Buy or Sell a House Now or Wait Until After the NAR Settlement Changes in August?

Industry disruptions can happen through groundbreaking products, like the iPhone, or policy changes, such as the legalization of alcohol after Prohibition. These disruptions often benefit the public, but not always. For example, policies that encouraged car manufacturing over public transportation (trains/trams) pushed people into buying cars at the cost of our environment.

This year, the real estate market is facing a significant shift with the upcoming National Association of Realtors (NAR) settlement changes set to take effect in August 2024. These changes could transform the home-buying and home-selling experience. Here’s a simplified look at what you need to know and consider.

Real Estate Policy Changes

The NAR lawsuit, which challenges the standard real estate commission practices, is a significant disruption. The lawsuit claims that realtors and brokers have implied a non-negotiable 6% commission (lol) and that sellers shouldn’t have to pay the buyer’s agent commission. Here’s a breakdown of the upcoming changes:

NAR Settlement Changes – Begin August 17th 2024

1. Offers of Compensation: Sellers can choose not to offer a Buyer’s Agent Compensation (BAC).
2. Written Agreements for Showings: Required for all residential and commercial showings.
3. Prohibition of Compensation Publication: Compensation for buyer’s agents cannot be advertised on the Multiple Listing Service (MLS).
   

For better context on the effects these changes will have, let’s first explore how traditional real estate sales function and compare it to the changes coming to the industry.

Traditional Real Estate Sales (1930 – August 2024)

Traditionally, selling a home involves:

• Hiring a realtor to list and market the home.
• Entering a listing agreement, which includes a commission that is split between the listing agent and the buyer’s agent.
• Marketing the property on the MLS, including the buyer’s agent compensation (BAC); Agents can see how much commission is offered for each property.
  

This system allows buyers and agents to work together without upfront costs, since agents earn their commission from the sale.

New Era Real Estate Sales (Starting August 2024)

With the new changes:

• Offers of Compensation: Sellers decide if and how much to compensate buyer’s agents, separate from the listing agreement.
• Written Agreements for Showings: Required for all showings, which is a significant change for agents and buyers.
• Prohibition of Compensation Publication: BAC will not be visible on the MLS, requiring new ways to negotiate agent fees.
  

Impact on Buyers and Sellers

For Buyers:

• Potential for Upfront Costs: Expect new fees from buyer’s agents, including flat fees or percentage-based commissions. There might be additional costs for services like property searches, showings, and offer writing.
• Written Agreements: Required for showings, potentially increasing upfront costs.
  

For Sellers:

• Potential Savings: Sellers might save on commissions by not offering BAC, but listing agents might introduce new fees for additional services like open houses and showings.
• Home Prices
  

What to Do?

The decision to buy or sell a home now or wait depends on several factors:

• Personal Financial Situation: This is always #1. The best time to buy is when you can afford it.
• Current Market Conditions: Consider interest rates and home prices.
• Expert Advice: Consult real estate agents and financial advisors to understand how these changes impact your specific situation.
  

While the full impact of these changes will take time to unfold, staying informed and planning ahead will help you navigate this new era in real estate.

For our sellers, we intend to continue to advocate for a buyer’s agent commission, as it will greatly increase the chances of a successful sale.

For our buyers, things could change, but how much remains to be seen. If buyer’s agents can’t secure a form of payment from a seller, they will likely ask the buyer to cover their commission in one form or another.

Much more to come from this!

Keep an eye on updates as we approach August 2024 to make the best decision for your home-buying or selling journey.