By Jamie Johnson, Building Kentucky
On March 15, 2024, The National Association of REALTORS® (NAR) reached an agreement that ends litigation brought by home sellers about broker commissions. The settlement includes changes to real estate transactions and reaffirms the choices consumers will continue to have about services and representation.
After August 17, all REALTORS® must enter into a buyer-broker agreement with any prospective buyers. Both parties must discuss their REALTOR®’s compensation structure, amount and capture in the agreement. This must be completed before any home tours (in-person or live virtual tours) or purchase discussions take place. Individual brokerages can implement their agreements, or they can use a standard one crafted by Kentucky REALTORS®.
“REALTORS® across the state provide their expertise and valued services to help their clients achieve their dreams of homeownership,” shares Pam Featherstone, Kentucky REALTORS® president. “While these practice changes will take time for both REALTORS® and consumers to get used to, we’re confident they will bring clarity to the real estate transaction process and allow REALTORS® to better demonstrate their value.”
Buyers should review these agreements carefully. Below are the top three things for buyers to discuss with their perspective REALTOR® during this process:
- Compensation: How will your REALTOR® be paid? (amount, structure, etc.)
- Scope: How will the REALTOR® support you in your transaction? What services will be provided?
- Timeline: How long will this professional support you in your home search?
When selling a home, consumers must determine compensation for both their agent to sell their home and potentially the buyer’s agent, called cooperative compensation. Cooperative compensation is often offered by the seller to cover or help cover the cost of the buyer’s representation. This practice is still allowed and often facilitates faster home sales at higher prices, making the investment worth it for home sellers.
The public can still attend open houses without an agreement to view homes for sale but must enter into a buyer-broker agreement to begin purchase discussions or to view the home privately.
Terms of the National Association of REALTORS® (NAR) Settlement:
The 2024 NAR settlement agreement contains provisions that will change certain procedures while preserving consumer choice:
- Agent compensation removed from the Multiple Listing Service (MLS): NAR has agreed to implement a rule prohibiting offers of compensation on the MLS (a database used by real estate professionals to share details about properties for sale in a specific region). Offers of compensation will continue to be an option consumers can pursue off-MLS through consultation with their REALTOR®.
- Written agreements for MLS participants acting for buyers: Many REALTORS® across the country have used written buyer agreements, as encouraged by NAR, to show consumers the services and value provided by their REALTOR®. The settlement requires the use of buyer agreements that outline the services provided by the REALTOR® and the compensation provided to the REALTOR®.
- Settlement payment: NAR has agreed to pay $418 million to a class action settlement fund over 4 years.
- NAR denies any wrongdoing: NAR has long maintained that cooperative compensation and NAR’s policies benefit consumers. They promote access to property ownership, particularly for lower- and middle-income buyers who can have more challenges buying. NAR is confident that the settlement provides clarity into a REALTORS® value and services.
“Consumers don’t have to navigate alone what is likely the largest purchase in their lifetimes. REALTORS® can help their clients through every step, including the new process changes and navigating the continuously fluctuating real estate market,” said Featherstone. “To find a REALTOR® or to learn more about homeownership in Kentucky, consumers should visit kyhousingfacts.com.”
