Clearing up the confusion over recent changes to the real estate transaction process

Buying or selling a home here in Southwest Florida can be pretty complicated – and that was even before the National Association of Realtors (NAR) settled a class-action lawsuit over how agents’ commissions are calculated. 

The changes prompted by that legal settlement are significant – but also pretty straightforward. With the rollout of this new approach now underway, allow me to clear up some of the continued confusion. 

NAR settlement: what it means  

Under the previous standard, home sellers would typically pay the agent commissions of both buyers and sellers – typically a 5-6% split. 

With the NAR settlement agreement reached in the spring and taking effect in mid-August, sellers now have the explicit right to not offer to pay for both commissions. That means properties listed in the Multiple Listing Service (MLS) database will no longer include offers of compensation to the buyer’s agents. Offers of compensation are still an option but must be communicated off-MLS if a seller chooses to make an offer available. 

So, the seller of a $1 million home would only pay $25,000 or $30,000 in commissions to their agent - rather than twice as much for both sides. 

Practically speaking, though, commissions have always been negotiable; if you called and told me you were ready to sell your house, we would discuss a negotiation in terms of commission – both how much I'd receive and how much the buyer’s agent would get. 

However, most sellers were not going that route. In today’s competitive market, most sellers offer to pay for both commissions. The difference now - this is part of the negotiations, not an assumption.  

Here’s what I advise sellers: (1) Don't bite the hand that feeds you (the buyer’s agent) and (2) Don't make it more difficult for a buyer to purchase your property. In an already competitive housing market, it just doesn’t make sense. 

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NAR settlement: Impacts on Southwest Floridians 

In general, this change favors sellers. 

If I’m representing a buyer, I have to sign a buyer-broker's agreement with them – before even showing the property – stipulating that they’re required to pay me a commission if I can’t collect it from the seller.  

That can make it a bit awkward for the buyer, since they’re probably already nervous about fees and closing costs. Buyers are thinking about the expenses stacking up, when most of the time, the seller has still paid for every one of those deals. 

As for the impact on those of us in the industry, newer agents will likely see more of an adjustment period with this new change (or wind up leaving altogether) than more experienced agents. Newer agents have had less life experience with a difficult housing market; during the pandemic, selling houses was much easier. Houses were on the market for brief periods, if even, and required little advertising, marketing or open houses.  

With these changes, newer agents may feel a bit nervous – right now, they aren’t making money unless they sell a house, and commission negotiations coming to light may be a challenge for them to navigate. This market shift is giving agents the opportunity for the best of the best to rise to the surface. 

READ MORE: Hot Southwest Florida neighborhoods 

Right now, we’re in more of a buyer’s market. With our current political environment, world issues and high interest rates, people are a little bit nervous. We’ve also had a lot of properties come onto the market recently.  

But an important thing to note is that buyers are getting the most incredible deals right now. With new construction builders, you can get some incredible deals, like buy downs on your interest rates and downpayment assistance. 

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This change will take some getting used to, but it is nothing to be afraid of. Commissions have always been negotiable – it's just that the ability to negotiate is clearer now. As NAR itself notes,  

“These practice changes provide consumers on both sides of a residential transaction with additional choice and transparency.” 

Need a trusted real estate agent? Contact Aprile Osborne, chief vision officer of Call it Closed International Realty, at 239-220-8607.