The #1 question I’m being asked lately: “What do you think of the upcoming NAR (National Association of Realtors) Settlement?” In one word? Fantastic.
Now, I know that might shock a lot of my fellow realtors and brokers. They’re worried about disruption, potential income reduction, and the general upheaval this settlement might cause. But here’s the thing: business exists to serve the consumer. What benefits the consumer ultimately benefits the business. Period.
Background on the Settlement:
Let’s break it down. For decades, the National Association of Realtors (NAR) has mandated that home sellers must compensate both their own agent and the buyer’s agent. However, after numerous lawsuits, NAR is changing the game. Sellers will now have the freedom to decide how they handle these commissions, and buyers will control how they compensate their agents.
What Are We Doing for Our Sellers?
With this shift, sellers are no longer required to pay the buyer’s agent. But the strategic question remains: how do you, as a seller, maximize your net proceeds and ensure favorable terms? The goal is simple—attract the highest number of qualified buyers and ensure a smooth, frictionless closing process.
Currently, 97% of buyers work with an agent who expects compensation. While this percentage will likely change, it won’t happen overnight. So, the question is, do you attract more buyers through a lower price or by raising your price to cover the buyer’s agent’s fee?
There’s no one-size-fits-all answer. Market knowledge is key. Strategies will vary based on location, price range, and other factors.
In many cases, I’m advising clients to flip the script—give the power to the buyer. I recommend incorporating the additional 3% for the buyer’s agent into the asking price, but with a twist: the money goes directly to the buyer. They can use it to pay their agent, cover closing costs, reduce the purchase price, or any combination thereof. This approach attracts all buyers, with or without agents, leading to the highest and best offers. Plus, while agent compensation can’t be advertised, seller contributions to buyers can be, drawing more interest.
Every situation is unique, and understanding the market is crucial. Sometimes, a lower price with no compensation is the best strategy. Other times, a blended approach works better. The good news? You, the consumer, are now in control, not the NAR.
What Are We Doing for Our Buyers?
The biggest change from the NAR settlement impacts buyers. Previously, buyers never had to think about agent compensation—sellers inflated prices by 3% to cover it, effectively building the agent’s fee into the buyer’s mortgage. After the settlement changes take effect on August 17th, buyers will decide how this works.
Sellers generally care about their bottom line. If a buyer wants to roll agent fees into the home price, most sellers will agree, provided the buyer qualifies and the home appraises at the higher price.
But what about buyers who don’t want to follow the traditional route? Here’s the beauty of the settlement: buyers are now in charge. While some may choose to represent themselves, I believe this will be a minority. Buying a home is complex, expensive, and infrequent, so most buyers will still seek some level of representation. Here are the options we’ve developed for our buyers, with more to come as the market evolves:
- Traditional Representation: For clients who want full service, from market analysis to closing, we offer comprehensive support. This involves 95-105 hours of work, including 30-40 hours of my personal time on market analysis and negotiation, with the rest handled by my support team.
- Flat Fees: For clients who are clear on what they want and are willing to do some legwork, we offer set fees for specific services. This allows buyers to save money by selecting only the services they need.
- Hourly or Per-Offer Rates: For clients preferring hourly charges or fees per showing/offer, similar to legal billing, we offer flexible options.
All these options can be structured to be rolled into the home price or paid separately. The buyer is in control, and we will continuously innovate and adapt as the market changes.
Conclusion:
The NAR settlement is the best thing to happen in real estate in decades. It puts the consumer in charge, allowing for freedom of choice in services. This consumer freedom will drive businesses to adapt and thrive—or close their doors if they can’t keep up. This is what makes our economy the greatest in the world.
If you need any assistance or have any questions, feel free to reach out. I’m here to help you every step of the way!
Kyle Alfriend has been investing in real estate for over 35 years, assisting over 3,000 clients in buying, selling, or investing in real estate. For more tips on buying, selling, or investing, or for a personal consultation, contact Kyle Alfriend, (614) 395-1776, or info@AlfriendGroup.com. Or go to our website, AlfriendGroup.com