National Association of Realtors NAR Lawsuit 2024 and Practice Changes | Salt Lake Pro "Your Utah Real Estate Resource"

By Teresa Larson / SaltLakePro
801-750-5446 / Village Real Estate
30+ years selling real estate in the Salt Lake City UT Metro area.

Dec 12,2024

National Association of Realtors Lawsuit 2024 and Practice Changes

This is an opinion based on information provided by the National Association of Realtors, and classes that have been provided by the Utah Association and Salt Lake Board of Realtors and or other approved continuing education instructors. Classes were ongoing after the settlement was announced in March 2024 and the settlement implemented in Aug 2024, a federal judge signed off on it Nov 26, 2024.

This is a Changing Landscape in Real Estate.

The lawsuit and the settlement which is now in place is about commissions paid for by sellers and buyers. The class action lawsuit was developed by attorneys against NAR and some big real estate franchises. Missouri and Illinois did not have buyer agency or broker contracts. Utah and 12 other states did have Buyer Broker agency and contracts in place since 2010. In a way the lawsuit is also about price fixing. Price fixing has always been against the law. However, for some time in our area the fees have been a bit more negotiable than some areas.

Agent Representation

Two real estate agents representing one or the other buyer or seller clients through separate contracts was the past standard with the total commission fee paid for by the seller on behalf of the buyer. The fee was essentially shared by the sellers listing real estate brokerage company and the buyer’s agent’s brokerage company. That is how multiple listing services have operated prior to the settlement. Listing companies typically would pay a buyer’s agent half of the total listing commission. The sellers were paying the buyers agent’s fee. The buyer’s fee came from the sellers proceeds of the home sale.

What the Lawsuit Settlement with the National Association of Realtors Means for Buyers and Sellers

During the lawsuit a good friend of mine told me they were glad that they would not have to pay the buyer’s commission. They didn’t think it was fair. They thought buyers should have to pay their own commission. I think this is how the public / sellers will see it as we keep going forward into the days after the lawsuit settlement, which is in effect now.

Since the Lawsuit Settlement Sellers do not Have to Pay the Buyer’s Agents Fees.

Agents are required to explain the fee structure better now. New contracts were made available for agents to use. The new contracts clarify the commission paid to each agent better. Part of the settlement reads; “There needs to be a conspicuous statement that broker fees and commissions are fully negotiable and not set by law in both buyer and seller contracts.”

Commission Fees are Negotiable

Sellers can agree to pay an agent fee for the buyer in the listing contract or they can put -0- in the listing contract for a buyer’s agent fee. How much total commission a seller is paying needs to be agreed upon in writing in in the contract, either the listing contract or the real estate purchase contract. Since the lawsuit settlement all of the pertinent contracts in our state Association of Realtors that are used in our area for real estate transactions have been redrawn to facilitate the changes.

In our state our real estate purchase contracts have a place for the buyer’s agent fees. It should be added to the Purchase contract and negotiated by the parties if the buyer needs it. The seller will already have at least a seller’s commission fee planned. The seller does not have to pay the buyers agents fee if they do not want to. It is negotiable and it all needs to be agreed upon by the buyer and seller. The agents involved will facilitate, negotiate, until it is all worked out between the buyer and seller.

How The New Real Estate Contracts Will Work

The seller may agree to offer compensation to a buyer’s agent. This practice is permitted by the NAR settlement but the offer cannot be shared on a Multiple Listing Service. Sellers when you are listing your home you need to be specific about how you want to handle this. You can let your agent know that you would be willing to pay x- amount and let them advertise that on their personal/office website separate from the MLS websites and their affiliates websites. Some agents will have statements on their personal websites that tell you how they will handle this for their listing/listings. You can instruct your agent to only provide this information through email or text if you don’t want a statement out there on the web. You can tell your agent: “I don’t want to pay the buyer’s agent commission” and put
-0- in the listing contract form and wait for offers to come in.

Real Estate Agents and Commission Fees

Some agents may feel that if the seller does not come up with an amount they would pay a buyer agent upfront, they will not show that listing. This seems like an un-wise thought to me on the agent’s part. If the buyer knew that their agent was not showing a listing that fit their criteria then they would think twice about hiring that agent to help them find a home. I heard an agent say they do not work for free so if no commission is agreed to by the seller up front with their agent they feel they are working for free? The buyer’s agent is required to have a buyers contract with the agent which would spell out their fee to the buyer before showing any listings. That is not free! When looking for homes buyers want to see all the properties that might work for them. With the internet the buyers are already looking at listings online anyway. Everyone needs to remember that brokerage fees are negotiable.

The Differences in Old Real Estate Contracts and New Contracts

In the past our contracts, forms and the MLS listings online the buyer’s agent could clearly see the fee they would be getting from the seller. That fee was actually an agreement that was offered through the MLS sharing of listings. After the settlement we can no longer put this information online through NAR state or local MLS listings. We used to share our listings and the amount that a buyer’s agent would get openly online now we can’t do that. We have to tell the other agent how much a seller is willing to pay on our own private websites, through email, text or phone. Yes, it is different than what we did in the past!

