The recent settlement by the National Association of REALTORS® (NAR) has sent ripples through the real estate industry. This landmark decision is poised to change how buyers and their agents operate, potentially shifting the dynamics of home buying in significant ways. Whether you're a first-time homebuyer or a seasoned real estate professional, understanding these changes is crucial.

What Is the NAR Settlement?

The NAR settlement resolves allegations that certain practices within the real estate industry were anti-competitive, particularly around how commissions are handled between listing agents and buyer agents. The settlement mandates increased transparency and may alter how commissions are negotiated and disclosed during the home buying process.

Key Points for Buyers: What You Need to Know

1. Increased Transparency on Commissions:
   One of the primary outcomes of the settlement is that buyers will now have greater visibility into how much their agent is being compensated. This transparency allows buyers to make more informed decisions and better understand the financial aspects of their home purchase.
   
   
2. Potential Changes in Buyer Agent Compensation:
   Previously, it was common for the seller to pay the commission for both their own agent and the buyer’s agent. Moving forward, there may be more flexibility, with buyers potentially being asked to pay their agent directly. This could change how negotiations are handled and may influence the final price of the home or out of pocket costs.
   
   
3. Empowerment in Negotiations:
   With the settlement encouraging greater clarity and competition, buyers may find themselves in a stronger negotiating position. Understanding the true cost of your agent's services can empower you to negotiate terms that better suit your financial situation.
   
   
4. Buyers Agents are Still a Best Practice:
   Choosing whether to use a real estate professional is always the choice of the buyer. That being said, it is still considered best practice to use industry experts when purchasing a home because consumers may often find great value in the knowledge, expertise, and services provided by buyer agents.
   
   
5. Buyer-side real estate commissions and fees may not be considered as Interested Party Contributions (IPCs):
   Freddie Mac® and the Federal Housing Administration (FHA) have both released announcements stating that such payments would not be considered as long as certain requirements are met.
   
   
6. Veterans using the VA-guaranteed home loan benefit can now pay for certain real estate buyer-broker fees:
   The Veterans Benefits Administration announced, beginning August 10, 2024, eligible Veterans, active-duty service members and surviving spouses who use their home loan benefits are no longer denied the ability to pay buyer-broker fees when purchasing a home with a VA home loan.
   
   

What This Means for Buyer Agents:

1. Adapting to New Norms:
   Buyer agents will need to adjust to a landscape where transparency is paramount. This may involve more upfront discussions with clients about commissions and fees, ensuring they are clear on how much they will earn from a transaction.
   
   
2. Building Trust Through Transparency:
   The settlement could be an opportunity for buyer agents to build deeper trust with their clients. By being open about their compensation and the value they provide, agents can strengthen their relationships and differentiate themselves in a competitive market.
   
   
3. Navigating Potential Shifts in Compensation Models:
   As the industry adjusts to the new rules, buyer agents may need to explore different compensation models. This could include discussing fees with clients directly or finding innovative ways to demonstrate the value they bring to the transaction.
   

Conclusion:

The NAR settlement marks a significant shift in the real estate industry, particularly for buyers and their agents. While these changes may seem daunting, they also present opportunities to enhance transparency, foster stronger relationships, and create a more competitive market.

Whether you're buying a home or helping others do so, staying informed about these developments is essential. By understanding the implications of the NAR settlement, you can navigate this new landscape with confidence and clarity.

Northpointe Bank is authorized to originate FHA, and VA loans, but it is not an agent of, or affiliated with, the U.S. Government.
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