate websites, such as Zillow and Realtor.com they will most likely no longer be available on these websites as well. The reason for this is to provide sellers with the option of whether to compensate cooperating brokers (and by how much) and to discourage brokers from steering their clients towards listings that offer to pay them more.

This is a huge change because it means that buyer’s brokers may find it harder to get paid. This may lead listing brokers to offer less compensation for the other side or to eliminate it altogether if their clients decide to. So, the question then becomes: who pays the buyer’s broker? To this point it has been exceedingly rare for buyers to pay their own brokers for their services, but that might become much more commonplace in the near future.. And the compensation for a buyer’s broker may be much lower if the buyer has to pay some or all of it directly. We all know that buyer’s costs to purchase a home are already high as they are without adding broker fees into the mix..

Written Agreements for Brokers Representing Buyers

Since we at NoCo Flex prefer to represent buyers as agents, this one won’t have as much of an impact but it will change business for a lot of buyer’s brokers that up to this point have not typically used a written agreement for their representation of their clients. The change is that ALL brokers will now be required to have a written agreement outlining their representation of their clients, not just the ones who want to work as agents that have a fiduciary duty to protect their clients’ best interest.

This may seem like a small change, but it will have a significant impact on buyer’s brokers who before didn’t really need to outline in detail how they will work for their clients or how they will get paid. Now, they will need to go over those details with their clients which might open them up to more scrutiny.

In short, these changes could make it much harder for brokers representing buyers to get compensated for their services. The flip side of that is that it may save sellers money which could put downward pressure on real estate prices. Just how much change we will see and who the exact winners and losers will be is still very much up in the air however..

Again, if you’d like more of a deep dive into these changes and their implications, you can read more on our earlier post here. And, as always, feel free to reach out with any questions or call us at 970-237-4749. And if you’re looking for a broker that didn’t wait for the class-action settlement to take effect to start delivering better value for clients, check out our listing and buyer plans.