NAR Settlement Information

WHAT’S GOING ON?:

NAR (National Association of Realtors) recently announced an agreement that would end litigation of claims brought on behalf of home Sellers related to broker commissions and is slated to go into effect in late summer 2024. This settlement was intended to underscore the importance of preserving consumer choice in real estate transactions. 

BREAKING IT DOWN:

When listing a home in the Denver metro MLS (REColorado), Seller brokers have been required to enter the amount of compensation offered to Buyer brokers based upon the total commission that a Seller is willing to pay.  For example, we have seen this total commission agreed upon (by Seller and their broker) to be around 6% of the final sales price of the home - whereby the Seller’s agent will receive around 3.2%.  The remaining 2.8% of the total commission is then offered to a Buyer’s broker as compensation for bringing the buyer to the deal and helping to complete the real estate transaction. It is the Buyer’s broker compensation that has been entered into the MLS to provide transparency to both the Buyer and Buyer’s broker regarding the commission that can be expected at closing. 

The total commission paid by the Seller is then usually collected at the time of the closing and deducted from the Seller’s net proceeds on the sale of the property. The lawsuit and settlement outcomes are the result of conditions in other states and among various brokerages where Sellers did not feel that there was transparency in the process nor should they “have to pay for” a Buyer’s broker commission.  

Once approved by the court, the settlement will take effect late summer/early fall. To further break down what this all means for our Mondo West clients, we thought it would be good to explain what you can expect by clarifying what’s new and not new….


NEW:

  • As a result of the impending settlement, NAR has agreed to remove the Buyer broker compensation entry from the MLS.  

  • Written Buyer Agreements must be established by MLS participants (agents) working with Buyers to clearly explain agency obligations, commitments and commission expectations.

  • Mondo West will require Buyers to enter into written Buyer Agreements before touring a home.  We will work with each Buyer individually to establish agreed upon commission terms with the premise that we will first ask for compensation from the Seller during the contract negotiation process. 

NOT NEW:

  • Despite misconceptions that are being headlined in the media - NAR is not preventing nor discouraging Buyer broker compensation from the Seller. 

  • Compensation for brokers has always been and will continue to be negotiable between Sellers, Buyers and their respective brokers.

  • The types of compensation available for Buyer brokers will continue to take multiple forms, depending on broker-consumer negotiations, including but not limited to:  

    • Fixed-fee commission paid directly by Buyers

    • Concession from the Sellers 

    • Portion of the Sellers’ broker’s compensation

  • Sellers have the option to not offer Buyer broker compensation. 

  • Buyers often do not have excess funds to pay for representation and, in most cases, broker fees cannot be rolled into a home loan.

  • Sellers are strongly encouraged to offer Buyer broker compensation for number of crucial reasons including but not limited to:

    • A Buyer deserves advocacy and expert guidance.

    • A Buyer’s agent will manage and usher all contract related aspects of the home buying process to help facilitate a smooth transaction from start to finish.

    • A Buyer’s broker will help guard against Fair Housing discrepancies, discrimination concerns and potential future litigation woes.

    • A Seller is usually also a Buyer!  (i.e., what comes around, goes around - and we want the best representation for our clients regardless of what side of the transaction they are on.)

  • Buyers are strongly encouraged to use a licensed real estate professional (Realtor(R)) who are bound by a strict Code of Ethics and pledge themselves to advocate, protect and promote the interests of their client. Buyers who use a Realtor to help them find and purchase a home can be assured of the agent’s fiduciary duties of:

    • Obedience

    • Loyalty

    • Disclosure

    • Confidentiality

    • Accountability

    • Reasonable Care and Diligence

  •  Mondo West has always required such Buyer Agreements to help consumers understand exactly what services and value will be provided, and for how much.

    ………………………………………………………….


Of course, as with any settlement of this national magnitude there are logistics in local implementation that are yet to be determined.  We anticipate updates to forms, contracts, and other agreements along with the MLS input process.  We are fortunate that in Colorado our local Realtor associations have been committed to upholding the mission of facilitating transparent, ethical and successful real estate transactions for all parties involved. Mondo West will continue to provide updates as they become available to ensure that our clients are equipped with the latest information. And, we hope that if you have any additional questions or concerns you’ll consider us your trusted, experienced, knowledgeable and go-to real estate resource.  We are here for you!