Realtors are licensed real estate agents who are members of the National Association of Realtors (NAR). There has been much news coverage of the recent (April 2024) settlement NAR reached to settle a lawsuit brought by homeowners in Missouri. The settlement requires Realtors throughout the country adopt new ‘practice changes.’

I thought I would give you a summary of those changes.

First, all of our agreements/contracts with buyers and sellers must include language that states that all commissions are negotiable between the two parties. Furthermore, the NAR rulebook explicitly says that Realtors cannot claim their commission rates are “the norm” or “typical for the area.”

Second, Realtors are required to have a contract with their seller clients that states what that agent is going to be paid at the time of the closing to compensate them for the work they did to facilitate the transaction.  That same contract must state that the seller is not obligated to provide any compensation to the agent that brings the buyer. The seller can opt to offer to compensate the buyer’s agent if they choose.

Third, Realtors are required to have a Buyer’s Agent Compensation Agreement with any potential buyer signed before that buyer sees any property. That Agreement is a contract and it must include the amount of compensation the agent will receive if a deal is accomplished. The compensation can be determined in several ways, for example a percent of the purchase price, an hourly rate, or a flat fee. The compensation must be calculable, not vague. The compensation to the buyer’s agent can be paid by the seller, by the buyer or by both.

This particular requirement is a significant departure from the way Realtors in our market engaged with buyers. However, it should be noted that this requirement has been in place in several states for a number of years.

The thrust of the practice changes is that members of the public need to be informed and engaged in purchasing real estate services and Realtors’ need to be 100% transparent about their fees.

The Houlihan & O’Malley team is always staying on top of the real estate market and we’re here to help you with your real estate needs, buying or selling.  Just give us a call.