The residential real estate industry is abuzz with the recent National Association of Realtors (NAR) Settlement, which is set to significantly alter the home-buying process as of August 17, 2024. This settlement introduces several important changes, but the key takeaway is that Buyer Agent commissions will no longer be listed on the MLS. Additionally, buyers must now have a signed agreement with a buyer’s agent before viewing homes or sign a document stating they will be unrepresented. Most notably, while it has been common practice for sellers to cover the Buyer’s agent commission in the past, this may no longer be the industry standard, and sellers are not obligated to pay this fee as a result of this settlement.
Under this new framework, the agreement between the buyer and their agent will clearly outline the agent’s expected commission. While the buyer’s agent will work to secure their commission from the seller or listing agent, the agreement may specify that if the seller does not cover this cost, the buyer may be responsible for paying the commission directly.
As a prospective homebuyer, it’s crucial to discuss this change with your real estate agent. They can explain the nuances of the new rules and how these changes might impact your transaction. A competent real estate agent will also be able to advise you on whether the seller is likely to cover their commission or if you should anticipate covering some or all of it yourself.
Given these changes, it’s wise to approach your home search with the expectation that you might need to pay your real estate agent’s commission out of pocket. We recommend budgeting an additional amount of your target purchase price, in addition to your down payment, to cover potential costs such as closing fees, escrow, title insurance, underwriting, prepaids, AND possibly your agent’s commission. While this doesn’t guarantee that you’ll need to pay your agent’s commission, it’s always best to be prepared. Having an open, candid discussion with your real estate agent upfront about their roles and responsibilities to you will help your transaction to move smoothly with minimize stress during the process.
If you have any questions about how this settlement might affect your financing or budget, please don’t hesitate to contact us. One of our experienced Mortgage Loan Originators will be able to assist you on how to maximize your budget and mortgage financing.
