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Separating Fact from Fiction: What the NAR Settlement Really Means and What You Can Do

By MNR News posted 18 days ago

  
News of the recent National Association of Realtors® lawsuit settlement sent a series of shockwaves through the real estate industry. As details of the settlement emerged, misinformation spread swiftly, akin to a childhood game of telephone. Media organizations of all sizes, spanning from local to national, perpetuated numerous inaccuracies related to the settlement and its potential impact on consumers and the real estate market. 

Here are just a few of the headlines that were published in the settlement’s wake:
“Realtors’ settlement could dramatically change cost of housing sales”
“The 6% commission on buying or selling a home is gone after Realtors® association agrees to seismic settlement”
“Powerful Real Estate Group Agrees to Slash Commissions…”
“Your Home Selling Costs to Fall After NAR Settlement”
“Realtors® agree to Axe 6% Commissions…”

Beyond the sensational headlines, certain publications have used the settlement news as an opportunity to suggest the end-as-we-know-it of Realtors®, undermine their value to consumers, and depict them as villains in real estate transactions. Of course, nothing could be further from the truth. 

Correcting the glut of misinformation has felt like a Sisyphean task for Realtors® and Realtor® associations across the country these past several weeks. Minnesota Realtors® (MNR) is working hard to set the record straight with our local media as well as through timely communications to our members and the public

We’ve put together a list of the important facts concerning what changes the settlement could bring, and tips for Realtors® to correct misinformation and stay informed. 

FIVE THINGS YOU SHOULD KNOW

  • Realtor® commissions have always been negotiable between brokers and consumers. The National Association of Realtors® does not set commissions. As such, there is no “standard, non-negotiable fee”—6% or otherwise—set by the National Association of Realtors®. 

  • Realtors® are not becoming obsolete. Consumers will continue to need the expertise of Realtors® after the ruling. To suggest that consumers will suddenly want to go it alone in the complex home buying/selling process is unlikely. Speaking of home buying, the rule changes stemming from the settlement are likely to make things harder, not easier, on buyers—especially first-time buyers, low-income buyers, minority home buyers, and potentially veteran buyers who choose to utilize the VA loan program. A Realtornegotiation skills, knowledge of local markets, familiarity with legal contracts, and understanding of the financial complexities of real estate transactions will continue to be critical services sought out by consumers. Further, unrepresented buyers pose a greater legal risk because there’s so much that goes into understanding a real estate transaction—this is just one of the many reasons buyer representation is extremely valuable. 

  • The settlement ruling won’t bring home prices down and it won’t solve the housing affordability crisis. Just like virtually every other market, home prices are tied to supply and demand. In Minnesota, like most of the country, we have a housing deficit and pent-up demand. In short, the housing market is doing what markets do. Until we see greater supply, home prices are likely to continue rising. Further, the notion that sellers are suddenly going to believe their home is worth 2–3% less post-settlement than they did previously is simply untrue. Additionally, housing affordability has declined in recent months due in part to inflation and higher-interest rates.    

  • Commissions for buyers’ agents are not going away. Buyers’ agents will not be working for free. While offers of cooperating compensation will no longer be listed on the MLS after the new ruling goes into effect, cooperating compensation itself will still be permitted. Further, seller concessions will also continue to be allowed. Is it possible that some agents might decide to lower their fees? Certainly, and it’s worth noting that there have always been discount brokerages available to consumers. On the flip side, top-notch Realtors®, who excel at communicating and offering high-quality value to clients, could decide to charge more for their services.

  • Cooperating compensation can still be offered by the seller. Listing brokers and sellers can continue to offer compensation for buyer broker services, but such offers could not be communicated via the MLS upon the rule change. Cooperating compensation will remain a viable option for home sellers and buyers. Brokers and agents will need to reinforce the importance of transparency and work diligently to keep their clients informed about their options, compensation, and the transaction process. 

FIVE THINGS YOU CAN DO

  • Don’t Panic. Unfortunately, it’s easy to promote panic in today’s frantic news cycle. Facts can take a backseat to eye-catching pronouncements. But many brokers and real estate experts are preaching calm as we enter the unknown because adaptation is simply part of this business. We know changes are coming after the settlement is finalized, and change can bring discomfort. But change also presents an opportunity for real estate professionals to innovate, adapt, and move forward together into a new future for real estate. It would be hard to find a more resilient professional than a Realtor®.

  • Know your value. Even in a time where almost everything can be researched and bought online, the undeniable value provided by real estate agents is apparent. A striking nine out of ten home buyers express their willingness to work with their agent again or refer them to others, according to an NAR study. Realtors® simplify local markets, offer extensive information on available homes, and assist in determining realistic budgets and financing options for buyers, among many other services.

  • Correct misinformation when you encounter it. Don’t hesitate to address inaccuracies surrounding the settlement at your client meetings, at professional events, and even with friends and family in casual conversation. With so much misinformation floating out there, your knowledge can help set the record straight. Small conversations can make a big difference in the court of public opinion. 

  • Continue using buyer representation contracts and talk to your broker. Realtors® will be required to enter into a written agreement with buyers before showing them any properties. In Minnesota, we have been requiring signed buyer representation agreements on residential transactions for 30 years, but this new rule will emphasize the timing of securing these agreements with clients. This may require a change in how some brokers handle buyer representation along with changes to MNR contracts for facilitation and exclusive or non-exclusive representation. It will be crucial for brokers to communicate any updated policies with their agents. 

  • Follow MNR’s coverage. We are proud to be providing detailed, up-to-date NAR settlement information and resources for Realtors® and brokers on the MNR website. Included on the page are infographics, suggested readings, and insights from MNR’s legal affairs experts. We will continue to update this page as we learn more about the changes to our industry. You can trust our coverage to deliver calm and accurate messages amidst the storm of information. 

Disclaimer: All facts and information presented in this article were accurate and current as of the time of printing. However, please note that information about the NAR settlement agreement is subject to change.  

To read this article in the May/June digital issue of our magazine, click here.

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