Effective August 17, sellers won’t have to agree to pay both sides’ commissions up front when they list their homes for sale. And agents can no longer communicate “offers of compensation” to other agents through their local Multiple Listing Services.
August will mark “a time of adjustment,” says Kevin Sears, who recently took the role of president of the National Association of REALTORS® (NAR).
Let’s take a look at what’s going on.
After the Lawsuits, Real Estate Agents Face “Time of Adjustment”
This year, NAR agreed to settle with home sellers who objected to paying for buyer agents’ commissions. As we reported in March:
NAR has long expected home sellers to agree to a commission (5-6% of the home sale price, to be split by the seller’s and buyer’s agents) when listing homes for sale through the Multiple Listing Service (MLS) database. Based on the new settlement document, NAR will delete that charge from the fill-in form.
The NAR settlement marks significant changes for the 115-year-old association and its members. Agents will still get paid, although they’ll be doing more to promote their services. Those determined to succeed will find ways to navigate the new restrictions. NAR’s attorney Charlie Lee explains on this YouTube video how agents can get their commissions legally, without communicating them through the Multiple Listing Service.
So, can’t sellers still offer solid compensation to their listing agents? After all, sellers gotta sell, and they’ll be under pressure to do what it takes to compete successfully with other listings. And can’t the sellers’ agents still work out fee-sharing arrangements without falling afoul of the new rules? That’s plausible. Buyers and sellers alike would be wise to keep up with NAR’s public messaging, just as agents are.
Don’t Stress, Find a REALTOR®: NAR Pumps Up the PR
Just before the March settlement agreement, NAR went on the defensive. Interim CEO Nykia Wright decried the “misinformation and attacks on the integrity of our association” and called on supporters to “make clear the true value that REALTORS® and NAR provide.”
NAR’s been on a public relations blitz ever since.
Reps went to Capitol Hill to speak with members of Congress. PR leaders said the effort gave policy makers across the country NAR’s perspective on the value of working with its member agents.
A NAR publicity tour appeared, under the name Real Estate and Housing Market Trends for the Summer and Beyond. At the same time, NAR leadership got busy setting up meetings and interviews with radio and TV stations.
One day of media outreach in May, based at the Walter E. Washington Convention Center in D.C., reached “an audience of nearly 11 million,” said Mantill Williams, the PR and Communications vice president for the embattled association. NAR’s May 8 media tour engaged outlets like WMC-TV’s Action News (NBC) in Memphis, and KEYE-TV (CBS) in Austin.
“Don’t stress,” went the mantra. “Find an agent who is a REALTOR®.” You’ll get key advantages, NAR promised — local market insights, guidance with forms and disclosures — which can help you steer clear of costly mistakes.
What About the Agents? How Many Are Leaving the Fold?
NAR’s leadership sent a team on road trips to meet with its members, assuring them that their membership has value. It made previously paywalled course work free to members, encouraging them to prove their value as they sharpen their skills. Looks like agents will now have to sell themselves as well as their listings.
NAR insists there’s been no “mass exodus” of agents. National Association of REALTORS® membership numbers, reports REALTOR® Magazine, have stayed basically stable over the year.
The group had about 1.5 million members in late May. That’s actually 2% less than it had last year. So some agents are leaving. But NAR points out that membership numbers always dip during slow markets.
Lawrence Yun, NAR’s chief economist, acknowledges that all members who paid their annual dues by New Year’s Day 2024 will keep their membership through the year, “even as they leave the business for other opportunities.”
This means the full impact of NAR’s legal setbacks on member numbers won’t become obvious until next year. NAR has promised to regularly post membership numbers through its magazine.
Unfair to Agents, Says Critic—And Not a Win for Affordability
A May 2024 opinion piece by Eric Forney in Housing Wire slams the end of sellers’ agreements to pay broker commissions. All this drama might look great for home sellers, but it piles stress onto buyers, Forney’s piece suggests. Upfront payments to agents will burden those already struggling, because they’ll have to shift a chunk of their down payment savings into the cost of hiring agents.
Hardest hit, says Forney, will be “minorities historically denied access, fixed-income seniors, and first-time buyers stretched for a down payment.” “A modern-day redlining,” Forney calls the commission reforms.
But Forney doesn’t acknowledge that buyers ultimately do have to pay for the agents. Buyers might not pay up front, but they cover these costs through their monthly mortgage payments. It’s the buyer who ultimately shoulders expenses that sellers have been agreeing to when listing their homes.
Forney piles criticism on the Biden administration and Department of Justice, too, for their push to stamp out fee splitting by brokers. The loss of incentives for agents to sell homes will just lead developers to raise their prices, Forney insists. Forney describes the future of real estate as “a technocracy mired in predation, fraud, and barring the middle class from home ownership.”
Forney’s argument for the “typical Realtor” seems stronger. The typical agent, according to Forney, is a “60-year-old woman in her second career” who earns just $46K while helping clients through some of the most important milestones of their lives.
No doubt, August will usher in a more difficult time for agents to earn their livings.
“REALTORS® appear resilient” so far, says NAR’s Lawrence Yun, adding that “they’re holding onto their licenses.”
The question is whether they’ll hold onto NAR.
Supporting References
National Association of REALTORS® via YouTube: Window to the Law – Settlement Facts. Understanding New Rules on Offers of Compensations (posted May 2024).
Melissa Dittmann Tracey for REALTOR® Magazine from the National Association of REALTORS®: NAR Membership Remains Steady Notwithstanding Slower Home Sales (Jun. 7, 2024).
Kevin Sears for the Spring 2024 edition of REALTOR® Magazine from the National Association of REALTORS®: What’s Next for Us? (May 3, 2024).
Nykia Wright, NAR Interim Chief Executive Officer, for the Winter 2024 edition of REALTOR® Magazine from the National Association of REALTORS®: Our Next Great Chapter (Feb. 9, 2024).
Stacey Moncrieff for REALTOR® Magazine from the National Association of REALTORS®: NAR’s Surrogate Strategy Demonstrates REALTOR® Value During Nationwide Media Tour (May 20, 2024).
Eric Forney for Housing Wire: Opinion – Will New Changes Make Houses More Affordable? (published by HW Media on May 1, 2024. Eric Forney is a writer for Housing Wire and the Senior VP for Training & Innovation at Livian, an advisory and coaching firm for agents).
And as linked.
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Photo credits: Antoni Shkraba, Alena Darmel, and Kampus Production via Pexels/Canva.
