If you, like many, are considering selling your home but are concerned about what this summer’s NAR settlement means for you, have no fear. Though the buyer side has changed, the main difference for sellers is a shift in perspective. Instead of simply discussing “the commission” with your agent, you’ll now look at the buyer’s and seller’s agents’ commissions individually. The core process remains unchanged – you’ll just be discussing each commission separately.
To understand why so much commotion led to only a minor shift for sellers, we’ll start by exploring the situation that inspired the lawsuit, then break down the rationale behind these changes, and finally, highlight what they mean for you as a seller.
History
In the world of real estate, commissions refer to the compensation real estate agents receive for the work they do to help their clients buy and sell real property. In the same way that lawyers, travel agents, and insurance companies are compensated based on the size of the problem they help with, real estate agents are usually compensated based on the size of the transaction.
For years, the common practice was for a seller's agent to negotiate a flat commission rate and share a portion of that with the buyer's agent. This way, the buyer's agent is paid for their time and skills while letting sellers have that higher ticket price. Regardless of click-bait headlines, the NAR Settlement hasn’t changed this.
The problem crept in when agents moved away from explaining how their commission would be split with the buyer's agent. Though they’ve always been separately negotiable, too many agents didn’t (or wouldn’t) take the time to explain that clearly to their clients. It was easier to negotiate for a single commission and not clutter their clients’ attention with every line-item.
The Settlement’s Goals
The goal of the NAR Settlement was to make it abundantly clear to you that the seller’s agent and buyer’s agent commissions are distinct, negotiable items. Each have to be addressed by you, and each have to be decided on before your property goes on the market.
That’s where the change from the settlement comes in. In practice here in Pennsylvania, the Pennsylvania Association of REALTORS® (PAR) has separate sections for seller's agent commission and buyer's agent commission on listing contracts. The thought is that with each being called out in turn, agents and their clients won’t be able to miss this discussion.
The big change for sellers in the wake of the NAR Settlement is that now you have to talk about both how much you’re going to pay your agent and how much you’re willing to pay the buyers’ agent. The same strategies, customs, and market forces are still around, so offering cooperating compensation is still as strategic a decision as ever – it’s just now you will spend more time talking about that, understanding the pros and cons, and deciding on a course of action.
Practical Changes
On the protocol side, there has been a change in how sellers can advertise any cooperating compensation you’re offering. It’s the second change you will face since the settlement, and is equally designed to prompt conversation, education, and informed decision making.
Before the settlement, the MLSs had a field for cooperating compensation. Since the settlement, that’s gone, and advertising cooperating compensation on an MLS is banned. Check out my article on how this settlement impacts buyers for a breakdown of this change’s impacts. Other platforms can still advertise cooperating compensation, like Compass.com, making these 3rd party search platforms that much more competitive in today’s market.
Conclusion
For sellers, that’s it! The big change from the settlement is that now you’ll have to talk with your agent about each part of the commission process – from how much each agent is being compensated to strategies around advertising that information. No big procedural shake-up, shift in core concept of the process, or industry-shattering changes for those selling real estate. Just a shift in perspective – a change in the way you look at real estate commissions in the hopes that you’ll have a clearer picture than before.
There’s just one more article in my series covering the Sitzer-Burnett lawsuit against NAR that settled this year. We’ve covered myths born in the headlines, the impact for buyers, and now the impact for sellers. All that’s left to wrap up the series is to put it all together into one big picture.
What do you think about this change in perspective for sellers? Did it live up to the hype and expectation? I’d love to hear your thoughts on this, and any other real estate matters! Reach out and chat – I’ll always make time to listen.
