The New Rules of Real Estate Commissons

The New Rules of Real Estate Commissons

Our Break Down of the NAR changes

Dun dun duuuunnnn....The infamous NAR changes to Buyer Agent Compensation are here and in full force as of August 17th.  You're probably wondering what's changed, and what to expect in your next purchase or sale. 

So let's break it down.

You may have heard the term "BAC". This is shorthand for "Buyer Agent Commission", and where our story begins. In the Spring of 2024 the National Association of Realtors settled a series of lawsuits resulting in policies requiring a "de-coupling of commissions", with buyers and sellers each having a contract with their respective brokers and liability for compensation in exchange for services falling on the individual consumer. This also created a ban on MLS listings stating the BAC offered by the seller, which had previously been required.

News of this spread fast, with national armchair experts quickly predicting market upheaval and a hopeless apocalyptic future for buyers...

During this time there was no shortage of misinformation, as us seasoned agents soon found out. But we knew clarity was just around the corner.

Fast forward to today. What's changed? Honestly.... not much. At least for our clients. Buyers do have to  complete a BAA  (Buyer Agent Agreement) prior to  viewing any homes. Within the agreement, our stated commission fee is set, but can be amended at a later date if appropriate. Along with the BAA we also include a sample of the next most important document, the "Seller Contribution Addendum", which is where we request for the seller to pay the buyer agent fee with acceptable offer.

Q: What happens if the seller refuses to pay the BAC?

A: So far that hasn't happened, but if it did we would need to ask additional questions.  

Is the seller refusing to pay a BAC at all, or just that specific BAC amount in context of an offer that isn't high enough to net their bottom line?

If it's the latter, then we would need to adjust our offer. If it's the former, we might need to find a different home because if a seller isn't willing to pay a BAC in spite of a solid offer, you think they'll be reasonable during the inspection period?

The answer is no.

What about selling, what should sellers do?

To Sellers: Keep calm and carry on.

For a seller, it's just math. We prepare our sellers to expect a BAC request from the buyer's agent, and calculate the net profit after fees and commissions to help make an informed decision.

In spite of what news outlets that have zero expertise in the real estate industry reported, no this BAC change has NOT changed housing prices. There is no drop as a result of this lawsuit, nor will there be. Prices are dictated by supply and demand. Not BAC's.

Please always consult with a real estate expert for real estate advice.

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So at the end of the day, what does this all mean for the future of real estate?

For our client's it means expect more of the same. Slightly more paperwork for buyers, but the commitment to you will remain consistent- you'll just be able to see it in writing. For our sellers, a little more conversation around this new nuance.

Moving forward, the country seems to have adjusted to the higher interest rates, or at least those waiting on the sidelines could'nt stand waiting any longer, as we're seeing a small increase of new seller and buyer activity. However, with more than 80% of homeowners holding an interest rate somewhere under 6%, we're not likely to see a booming busy market again until more significant rate reductions can be achieved.