How Does the NAR Settlement Affect You as a Buyer or Seller?

The National Association of REALTOR's (NAR) settlement has the been the biggest news in real estate this year. Along with that has been a lot of misinformation and conjecture. We hope to provide some clarity on the topic and specifically what has changed here in Washington State. In order to understand what has changed you must first understand what got us here. 

The fundamental allegation was from a group of sellers that argued that it made no sense that they were required to compensate the buyers agent in addition to their own agent when selling their property. Additionally, why are they compensating the agent that is negotiating against them. 

An important differentiator to understand is that most of the Multiple Listing Service's (MLS) across the United States are owned by NAR. MLS's are the central database that all member agents enter their listings into as well as where buyer's brokers find "agent only" information to prepare tours as well as offers. Here in the Puget Sound area, our MLS (NWMLS) is member owned, not NAR owned. As a side note to this story, NAR membership in the Puget Sound area is much lower than other markets in the US due to membership not being required to access the MLS

In 2019 the NWMLS leadership saw these lawsuits being filed across the country and how "coupling" the buyers broker compensation with the listing brokers compensation lead to the filings so they "de-coupled" commissions here in the Puget Sound market. Another side note that may provide some clarity; not only are MLS's the central database, they are also the provider of forms that brokers use to create real estate contracts. Our NWMLS forms and rules went from requiring the listing brokerage to "share" compensation with the buyers' brokerage to giving the seller the option to pay their broker a commission and the buyers' broker a different commission or no commission at all. 

As you can imagine, when this change came about brokers across the Puget Sound were sure it was the end of buyer representation as we knew it. Why would a seller OFFER to pay the buyers broker?? Well, the change came and went and very little changed in buyers brokers compensation. The only measurable change was that new construction reduced buyer broker compensation. Some builders made a small reduction and one national builder removed buyer broker compensation all together. 

Prior to 2024 buyers and their agents, more often than not, worked by a "handshake" and did not have an agreement in place like sellers and their listing agents did. January 1st, 2024 Washington State changed that. Now buyers' brokers are required to have an agreement in place with their client and an important part of that agreement is what the brokers' compensation will be and how it will be paid. On August 17th, 2024 the rules and forms changed again to accommodate those of us who are REALTOR's to be in compliance with the NAR Settlement. Now sellers have 3 options for buyers' broker compensation. Essentially the options are 1) offer a percentage or flat fee for selling the home, 2) offer no compensation or 3) instruct the buyer and their broker to present the compensation in their offer. The nuance here is, what did the buyer and buyers' broker agree that the broker's compensation should be? As you start to peel away the layers of that onion, you can see that both sellers' broker and buyers' broker compensation has become far more complex. How sellers win and buyers win will require a relationship with a skilled broker to help them navigate these waters. We are here to help you come up with your winning strategy!