Understanding Buyer-Broker Agreements and the Impact of Recent NAR Settlements
The National Association of REALTORS (NAR) settlement agreement practice changes are scheduled to take effect on August 17, 2024, and all NAR members and related MLS organizations must comply by September 16, 2024. The changes include:
Prohibiting the use of the MLS to communicate compensation offers
Eliminating the requirement for compensation offers in the MLS between listing brokers and sellers to buyer brokers
Requiring the MLS to remove all broker compensation fields and compensation information
The AZDRE is implementing the NAR changes regarding buyer-broker agreements on August 1 and removing public facing compensation beginning August 8.
What is a Buyer-Broker Agreement?
A buyer-broker agreement is a contract between a homebuyer and a real estate broker that outlines the broker’s duties, compensation, and exclusivity in representing the buyer. This agreement is essential as it formalizes the relationship, ensuring that both parties are clear about their obligations and expectations.
Types of Agreements: There are different types of buyer-broker agreements, including non-exclusive and exclusive right-to-represent contracts. Each has varying levels of commitment and implications.
Broker’s Responsibilities: The broker agrees to help the buyer find suitable properties, negotiate terms, and assist through the closing process.
Compensation: The agreement specifies how the broker will be compensated, which is often through a commission paid by the seller, though it can vary. It can be split between buyer and seller, through a seller credit or solely from the buyer.
For more detailed information on buyer-broker agreements, the Arizona Department of Real Estate provides a comprehensive consumer advisory.
Recent NAR Settlements: What They Mean for Homebuyers and Sellers
The National Association of Realtors (NAR) has recently settled several legal cases, bringing significant changes to the real estate industry. These settlements focus on commission structures and transparency, aiming to create a more equitable market.
For Homebuyers:
Increased Transparency: One of the key outcomes is the requirement for more transparency in how commissions are disclosed. Buyers will have a clearer understanding of how their brokers are compensated and can make more informed decisions.
Potential Cost Savings: With greater transparency, there may be increased competition among brokers, potentially leading to lower commission rates and cost savings for buyers.
Read more about the implications for homebuyers in the NAR's detailed article.
For Home Sellers:
Commission Flexibility: Sellers may see changes in how commissions are negotiated. The settlements encourage a more competitive environment where commission rates are not standardized, potentially benefiting sellers.
Better Negotiation Power: Sellers might have more leverage to negotiate commission rates, leading to potential savings.
Encouraging Buyer Agent Compensation: While sellers may have the option to negotiate commission rates, it's beneficial to continue paying for the buyer's agent compensation. Buyers already face multiple upfront costs, including earnest money, home inspections, appraisals, down payments, and closing costs. Adding the burden of buyer agent compensation can significantly increase their financial strain. By covering this cost, sellers can attract a larger pool of potential buyers, making their property more competitive in the market.
The NAR also provides insights specifically for home sellers, which you can explore in their informative piece.
How Gervais Mortgage Can Help
Here at Gervais Mortgage, we understand that buying or selling a home involves many moving parts. Our goal is to support you through every step of the process, from understanding buyer-broker agreements to navigating the implications of recent industry changes. Beef and Alaina Gervais are here locally in Phoenix to provide personalized advice and mortgage solutions tailored to your needs.
Contact us today to learn more about how we can assist you in your homebuying or selling journey.
