What the National Media Has Wrong About the Proposed NAR Settlement

You may have seen almost gleeful headlines or stories on the news late last week that the 6% real estate commission was dead as a result of a tentative settlement of a lawsuit against the National Association of Realtors.

Before you go jumping up and down, those headlines were wrong on many, many levels. And while we are all waiting for further clarification in the weeks and months ahead, there are a few things we do know now.

1. There is not now, nor has there ever been a standard set commission rate to sell a property. The commission has always been negotiable.
2. Not every state uses the same contracts. The case in Missouri that started this seems to have sprung from a lack of transparency around the commission on their state’s forms. The option for both buyers and sellers of whether to pay commission in Minnesota is clearly stated in both buyer representation agreements and listing contracts.
3. Minnesota’s buyer representation agreement has always stated the buyer is responsible for paying their Realtor, unless the seller is offering compensation upon a successful closing that would offset that expense.  The seller’s willingness to do this has always been negotiable between them and their listing agent. The amount of the compensation being offered was published on the MLS. Going forward, the proposed change is the seller may continue to offer buyer concessions on the MLS that may be applied toward things like closing costs. However, commission rates will not be published on the MLS, nor included in the sellers published concessions.
4. Going forward, buyers will be required to sign a buyer representation agreement with a real estate broker before the Realtor can show that consumer even one single house. While this has always been considered best practice in the industry, it will now be a requirement.
5. Until July, we are operating under the old system.
6. Properties are not going on sale. Duplex and home prices are high due to a lack of inventory. This settlement will not result in even one more duplexes and homes getting built.
7. Property values on the MLS included the payment of a commission. If a Realtor is not involved, then that house is worth the price, less the commission that would have been paid.
8. We aren’t sure how all of this will play out, but have been assured we will know more well before summer.

If you have any questions, please feel free to call. Realtors provide many valuable services, the most important of which may be education.