How Will This Impact the Real Estate Industry?

It will be interesting to see what happens in the new scenario sellers are thinking they will only have to pay half of what they might have paid before the settlement. Buyers will have to pay their own agent fee on top of all of the other buyer related closing costs and remember the seller has additional closing costs too. Make sure your hired agents are letting you know exactly what the cost of buying and selling is.

First Time Buyers May Need the Seller to Pay the Fee for Them

Many will be very tight on the funds needed to buy a home. In our area the median home price is approximately $650,000 for an FHA loan the minimum downpayment 3.5% would be $22,750. The closing costs would be an additional approximate amount of $22,750. There are different loans with less down and closing costs for people with super good credit. Because of the amount needed to get into a home. Many first time buyers can’t buy because of the large amount of cash needed to start out. In this case a seller might pay the buyers agent fee if the buyers offer is good enough and the buyer needs it to qualify.

Buyers Need to Sign Agency Contracts Before Seeing Houses With Buyers Agents

Unless you are using the seller’s agent to see the house buyers need to sign a buyer’s agency agreement. Buyer’s agents need to have a written contract that explains agency and clearly states their fee before showing another agent’s listing. Listing agents can still show unrepresented buyers on the seller’s behalf with an appointment or at open houses. Buyers please be careful what you might tell a seller’s agent in this circumstance, because they represent the seller and are bound to tell sellers all they know through their fiduciary relationship. It is simple if you do not want the seller to know something then do not share it with the seller’s agent. just don’t share with the seller’s here is an example The house is listed for $530,000: “The Buyer tells the sellers agent I will offer $500,000. I can go up to $525,000 if I have to.” In this case the seller’s agent is required to tell the seller the $525,000 amount. Just tell the agent I will offer $500,000 and we will see what happens. Let the seller give you a counteroffer if they don’t like your original $500,000 offer.

You Cant Ball Park What you Think you Might Qualify for!

Buyers please don’t be upset if a listing agent wants to see proof you can qualify before showing you, their listing. Please get qualified, a good credit letter explaining your qualifications to a prospective seller will help you a lot. It increases your chance of getting a home. It is also comforting for the seller and their agent to know that you are a for real buyer. Not someone who is possibly in the home looking for valuables and prescriptions or thinking other misdeeds. The idea is when you have a buyer agent they have done the leg work getting you qualified with a lender, making sure the properties you see fit your buying criteria as close as possible. As a seller’s agent having an unrepresented buyer, a good agent would ask for proof of ability to buy before letting you in the door. Proof of cash funds for those purchasing that way should be planned on also by cash buyers.

Sellers Do Not Have To Pay the Buyer’s Agents Commission Fees

This is totally negotiable. Seller’s might do it if your offer is good enough and you need it to qualify. In our state our real estate purchase contracts have a place for the buyer’s agent fee. The best way to handle the real estate purchase agreement for the buyer’s agent fee is to add it into the REPC, if you want the seller to pay for it.

Commission Fees and Deductions for Your Taxes

There is a lot more to the paying of commissions and who gets to deduct that fee. Technically it needs to be put on the correct closing side of the closing statement for the buyers and sellers. Who ever really pays it should get the benefit. The question is tricky since the sellers in the past have felt like they are paying the fees. Buyers did hire and ask the seller to pay it in their behalf. You could say the buyers have paid it through their purchase price and loan on the property. This is basically what we will see happen for first time buyers. There might be some tax benefits to the paying of the commission. It is a gray area. It might be deductible on your taxes. Of course you need to check with your accountant or lawyer since real estate agents cannot give advice on accounting or legal matters.

What Will be the Outcome of the recent National Association of Realtors Lawsuit?

Maybe the outcome of the lawsuit will be an increase in buyers using the seller’s agent if they have time for the researching of available listings. It is a common fact that buyers already do this. There is a chance that more buyers may want to use the seller’s agent to save money. Seller agents are obligated to treat everyone honestly and fairly. When a seller lists their property with an agent they need to be sure of the contract, does the listing contract allow the buyer to use the listing agent as an unrepresented buyer.

Real Estate Agents Bring Value to Your Real Estate Transactions

Everyone is trying to get the best of both worlds, so one agent in the real estate transactions could be a possibility. Real estate agents have always had to work hard for their money even though they are perceived by the public to get a lot of money for what they do. Research and overall expertise in Real Estate areas such as pricing, loan types what buyers need to do to qualify and more come into play in a real estate transaction. Real Estate agents help to get the job done proficiently and correctly!

Source: Vann Larson Principal Broker Village Real Estate, Teresa Larson Associate Real Estate Broker Village Real Estate, National Association of Realtors https://www.nar.realtor/the-facts/homebuyers-what-the-nar-settlement-means.